Though the current merger & acquisition (M&A) activity in India has increased at a CAGR of 15 percent over 2012-14 yet in terms of volumes, the deal activity showed only a moderate increase of 3 percent since 2012, reveals the ASSOCHAM-PWC joint study.
The study jointly undertaken by ASSOCHAM and PWC has revealed that though subdued when compared to the peak levels of 2010, the deal activity (in terms of value) increased from 31.1 billion USD in 2012 to 36.4 billion USD in 2013 and 40.8 billion USD in 2014.
The trend is an indication of caution that the investors have been exercising in their inorganic growth strategies, said Mr. D S Rawat, Secretary General ASSOCHAM while releasing the study.
The study further indicates that transactions in 2015 will be driven by fundamentally strong domestic companies and investment activity by PE funds. This activity will be backward integration knowledge and technology acquisition, economies of scale, access to and association with international brands, risk diversification rationale, investment opportunities offered by mid-sized companies and exit by existing investors.
Increasing deal size for M&A and Private Equity (PE) investments in India indicate rebounding of deal activity and increased business confidence. Deal of 100 million USD and above in value formed 49% of the total private equity capital invested in 2014. Within strategic M&A, deals of 100 million USD and above comprised 82% of the total disclosed M&A deal value in this year.
Over the period 2012-14, while the growth capital and latestage investments comprised majority of the overall PE investments, the number of early-stage deals by angel and VC funds indicated and increase from 453 (1.1 billion USD) to 532 (2.2 billion USD). This is also an indication of the Indian M&A activities were dominated by domestic transactions in 2014. Crossborder deals, both inbound and outbound, were on hold on account of macro-economic conditions and for clarity on policy matteres from the new government.