The value of merger and acquisition (M&A) deals deflated by 85% in the first month of the year due to the absence of large ticket transactions during this period. The month saw 36 transactions worth $ 2.3 billion, according to Grant Thornton’s monthly Dealtracker. The deal volumes also fell by 23% compared with January 2018.
January 2018 had recorded four transactions in the billion-dollar category aggregating to $13.9 billion compared with only one such deal witnessed in January 2019, which was valued at $ 1.3 billion. The average deal size in January 2019 reduced significantly to $64 million from $322 million in January 2018 and $234 million recorded in December 2018.
The overall fall in the deal activity is also be attributed to the recent uncertainty around trade and Brexit, current fiscal conditions due to exchange rate volatility and rising crude oil prices that have resulted in the absence of big-ticket transactions as compared to January 2018.
“Inactivity in domestic M&A transactions mostly impacted the M&A report card for January 2019. Consolidation for creating leadership position, sale of non-performing business and expansion to new geographies were the underlying themes for key transactions last month,” said Pankaj Chopda, director, Grant Thornton India LLP, in a statement.
In January, focus was primarily on pharma, healthcare and biotech, manufacturing, IT and ITES, and banking and financial sectors for M&A transactions. Real estate, infrastructure, pharma, healthcare and biotech, and manufacturing are expected to be the sectors of interest based on the announcements in the interim Budget 2019.
“Though the Union Budget has attempted to create a favourable deal environment - as mentioned in our earlier reports - deal activity is expected to be tepid for the part of the year considering the domestic political uncertainty and global economic conditions,” said Chopda.
Domestic M&A deals saw a sharp decline both in terms of deal volumes by 41% and values falling from $12.6 billion to $385 million year-over-year. On cross border deals front, the volumes remained muted.
Pharma, healthcare and biotech sector led the deal activity in January accounting for more than half of the total deal value driven by Radiant – Max Healthcare deal amounting to $1.3 billion. This deal also makes the combined entity India’s third-largest hospital chain by revenue, and will operate more than 3,200 beds through 16 hospitals across India, making it fourth-largest by capacity.
Contrary to previous months, the IT sector led the deal pack with eight deals valuing at $ 42 million, spread across IT solutions, mobile VAS, BPO, and hardware segments. Education, agriculture and manufacturing sectors were active last month recording big-ticket transactions valued over $100 million.