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Record $64.5 billion M&A deals inked in 2016

Record $64.5 billion M&A deals inked in 2016

Rapidly becoming an influential market for mergers and acquisitions (M&As) in Asia-pacific region, India hit a record level in this space with 388 deals worth USD 64.5 billion during 2016, said a report.

Deal value surged 90.5 percent, while deal count fell slightly to 388 from 421, during the last year compared to 2015, according to global deal tracking firm Mergermarket.

Significantly, the country’s market share in total M&A deals in Asia-Pacific stood at 8.8 percent last year — the highest since 2007 (9.4percent) and significantly more than the 3.6 percent logged in 2015.

“India’s M&A activity in 2016 reached the highest annual value on Mergermarket record (since 2001) with 388 deals worth USD 64.5 billion,” the firm said in the report.

“The top three deals targeting India in 2016 amounted to USD 20.6 billion, accounting for 32 percent of the total value of M&A in India,” the report said.

Sectoral analysis by Mergermarket for 2016 showed that energy, mining and utilities replaced financial services as the most active sector with deals totalling USD 17.1 billion – almost three times more compared to 2015.

The energy, mining and utilities sector account for 26.5 percent share in total M&A deals which was largely fuelled by Essar Group selling a combined 98 percent stake in Essar Oil to both Rosneft and Trafigura for a combined value of USD 12.7 billion.

Telecommunication deal value rose nearly 5 times to reach USD 13.6 billion from USD 2.5 billion in 2015.

Mergermarket noted that the upcoming spectrum auctions in telecom are expected to increase competition that could subsequently spark a pricing war involving new entrant, Reliance Jio, and could further fuel growth in the sector.

“Large industry players will need to prepare for the auction by selling non-core assets and deleveraging their balance sheets,” the report added.

Going forward, businesses related to cement, steel, power and toll roads are likely to contribute further in M&A space in 2017, depending on the upcoming Union Budget.

Technology accounted for just 56 deals, down from 89 in 2015 — the largest drop in deal count across all sectors.

However, the report said technology has the potential to improve in 2017 but is unlikely to reach the heights seen in 2015 when the sector was ranked the busiest sector by deal count and second most active by value (89 deals, USD 5.4 billion) as investors wait for a further easing towards more realistic multiples and valuations.

Total inbound activity in India’s M&A in 2016 reached record high with 176 deals amounting to USD 30.8 billion — 62.3 percent jump over USD 19 billion in 2015.