M&A tracker

February 2011 has been a good comeback month for India's M&A activity. The month saw Indian corporates seal deals worth over $8 billion, three times what was recorded a month before, in January (about $2.6 billion), according to the data put out by Thomson One Banker and E&Y analysis.

A large portion of the deal value, however, was pepped up by the mega deal between Reliance Industries and BP. In a recently forged deal, BP Plc agreed to buy a 30 per cent stake in Reliance Industries' 23 oil and gas blocks for about $7.2 billion. That, by contrast, there was no mega deal struck in January also helped.

But while M&A deal values surged sequentially, it remained poor in comparison to the year-ago period, with values falling by 54 per cent and volumes by 35 per cent. In February 2010, India Inc. struck M&A deals worth about $17 billion across 110 deals. Besides, there were two mega deals in February last year — $10.7-billion Bharti-Zain and $4.8 billion deal involving ONGC, IOC and Oil India to jointly develop a crude oil block in Venezuela with Spain's Repsol YPF SA. (Mega deals include deals with value greater than or equal to $1 billion.)

Another notable difference in the transaction landscape was that while the two mega deals made last February were outbound in nature, the one struck last month was inbound.

Inbound deals dominate

On the whole, however, there was a definite interest in inbound deals, with such deals making up over 93 per cent of the total transactions value during the month. In contrast, domestic and outbound deals experienced relatively less activity, with a 2 per cent and 5 per cent share respectively in the total deal value pie. While it may be too premature to say if the tides are turning inbound, trends in this space will need to be monitored closely. In terms of volume (deal count) though, domestic deals dominated the space. Of the total 71 deals struck during the month, 42 were domestic deals, while inbound and outbound made up 17 and 12 deals respectively. Lower valuations and benign business environment in the country may have helped the trend.

Oil & Gas lead the way

Thanks to the Reliance-BP deal, it was the oil and gas sector that emerged a clear majority in terms of sector shares in the mergers and acquisition space for the month. The sector saw three deals being struck for a total value of about $7.55 billion. At a distant second was the logistics sector, with three deals for an aggregate value of $108.4 million. Paper, education and healthcare were among the other sectors that saw considerable M&A interest during the month.

The dynamics, however, were different in terms of deal count, with industrial products registering the highest deal activity, having struck 10 deals. Retail and consumer products (8), financial services and technology (6 each) and automobiles and media and entertainment (4 each) were among the other sectors that saw notable activity.

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