Merger and acquisition activity to touch $ 56.2 billion

New Delhi: Corporate India's merger and acquisition (M&A) activity touched a six-year high in 2016 with deal value touching USD 56.2 billion, and the momentum is expected to sustain this year as well, says an EY report.

The report said a total of 867 deals with disclosed value of USD 56.2 billion were announced during 2016, up 87 per cent over the previous year, while the number of transactions declined by 2 per cent.

This surge in deal value was largely owing to big-ticket acquisitions. There were 12 billion-dollar-plus deals totalling USD 34.4 billion in 2016. The largest transaction of 2016 was the USD 12.9 billion acquisition of Essar Oil Limited (98 per cent stake) and Vadinar port by Russia's state-controlled petroleum giant Rosneft Oil Company-led consortium.

Sector-wise, oil and gas led in terms of the deal value, followed by financial services. From the volumes perspective, technology, infrastructure and financial services sectors dominated in 2016.

"M&A activity in India was buoyant in 2016 with the announcement of several big-ticket deals. The momentum is expected to sustain in 2017 as the Indian government continues its focus to improve business and investment climate in the country.

"Sectors like technology, life sciences and financial services are expected to attract significant investor attention," said Amit Khandelwal, Partner and National Leader Transaction Advisory Services, EY.

According to the EY report, significant momentum behind the M&A activity was driven by an increased consolidation across sectors as companies divested distressed assets in an effort to reduce debt.

On the other hand, corporates with stronger balance sheets were seen deploying funds towards acquisitions and consolidating their market position. The year saw 505 domestic deals totalling USD 25.1 billion.

Meanwhile, restructuring also emerged as an important factor for the robust M&A activity, with companies' focus on optimising their portfolios, and maximising operational efficiency with the aim of unlocking value for shareholders.

A total of 60 restructuring deals with an aggregate disclosed value of USD 7.7 billion were recorded during 2016, as compared to 44 such deals worth USD 4.3 billion in 2015.

Some of the prominent examples include the merger of Grasim Industries and Aditya Birla Nuvo, two subsidiaries of Aditya Birla Group and demerger of Talwalkars Better Value Fitness' gym business into a separate company, Talwalkars Lifestyles.

Meanwhile, a total of 362 cross-border deals with a cumulative disclosed value of USD 31.1 billion were clocked in 2016.

The US sustained its position of being the most active cross-border partner with a total of 93 cross-border deals (50 inbound; 43 outbound), followed by the UK (21 inbound; 23 outbound) and Singapore (16 inbound; 8 outbound), the report said.