Merger and Acquisition (M&As) activity during the month of August has recorded an eight-month low with 33 deals aggregating to $0.6 billion. With a drop in the mega deals, the average deal size decreased to $19 million from the $178 million recorded in the previous month.
On account of the absence of big-ticket transactions, August recorded the lowest deal values in 2018 – $2 billion across 100 M&A and PE deals. Only six deals valued over $100 million each took place as compared to two billion-dollar deals and six deals valued at and over $100 million each in August 2017, according to Grant Thornton India LLP,
The month recorded only two deals valued over $50 million each compared to five such deals recorded in August 2017. Compared to July 2018, the month witnessed a significant drop in the deal trend both in terms of deal values by 93 per cent and deal volumes by 33 per cent. This was primarily on account of the absence of billion-dollar deals that were recorded in July in addition to seven big-ticket transactions valued over $100mn compared to only two such deals executed in August 2018.
However, despite the drop, the current M&A environment is "quite healthy".
Driven by Constellation Alpha Capital Corp’s acquisition of Medall Healthcare Pvt Ltd for $212 million, the healthcare sector led the deal activity with 37 per cent of the total M&A deal values followed by media & entertainment (22 per cent) and startup (19 per cent). On the other hand, Contrary to the previous month, the month was driven by activity in the startup sector, which accounted for 37 per cent of deal volumes.
Pankaj Chopda, Director, Grant Thornton India LLP said that M&A transactions reported about 30 per cent decline in volume and value terms in August 2018 as compared to August 2017. Lack of conclusion on large ticket IBC transactions and other domestic or cross-border transactions impacted the deal report card in August 2018. Pharma, healthcare & biotech and Media & Entertainment sectors witnessed the maximum activity.
Considering the proximity that BFSI, Consumer & Retail, Manufacturing, IT&ITES and Pharma, Healthcare & Biotech sectors have to consumer consumption trends and lifestyle, these sectors are expected to witness M&A deal activity. Further, lack of relief to power companies facing insolvency suits under the IBC law will also drive M&A transactions in the sector.
"India continues to see strong growth in deal activity, backed by cross-border M&A and domestic consolidation, largely spurred by the bankruptcy process. The year so far has marked a record $87.6 billion across 869 M&A and PE deals, with deal values almost doubling compared to the same period last year, supported by increased multi-billion-dollar transactions," Chopda said.
M&A deal values recorded a robust 2.3 times increase YoY. This was primarily on account of revived domestic and cross-border deal activity, witnessing an increase of around seven times in deal values.
The year so far has registered 12 deals in the billion-dollar category and 33 deals valued at and over $100 million each compared to only two deals in the billion-dollar category and 23 deals valued at and over $100 million each in YTD 2017.
The telecom, e-commerce, manufacturing, energy, agriculture, banking and IT sectors led the deal activity, capturing 94 per cent of the total deal values. On the other hand, the start-up sector dominated the deal volumes with a 23 per cent share.
In August, Pharma, health and biotech attracted $235 million with two deals, while media and entertainment sector $135 million with four volumes, start-ups have reported $119 million across 12 deals. IT and ITEs sector $59 million across three deals and Hospitality and leisure $19 million across three details.
The deals in startups were high due to established corporates targeting them to digitise their operations, leverage operational efficiencies and expand consumer base.
The media and entertainment sector was active this month with four deals, of which two were in the entertainment (Multiplex and gaming) space.