Lower M&A activity reported in quarter ended September over last year

Local and foreign firms reported lower mergers and acquisitions (M&As) activity in the three months ended 30 September as against a year ago, with many seemingly waiting for higher valuation and more business-friendly policies from the new government, Live Mint reported.

In the third quarter of 2014 a 65.2 per cent decline was registered in the value of M&A deals, according to a report released by deal tracker Mergermarket on Monday.

Since the beginning of the year, India  witnessed $21.7 billion worth of M&A deals as against $22.3 billion in the whole of calendar 2013, primarily due to big-ticket transactions announced in the three months ended 30 June.

For instance, Sun Pharmaceuticals Ltd's acquisition of Ranbaxy Laboratories Ltd, which was announced in April, was valued at $3.9 billion and in the same month, Diageo Plc launched its $3.1 billion open offer for the acquisition of a 26 per cent stake in United Spirits Ltd.

In the September quarter, however, only $4.7 billion worth of deals were seen.

Inbound M&A activity in the quarter was registered at its lowest since 2009.

''Investors are likely to be waiting for new rules to become official that will entice more inbound investment in the mid to long term,'' the report said. According to investment bankers higher expectations from sellers were also resulting in delays.

According to Sanjay Bhandarkar, managing director, N M Rothschild & Sons (India), there was another avenue for raising money, so promoters were taking stock, Business Standard reported. He added, the economic environment had changed from gloom to optimism, so unless it was a desperate situation promoters would like to explore other options before getting into an M&A transaction.

Further, 2014 had been bad for inbound deals which at $10.2 billion marked a five-year low with inbound M&A deals in January-September 2013 worth $12.1 billion.

According to Anjali Piramal, head of strategy for the Asia Pacific at Mergermarket, a few deals were held up over pricing. She added as valuations of listed players improved, promoters of private companies could hold on for better prices.

Sectors such as e-commerce had already seen frothy valuations reflected by peers abroad. According to Manisha Girotra, chief executive officer of Moelis & Company in India, the valuation expectations had certainly gone up with the re-rating of the economy, but the issue was not as much at seller side as at the buyers. FDI (foreign direct investment) was not happening and investors needed to be convinced about policy stability and other regulations, she said.