Mergers and Acquisitions are tools which create transformation of businesses. They help in unlocking the potential of businesses specifically in those situations where one of the two parties involved is stressed. In 2016 the Indian industry latched on this tool in a very big way ever since 2007.
The investors’ confidence in the Indian growth story was highlighted by the marked increase in the M&A deal value in 2016. Year 2016 marked the highpoint of any Indian announced merger and acquisition deal value. Bettering the previous best of US$ 67 Billion (in 2007) the deal value rose to US$ 72.4 Billion in the last calendar year. As against 2015 this marked a growth of almost 97.27 %.
A close scrutiny of the figures reveals that the M&A deal value in the Power and Energy segment grew by 254 %, while the Materials segment, metals is a part of which, grew by 268% in comparison to 2015
Out of the total deal value of US$ 72.4Billion a mere 6.08 % (US$ 4.4Billion) was Private Equity backed.
In 2016 the domestic M&A deal value increased by 188%, the Inbound deal value standing at US$ 34.1 Billion grew by 75% while the outbound deal value grew by 71%.
India’s M & A deal traffic was largely driven by domestic investor interest. Domestic and Inbound transactions, together increased by over by 112% as compared to the 2015; contributing to over 85% of the total M&A deal values. Cross-border transactions in 2016 included US$ 28.1 billion worth of inbound deals and US$ 8.7 billion worth of outbound deals. In the context of a rise in domestic and inbound deal values, the increase indicates strong domestic and global investors optimism in the domestic market.
As per a joint report from Kroll and Mergermarket “General sentiment among foreign investors for Indian investment opportunities remains strong, creating a bright outlook for inbound M&A through the rest of this year and into 2017”. Other transaction advisory firms have also echoed the same sentiment.