Recent data collated on mergers & acquisitions (M&As) and private equity (PE) investments in 2007 only revalidates the belief that corporate India continues its quest to beef up economies of scale and improve synergies, even as it welcomes strategic investors to share risks with gusto. The action actually began in 2006, reaching a crescendo this year. The total number of M&A deals and PE infusions involving Indian firms in 2007, at an astounding 1,047, was more than twice the figure for 2005, while the sum of investments made through them, at $68.3 billion, was more than thrice. That?s a lot of money, and it would be fair to deduce that few if any of these deals were throwaway sales, indicating strategic intent rather than price opportunism. This is in broad tune with global trends, where the M&A tally has gone up to record levels for the second consecutive year, even though there was a sharp slowdown in deal-making in the second half. Also, the money involved went up handsomely. The average size of M&A deals involving Indian companies went up by around four-fifths to $78 million. The size of PE deals, by two-thirds to $44 million.
Whatever the figures say, the show was stolen by a few outbound M&A megadeals struck by Indian industry as it sought to globalise operations. As noted in an FE report, the large inbound and outbound M&A deals announced in the steel and telecom sectors alone accounted for around half the value of all deals. In contrast, the largest gainers from PE investments were sectors like real estate, infrastructure, banking and financial services. The micro trend here was towards specialisation by different groups in their specific areas of expertise. This is likely to attract even more funds in time to come. Though the jury is still out on the net value addition of M&A activity, the very enthusiasm displayed by the most prudent of players in India is an indication that much has been learnt from mistakes of the past, and so ?deals from hell?, as defined by the US-based M&A expert Robert Bruner, are that much less likely now. Or so we hope. On paper, M&A activity results in efficiency, since it is supposed to turn productive assets over to those who can make the most of them. We shall now see how well this works in practice.
