M&A Activity Falls To $14.58 Billion In 2023, Lowest In 12 Years

MUMBAI: Hit by a dearth of big-ticket deals, India’s merger and acquisition (M&A) activities fell 6.24 times to $14.58 billion in calendar year 2023 (YTD), its lowest in the past 12 years. While geopolitical developments have played their part, the deal-making scenario continues to be restrained for the rest of the year.

In comparison, the deal size (including M&As and PEs) for the entire 12-month period of 2022 — across domestic, inbound and outbound — stood at $91.45 billion, according to data collated by advisory firm Grant Thornton Bharat.

“This year is poised for a substantial decline in deal values compared with 2022, mainly due to the absence of multibillion-dollar transactions of previous year, which were collectively valued at a staggering $68.2 billion. The highest deal observed in 2023 was Suraksha Realty’s acquisition of Jaypee Infratech in an insolvency case, valued at $2.45 billion, followed by Walmart’s 4% stake in Flipkart worth $1.4 billion,” Shanthi Vijetha, partner at Grant Thornton Bharat, told FE.

The other major transactions in 2022 included the HDFC–HDFC Bank merger (domestic deal valued at $40 billion), L&T-Mindtree merger ($17.7-billion domestic deal) and Gautam Adani’s controlling stake in Ambuja Cement from Holcim ($10.5-billion outbound deal).

“As it stands, this is shaping up to be the most challenging year for M&A deals in terms of both volumes and values in the past 12 years, recording its lowest. Not surprisingly, this is in the midst of challenges like rising interest rates and geopolitical instability, potentially leading to cautious investments even by the domestic conglomerates who led both domestic and cross-border deals,” Vijetha added.

The total domestic M&A deals fell to $8.7 billion in 2023 (YTD) from $70.75 billion in 2022 and outbound fell to $1.69 billion (from $17.94 billion), while inbound rose to $4.17 billion ($2.75 billion). Walmart’s acquisition of a minority stake in Flipkart Online Services for $1.4 billion in August topped the charts in inbound deals, while Proximus Opal’s buy of a controlling stake in Route Mobile for $721 million came in second.

According to Sonia Dasgupta, MD & CEO (investment banking) at JM Financial, “the rising global interest rates have made it expensive to fund acquisitions, especially by financial sponsors. The geopolitical developments have also made the deal-making scenario restrained. Maximising profitability and developing synergy in terms of cost, market, innovation and operations have taken precedence over building scale. At present, companies are focussed on closing value-accretive deals rather than investing in cash-intensive transactions for immediate outcomes.”

“Having said that, dealmaking is expected to gain momentum going forward as corporates are well-capitalised to close high-value deals. Investors are sitting with investable funds. They are scouting for opportunities in financials, healthcare and consumer and emerging sectors like renewables. Long-term value-creation will be the underlying theme,” Dasgupta added.

However, many fear the deals during the remaining days in November and the entire December would not be enough to “stitch” enough deals to match that of 2022.

According to Grant Thornton Bharat, the Indian deal market recorded 122 deals valued at $2.5 billion in October 2023, while the month recorded a 14% rise in deal volumes.

In 2023, the pharmaceuticals and healthcare sector has become the showstopper yet again, with as much as 130 deals worth $6.8 billion (January-September) as companies expanded product base and diversified into newer markets.

Source: The Financial Express

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