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M&A, PE deal values shrink in April; healthcare tops list

April saw the value of mergers and acquisitions (M&As) and private equity (PE) deals shrink, despite overall volumes remaining firm, owing to what experts say is a dip in appetite for larger deals and a drop in valuations.

According to latest figures compiled by Grant Thornton, the total value of M&A and PE deals in April 2012 stood at $2.6 billion spread across 99 deals. This is much lower than the $8.2 billion recorded in the same month in 2011, but with nearly the same number of deals (101), it's a clear indication that while volumes have remained similar, the deal size has dropped significantly this year.

Reuters

In April 2010, this figure was $3.1 billion, with 136 deals. The total value of outbound deals (where Indian companies acquired overseas businesses) during April 2012 was a mere $0.4 million by way of just seven deals, proof enough that Indian companies are hardly in any frame of mind to go for overseas acquisitions at this point. That figure was a much higher $1.9 billion with 21 deals in the same month last year.

The value of overseas companies acquiring Indian assets, or inbound M&A activity, was healthier in comparison at $1.1 billion (with 21 deals) though much lower from the same month last year, where the figure was $5.3 billion with 18 deals done at that time.

On the PE side, the figures aren't too dramatic. The total PE deals recorded in April 2012 amounted to $0.6 billion, with 38 deals done, compared to $0.8 billion with 37 deals in April 2011, signifying very little change. There were only two IPOs listed in April, taking in $45.2 million from the public. January-December 2011 saw 30 IPOs raising a total of $1.2 billion from the market, as the IPO market continues to remain sluggish.

The top M&A deal in April was the one where Japan's Mitsui Sumitomo Insurance acquired 26 percent in Max New York Life for $530 million, marking New York Life's exit from the insurance joint venture. The top PE deal, on the other hand, involved Advent International investing $105 million in Care Hospitals by acquiring existing shares and injecting fresh capital. This indicates that healthcare continues to be a preferred sector for PE players.

While fast-moving consumer goods (FMCG), banking and financial services and retail were the top three sectors in April for M&A activity, on the PE side, pharma and healthcare, FMCG and banking and financial services were the top three sectors. The top five M&A deals accounted for a hefty 69 percent of the total deal values, while the top percent PE deals were responsible for 53 percent of the total, another indication that there wasn't a marked preference for large deal sizes across the board.