M&A activities sluggish in January-March; 33% decline in deal value to $12.5 billion: Grant Thornton Report

New Delhi: The first quarter of 2019 recorded 110 merger and acquisition deals worth $12.5 billion (about Rs 86,500 crore), a 33 percent fall in value terms as against the year-ago period, due to factors such as global economic conditions and uncertainty around Brexit, according to a report. As per Grant Thornton’s quarterly deal tracker report released Wednesday, “This drop (in value) can be attributed to delays in execution of deals, growing complexity in deal structures and macro-economic factors like upcoming elections, global economic conditions, and uncertainty around Brexit dampening investor sentiment.” However, the quarter recorded a marginal increase in deal activity as compared to the fourth quarter of 2018, owing to encouraging factors such as proceedings under the Insolvency and Bankruptcy Code, divestments of non-core assets that have no synergies with larger group firms, drive in stressed asset space and cleaning up of bad loans. The deal volume witnessed a seven percent decline as compared to the first quarter of 2018 when it stood at 118, the report added. This quarter witnessed an encouraging trend with a two percent increase in deal value and a seven percent increase in volume as compared to the fourth quarter of 2018, demonstrating a positive and promising deal sentiment. [caption id=“attachment_2010949” align=“alignleft” width=“380”] Representational image.[/caption] “Although we entered 2019 with substantially less momentum with 110 M&A deals worth $12.5 billion compared to 118 deals worth $18.7 billion in Q1 2018, some big deals announced this year have provided some encouragement that the outlook for M&A will be healthy despite a drop,” said Grant Thornton India Director Pankaj Chopda. The announced deals include Arcelor Mittal’s acquisition of Essar Steel for $7.2 billion, Radiant Life care’s merger with Max healthcare for $1 billion, he said. Strengthening market position through consolidation and geographical expansion along with monetisation of non-core assets to strengthen the core business were the key drivers for the transaction during the quarter, Chopda added. “We expect to see an uptick in M&A deal activity across domestic, inbound and outbound segments spurred by action from the financial services sector to minimise NPAs, and the US-China trade war being favourable in boosting India’s manufacturing exports,” he said. Deal value increased exponentially in March 2019 with over 5 times as compared to March 2018. The month recorded the highest value in the past seven months on the back of eight high-value transactions despite a 6 percent fall in volume. Two deals of $2 billion each were recorded in manufacturing and pharmaceutical sectors in the first quarter of 2019 and 15 deals valued and estimated at and over $100 million each together contributed 93 percent to the total M&A deal value and 15 percent to the M&A volume, thus demonstrating an appetite for big-ticket deals and an uptick in deal activity amid other uncertainties.