Hit by sluggish economic trends, merger and acquisition activities of Indian companies slowed down in 2013 to a total of nearly 500 deals worth close to USD 30 billion, but the momentum is set to pick up in the new year especially after the general elections.
In comparison, Indian companies were involved in 598 M&A deals worth USD 35.4 billion in 2012 and 644 transactions worth USD 44.6 billion a year ago in 2011, shows an analysis of data compiled by various deal-tracking firms.
While deal volumes have slipped for two consecutive years now, experts believe there is a lot of pent up demand for M&A transactions and the deal momentum is set to pick up in 2014.
Muted economic growth projections and uncertainty over policies held back M&A transactions, and deals are now taking longer to close because of macroeconomic concerns.
According to Grant Thornton, there have been a total of 480 deals amounting to USD 27.4 billion during 2013 involving Indian companies, as on December 13, 2013.
A few more deals have been announced since then.
Global deal-tracking firm mergermarket's India Bureau Chief Mithun Varkey said deals would be mostly driven by local consumption story, especially in sectors like consumer durables and pharmaceuticals, during 2014.
"A revival in core sectors such as in power, road and infrastructure sectors still seem unlikely as due to lack of investor confidence," he said.
Moreover, the upcoming general elections are also holding many deals back, as many investors and dealmakers prefer to wait and watch.
"We expect subdued activity in the first quarter of 2014 and then based on the election results and market sentiment we believe there would be a big uptick in M&A thereafter," said Harish HV, Partner, India Leadership Team of Grant Thornton. According to Vikram Utamsingh, Managing Director, Transaction Advisory services, Alvarez & Marsal India, there are several insights to the M&A deal tally of this year.
Firstly, both global buyers and investors now believe that it is an opportune time to do deals in India as deals have become cheaper in dollar terms due to the sharp devaluation of the rupee against the US dollar.
Secondly, global investors believe that the Indian economy is at the bottom of its economic cycle and with government elections in the new year coupled with efforts by the present government to increase growth, India should start growing at a higher rate from 2014.
Thirdly, valuations in some sectors