Corporate India's merger and acquisition activity in the July-September quarter witnessed a downtrend with total deal value falling by more than half over the last year, largely owing to a slump in economic activity and lack of big ticket deals, says a report.
According to Grant Thornton's quarterly M&A Dealtracker 2019, in the third quarter of this year, corporate India announced deals worth USD 6,025 million through 97 deals against 134 such transactions worth USD 13,185 million in the same period of the last year.
"Despite the government's effort to revive sentiments, market performance remained muted due to global and domestic growth concerns. There was a steep decline in the M&A deal activity in third quarter 2019 with total values dropping by more than half as compared to Q3 2018, largely driven by a 71 per cent fall in cross-border deal values," Pankaj Chopda, director of Grant Thornton India LLP said.
The third quarter of this year was dominated by M&A deals in the IT and ITeS sector, pushed by consolidation in the software development and IT solutions segment, the report said.
Further, core sectors like energy, infra, banking, pharma and manufacturing have succeeded in executing high value deals with a view to build synergies, pare debt, for inorganic expansion, market capitalisation and divestment of non-core businesses amid stiff competition and uncertainties, it added.
Similar to deal values, number of deals also witnessed a 28 per cent fall on the back of 37 per cent fall in domestic M&A deals.
During the January-September period, deal activity continued to witness weak performance both in terms of deal volumes and values as compared to the corresponding period last year.
There were 322 M&A transactions worth USD 23,716 million in the first nine months of this year, while in the same period last year there were 367 such deals worth USD 77,829 million.
"Regardless of this drop, it is encouraging to witness a steady pipeline of deals pushed by distressed asset acquisitions, acquisitions to accelerate topline growth through new and attractive market segments and new capabilities, and divestment of non-core assets or businesses, particularly in capital-intensive industries," Chopda said.
He further added that in light of the economic slowdown and depressed capital markets, Finance Minister Nirmala Sitharaman announced a slew of measures, including a rollback of the surcharge on foreign and domestic portfolio investors to increase consumer demand and investments.
"Further, measures such as enhancing the liquidity of banks to shore up purchases by consumers, easing goods and service tax refunds to micro, small and medium enterprises and easing conditions for a beleaguered automotive sector are expected to boost the deal sentiment," he said.