Indian M&A remains strong, observes a 18% jump in the aggregate disclosed value, says EY report

November, 2015

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  • Cross-border deal activity upbeat, accounted for 85% of disclosed deal value and 50% of deal volume
  • Outbound deals surge; 5 of the top 10 deals of the quarter were outbound transactions
  • Technology, consumer & retail lead deal volume, oil & gas and pharma lead on deal value

According to EY’s Transactions Quarterly, M&A activity involving Indian companies picked up its momentum during the quarter ending September 2015 and saw a total of 233 deals with a cumulative disclosed deal value of US$7.7 billion. While this represents an 18% increase in terms of aggregate disclosed value (vs. US$6.5 billion in 3Q14), the deal volume remained at the same levels (232 deals in 3Q14). The technology sector continued to dominate the M&A sector tables in terms of volume, accounting for 36 deals, as companies remained focussed on acquiring firms specializing in SMAC (social media, mobile, analytics and cloud) capabilities.

Says Amit Khandelwal, Partner and National Director, Transaction Advisory Services, EY, “Cross-border transactions were a significant driver of the M&A activity. This reflects increased business confidence of global players in the Indian economy and the domestic companies. The M&A activity on the domestic front, though subdued, is expected to pick up over the next few months as the economy continues to improve.”

Cross-border deals dominate M&A activity; outbound drives deal value

Cross-border M&A dominated the country’s deal landscape during the quarter with 116 deals with a cumulative disclosed value of US$6.6 billion, accounting for 85% of the total disclosed deal value. Compared with the previous quarter, the deal volume increased by 27% (91 deals in 3Q14) and deal value by 150% (US$2.6 billion in 3Q14). This surge in deal value can be attributed to three outbound big-ticket transactions (US$500 million and above) and two inbound deals totalling to US$3.6 billion, compared to only one big-ticket cross-border transaction in 3Q14 that being an inbound deal valued at US$610 million.

From an outbound M&A perspective, the quarter witnessed 33 outbound deals with a cumulative disclosed deal value of US$3.6 billion. While the deal volume remained nearly at similar levels as seen in the corresponding period last year (31 deals in 3Q14), the disclosed deal value saw an increase of nearly 8 times from US$401 million in 3Q14. Key transactions within the space included ONGC Videsh Limited’s agreement to acquire up to 15% stake in Russia-based CSJC Vankorneft for US$1.3 billion, Lupin Limited’s agreement to buy the US-based Gavis Pharmaceuticals LLC and its affiliate Novel Laboratories Inc. for US$880 million and Cipla Limited’s agreement to acquire the US-based InvaGen Pharmaceuticals Inc. and Exelan Pharmaceuticals Inc. for a joint consideration of US$550 million.

“Of the top 10 deals of the quarter in terms of value, 50% were outbound and drove the significant increase in value to US$3.6 billion in 3Q15, compared to US$0.3 billion in 1Q15 and US$0.5 billion in 2Q15. These transactions marked an end to a prolonged absence of big-ticket outbound transactions from the M&A activity in India since 2012.” says Amit Khandelwal.

On the inbound front, the quarter recorded the highest number of transactions in over five years, reflecting the resumed foreign investors’ confidence in India’s long-term growth story. A total of 83 deals were registered with a cumulative disclosed deal value of US$2.9 billion, up from 60 deals with a total disclosed deal value of US$2.2 billion in 3Q14. Technology, infrastructure and financial services were the most active sectors for inbound investments.

The US continued to be the most active cross-border partner

Companies from the US continued to be the most active counterparts of Indian companies in the cross-border transactions. During the quarter, players from the US were involved as acquirers in 23 inbound deals and as targets in 9 outbound transactions. Companies from the UK followed next with 6 inbound and 5 outbound transactions.

Domestic deals witnessed soft performance

Domestic M&A activity took a plunge this quarter, both in terms of disclosed deal value and volume. The deal volume decreased to 117 from 141 in 3Q14 and aggregate disclosed deal value decreased to US$1.1 billion from US$3.9 billion in 3Q14. The largest deal in domestic arena was Birla Corp’s agreement with Lafarge India to acquire its two cement assets for US$768 million.

M&A expected to remain strong

The latest quarter ended on a positive note for Indian M&A activity, registering significant improvement in disclosed deal value and sustaining healthy levels of deal volume. The M&A activity is expected to remain strong in the coming months, on the back of positive economic outlook, improved investor confidence and favourable capital markets.

Top ten deals for the quarter ending September 2015


Deal
Value (US$ million) Deal status Target Target vertical Target nation Acquirer Acquirer nation
Outbound 1,250.0 Announced Vankorneft' AO Oil and gas Russia Oil & Natural Gas Corp Ltd India
Outbound 880.0 Announced GAVIS Pharmaceuticals LLC, Novel Laboratories Inc. Pharmaceuticals US Lupin Ltd. India
Domestic 768.2 Announced Two cement units of Lafarge India Pvt. Ltd. Cement and building products India Birla Corp Ltd. India
Inbound 500.0 Closed Ballarpur Industries Ltd’s stake in Malaysia-based Sabah Forest Industries Sdn. Bhd. Paper and forest products India Pandawa Sakti Sdn. Bhd. Malaysia
Outbound 500.0 Announced InvaGen Pharmaceuticals Inc. Pharmaceuticals US Cipla Ltd. India
Inbound 500.0 Closed Snapdeal.Com Retail and consumer products India Alibaba Group
Holding and
SoftBank Group
China, Japan
Outbound 400.0 Closed European Gold Refineries Holding SA Metals and mining Switzerland Rajesh Exports Ltd. India
Outbound 331.4 Announced Cavendish Industries Ltd. Automotives UK JK Tyres & Industries Ltd. India
Inbound 255.6 Announced IIFL Holdings Ltd. Financial services India Fairfax India Holdings Corp. Canada
Inbound 254.1 Announced Greenko Mauritius Ltd. Infrastructure India GIC Pte Ltd. Singapore

Source: ThomsonONE and EY analysis

Notes to Editors

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