Mergers and Acquisitions records drastic decline in 2019, likely to pick up in 2020
HYDERABAD: Corporate Mergers and Acquisitions (M&A) saw a drastic dip in 2019 according to multiple estimates, but the activity is likely to pick up pace in 2020.
According to Grant Thornton, M&As in January-November 2019 saw a significant decline in the deal value due to 14 marquee billion-dollar deals witnessed in the same period of 2018 compared to only four this year. Sector-wise, manufacturing, energy, start-up, pharma, banking, IT, infra, retail and consumer and e-commerce sectors led the pack accounting for over 91 per cent of the total overall deal value.
On the other hand, start-up and IT sectors continued to dominate capturing 36 per cent of the total deal volumes. Going forward, experts see M&A activity to remain steady in 2020 due to the government’s disinvestment process and resolutions under the Insolvency and Bankruptcy Code, such as Essar Steel and others.
According to Ernst & Young (EY), the overall M&A activity during January-November 2019 stood at $33 billion across 812 deals and the average deal size was $81 million — the lowest in last three years. The average deal size stood at $199 million in 2018 and $97 million in 2017.
Domestic and inbound deals were main contributors to both deal volumes and the deal value. Domestic deals constituted the largest part of M&A activity comprising 64 per cent in terms of deal count and 58 per cent in terms of disclosed value. Inbound deals contributed 24 per cent of the total deal count and 36 per cent of the disclosed deal value.
“General elections overhang led to lower domestic deal activity in the first half of 2019 and though we had the outcome of a clear election, the domestic deal activity remained muted in the second half due to the slowdown in the economic activity,” said Ajay Arora, partner, EY India. The government is targeting March 2020 for divestment of BPCL and Concor stake and collectively these should contribute close to $12-15 billion to deal value, it said.