Just where is the Indian M&A story headed? This question has become increasingly hard to answer as access to capital remains a huge worry. The slowdown is evident from the lukewarm numbers. For the first half of 2012, according to data from Grant Thornton, the total value of M&A activity was $24.6 billion, down 18.5% from $30.2 billion for the first half of last year. The comparable number for first half of 2010 was $29.4 billion. According to K Balakrishnan, chairman & managing director, Lazard India, this has quite a bit to do with Europe in crisis, apart from the US being in a cautious mode. “Speaking for India, there is a policy paralysis and that has affected key sectors like telecom, power and retail. The platform for facilitating investment is just not there,” he thinks.
The M&A data for the first half of 2012 reveals some rather worrying facts. Of the $24.6 billion, as much as $15.2 billion has come from internal mergers and restructuring. That means pure play M&A activity — inbound, outbound and domestic — was just $9.4 billion, which is less than a third of the $29.8 billion that took place in H1CY11. The corresponding ticket value for internal mergers and restructuring was just $0.4 billion.
Where are the big buyouts?
1 May 2026
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Veteran investment banker Rajeev Gupta feels issues like land acquisition are hindering the flow of big-ticket investments in the country. “There is very little to suggest that M&A deals in the domestic space or foreign companies wanting to invest in India will take off. The only plus point is Indian companies may continue to buy assets overseas,” he says.
The lack of foreign capital inflows has another serious implication. “It will be difficult to create new jobs,” says Balakrishnan, whose firm was involved in Binani Industries’ $360 million buyout of Belgian fiberglass maker, 3B. Besides, India isn’t the only destination available. “With valuations dropping in the US and Europe, assets there are looking attractive,” he says. One case is Piramal Healthcare acquiring US’ Decision Resource Group in May this year for $680 million.
Dealmakers concede that raising capital will be a serious issue for a while at least. According to Balakrishnan, M&A activity for now will be in the “neither here nor there” zone. “There could be some interest in inbound activity in 2013 since both Indian promoters and foreign buyers may get realistic about valuations, which is not the case today. Besides, these international players are still grappling in their home markets,” he says.
Even more challenging for Indian companies is the inability of the rupee to hold out against the dollar. “This puts serious pressure on interest costs for companies looking to raise money abroad,” sums up Balakrishnan. Not a pretty picture by any yardstick for the Indian M&A story, which not too long ago had multi-billion dollar deals happening.
