M&As falter in 2012, to see revival in the new year

Mergers and acquisitions activity in 2012 failed to live up to the expectations raised in the previous year, which saw a surge in such deals, particularly inbound.

In 2012, deals fell both in value and volume terms, thanks to the ongoing euro zone crisis, slow recovery in the US, a weak rupee and a volatile stock market.

According to Grant Thornton, the period from January 1 to December 15, 2012 witnessed 582 M&A deals, totalling $41.5 billion, compared to 644 deals worth $44.6 billion in 2011. The 2012 figures include mergers and internal restructuring of $14.8 billion, bereft of which deal value fell as much as 39 per cent.

"At the start of the year, we were hopeful of several transactions happening," said Raja Lahiri, partner, transaction advisory, Grant Thornton. "The optimism sprang from the experience in the last two years, when there was a big interest in inbound deals from Japan, the US and Europe, riding on the India growth story."

Value of inbound deals fell sharply to $7 billion compared with $29 billion in 2011 and $9 billion in 2010. "The triggers (for the slowdown) were there from the first quarter, when the GDP growth slowed. The second trigger was the Vodafone tax issue, and the GAAR amendments proposed in the Budget. The issues surrounding telecom were a dampener, too."

But the year has been a landmark one for corporate India, when companies that borrowed heavily to fuel expansion came in for a reality check, bogged down by slowing cash flows and high interest rates. Mounting debt also forced some promoters to sell part of their assets. Vijay Mallya, who shut down operations of his ailing airline Kingfisher, sold 53 per cent in United Spirits to Diageo for around $2 billion while Kishore Biyani sold a controlling stake in Pantaloon to Aditya Birla Nuvo in a Rs 1,600-crore deal.

... contd.

Please read our terms of use before posting comments
TERMS OF USE: The views, opinions and comments posted are your, and are not endorsed by this website. You shall be solely responsible for the comment posted here. The website reserves the right to delete, reject, or otherwise remove any views, opinions and comments posted or part thereof. You shall ensure that the comment is not inflammatory, abusive, derogatory, defamatory &/or obscene, or contain pornographic matter and/or does not constitute hate mail, or violate privacy of any person (s) or breach confidentiality or otherwise is illegal, immoral or contrary to public policy. Nor should it contain anything infringing copyright &/or intellectual property rights of any person(s).
comments powered by Disqus