M&A activity lost steam as outbound deals surged in H1

Industry:    2021-08-04

Merger and acquisition (M&A) activity slowed in the first half of 2021 in India with inbound M&A deals falling to $14.4 billion from $26.1 billion in the year-ago period, according to a report by PwC. M&A activity in H1 2021 was also lower than the deals worth $17.7 billion in H2 2020, the report said.

“Outbound deals grew significantly in H1, while because of various travel restrictions, inbound deals were impacted significantly. Also, for inbound deals, you need to be cash-rich in your home country, so since many of these international acquirers were facing challenges in their domestic economies, they could not give enough time and attention to outbound activity,” said Dinesh Arora, partner and leader, deals, PwC India.

Inbound activity amounted to only $0.5 billion in H1 2021, or 4% of the total M&A activity.

“There should be a good revival for inbound interest in the second half. On the industrials side, people are planning out China+1 strategy, so that will see some manufacturing activity shift to India, though some of it may happen in greenfield situations and not brownfield,” Arora added.

The M&A space continues to be dominated by domestic deals with activity worth $6.2 billion in H1, PwC said.

Domestic activity was driven by big-ticket deals, including the $1-billion acquisition of Aakash Educational Services by Byju’s. Adani Ports was also a major contributor with its acquisition of a 89.6% stake in Gangavaram Port for $755 million. Besides, India Grid Trust completed the largest transmission project deal wit the acquisition of NER-II Transmission from Sterlite Power for $637 million.

Outbound acquisitions by Indian companies saw a sharp increase in H1 on the back of a few mega deals, said PwC.

“H1 2021 was marked by the dominance of billion-dollar outbound deals. Adani Green’s acquisition of SB Energy India for $3.5 billion was the largest deal recorded in H1. The number of deals recorded in the renewable energy space increased in this period. Wipro was one of the major contributors towards high-value outbound deals with the acquisition of UK-based Capco for $1.45 billion,” it added.

To be sure, while M&A deals slowed in H1, private equity (PE) investments saw a surge.

“PE activity kept the momentum going in H1 2021 and recorded deal value worth $26.3 billion, up by 19% and 25% from H2 2020 and H1 2020, respectively,” said PwC.

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