India Inc sews $60 bn M&A deals in 2017

The need to consolidate in the wake of financial stress, as also for cashing out from valuable businesses to meet debt obligations, will continue to give a further boost to the deal-making activities, experts feel.

Experts believe the new year also looks promising in terms of deals as political stability is in place, economic reforms are on a fast track and broader macro factors are also looking positive, though some pressure may come from stretched valuations and high capital market benchmarks.

According to global consultancy giant Grant Thornton, the overall deal activity -- including both M&As (mergers and acquisitions) and PE (private equity) -- has been about $59 billion in the January-November period of 2017, a 9 per cent rise from the last year. The final tally for the year may cross $60 billion.

"Valuations expectations, lack of understanding of regulatory process resulted in decline of the deal volumes and values in 2017," according to deal-tracking firm Mergermarket India. It, however, noted that M&As may see a slower pace in 2018, with 2019 being the election year and the growth still looking tepid on the economic front.

According to Amit Khandelwal, Managing Partner, Transactions Advisory Services at EY, the domestic deal activity is expected to dominate the overall M&A landscape going forward, on account of the ongoing consolidation wave across sectors and the resolution of insolvency cases.

In addition, digital disruption and sector convergence will likely support the deal momentum as businesses look to acquire capabilities to gain a competitive edge, Khandelwal said. Experts believe, start-ups, banking and insurance, e- commerce, manufacturing, pharma, healthcare and biotech will be the key sectors in terms of deal action.

"We consider that manufacturing, pharmaceuticals, healthcare and life sciences, financial services, insurance, renewables, telecom and fintech will attract significant interest," Aakash Choubey, Partner, Khaitan & Co said, adding several deals will be done out of distressed assets. EY's Khandelwal also believes that "with the IBC (Insolvency and Bankruptcy Code) taking effect in 2017, 2018 is expected to see domestic deals emerging from restructuring activities and distressed asset sale.

On the cross-border front, outbound activity is expected to remain "sub-par", except in sectors such as pharma and technology where Indian players keep looking for additional resources and leading-edge technologies," he said, while adding that inbound activity can see some traction as global players are trying to expand their presence in India.