Despite a boom in 2018, M&A cooled down in the first half of 2019, amid elections and weak economic sentiment.
Mergers and Acquisitions value in India soared in the last year 2018 with a total deal value reaching a lifetime high of $95.4 billion, driven mainly by multi-billion-dollar transactions including Walmart-Flipkart, Vodafone-Idea, ONGC-HPCL, and Tata Steel-Bhushan Steel. These four deals contributed 41 per cent of total deal value for 2018, according to a recent CII report. Though the number of deals was more in the previous years, the value of such deals was highest in 2018. In the previous year 2017, the total deal value of M&A was $61.9 billion. This saw a 54 per cent increase in 2018 to over $95 billion.
However, despite a boom in 2018, M&A cooled down in the first half of 2019, amid elections and weak economic sentiment. M&A worth only $32.5 billion took place in the first eight months of the current calendar year. Over the past decade, four of the top ten deals were completed in 2018. The highest deal of the decade was Walmart-Flipkart with a total deal value of $16 billion, followed by the Idea-Vodafone with a value of $12.6 billion.
While M&A of Walmart- Flipkart took place for better market reach, the Vodafone-Idea merger took place after the telecom companies lost ground with the launch of Reliance Jio. The tariffs dramatically dropped after Mukesh Ambani-led Reliance Jio introduced freebies and cheaper data and voice plans.
“It is possible that India is about to witness yet another revamp of the league table owing to multiple business reforms, banking regulations, foreign capital flows, large scale bankruptcies, etc,” said the CII report. Sparked by an economic downturn in recent years, many business houses are reeling under stress due to high leverage and poor financial performance.
Tightened banking norms and the RBI crackdown on stressed assets has brought the stress out in the open. A few groups such as Jaypee Group, Anil Dhirubhai Ambani Group, Lanco and Essar, which were great wealth creators of the past, have been subject to insolvency now.