Despite the coronavirus pandemic and the resultant ravaging of the global economy, the Deal Street managed to grow 7 per cent in 2020 over 2019 to about USD 80 billion across 1,268 transactions, thanks to a string of big-ticket deals by Reliance, according to a report.
More than a third of the total deal came through Reliance — into Jio Platforms and Reliance Retail, according to the data collated by PwC India.
While Reliance Jio attracted FDI worth USD 10.2 billion led by Facebook, Reliance Retail also got billions in foreign direct investment (FDI) in the second half. All other FDIs put together totalled just USD 3.2 billion.
Merger and acquisitions (M&As) accounted for over 50 per cent of the total deal value this year, while private equity (PE) activity kept pace with last year, recording investments worth USD 38.2 billion, which is same as in 2019, says the report which said the numbers pertain to January 1 and December 7.
Excluding the big-ticket deals in the telecom sector, the first half saw a slowdown with investors putting their plans on hold and shifting focus towards cash conservation. Within the PE community, several funds adopted a more cautious approach during the initial months of the year.
From the domestic deals, Reliance Retail buying the retail, wholesale, logistics and warehousing businesses of Future Group for USD 3.3 billion was the largest.
Consolidation continued to drive M&As, accounting for nearly 50 per cent of the value and given the volatility, uncertainty and complexity of the current times, this is expected to be a continuing trend.
Inbound deals recorded an 11 per cent increase over 2019. However, over three quarters of the USD 13.4 billion invested were concentrated in Jio alone. Facebook invested around USD 5.7 billion in Jio for nearly a 9.9 per cent stake, making it the largest deal virtually completed during the lockdown. This was followed by a USD 4.5 billion investment from Google for a 7.7 per cent stake in Jio Platforms.
Foreign direct investment worth USD 30 billion arrived between April and September, which is a 15 per cent increase over the same period in 2019.
Expectations exceeded on the PE front as investments worth USD 38.2 billion were recorded in 2020, amounting to nearly the same level of activity in 2019.
Reliance was once again a large contributor to PE deal values and helped in retaining momentum with PE investments in 2019. Following Facebook, a consortium of funds, including TPG, KKR, General Atlantic, Silver Lake and other PEs, and sovereign wealth funds invested USD 9.8 billion in Jio. It accounted for 66 per cent of the growth-stage PE investments in 2020, driving growth investments to an all-time high of USD 15 billion.
Similarly, Reliance Retail Ventures saw investments worth over USD 5.1 billion, resulting in a spike in late-stage PE investments and making 2020 a record year for this type of investment as well.
The year saw USD 17-billion deals, nearly double of nine in 2019. But, deal volumes have progressively been declining with increasing deal value. As against this, as much as 2,035 deals worth USD 63 billion were recorded in 2016, compared with 1,268 deals worth USD 80.4 billion in 2020.
Top-5 M&As of the year included the Jio Platforms-Facebook deal of USD 5.7 billion for a 9.9 per cent stake, Jio-Google deal for USD 4.5 billion for 7.7 per cent stake and the USD 3.3-billion takeover of Future Enterprises by Reliance Retail.
The Lummus Technology-Haldia Petrochemicals-Rhone Capital deal of USD 2.7 billion as another major deal.
Telecom replaced technology in the top position by attracting investments worth USD 11.2 billion, while the retail sector was another new entrant, attracting investments worth USD 6.5 billion. Both sectors recorded increased levels of investment mainly on account of large-scale investments in Reliance entities.
Technology saw investments totalling over USD 6 billion led by online aggregators and pharma accounted for a majority of the USD 2.5 billion invested in this sector.
PE exits reached an all-time low in the past five years and continue to remain a challenge amidst market volatility. The year under review saw 136 exits worth USD 4.2 billion, a 56 per cent decline in value.