#m&a activity, #pe deals

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An accelerated immunisation drive and a regulated reopening of economic activities have led to increased buoyancy in the deals segment which saw Q3 recording a total of 597 mergers and acquisitions (M&A) and private equity (PE) deals, according to a Grant Thornton Deal Tracker Report.

This represents a hefty increase of 86 percent over deals announced during the same period last year. Compared to Q2, Q3 2021 recorded a 33 percent increase in the deal volumes while values dropped by a marginal 4%. The quarter also witnessed the highest number of IPO issues in over a decade with 18 issues amounting to $5 billion.

KEY DEAL TRENDS: RETURN OF CROSS-BORDER ACTIVITY?

A) Q3 witnessed two marquee inbound transactions with PayU’s acquisition of Billdesk worth $4.7 billion and Sumitomo Mitsui Financial Group’s acquisition of Fullerton India Credit Company estimated at $2 billion. These two deals alone accounted for over 52 percent of the total M&A value in Q3.

B) Driven by lower interest rates and cash-rich Indian businesses, corporates such as Bharti Airtel, Mphasis, Strides, Lupin coupled with well-established unicorns, Byju’s, and upGrad were able to engage in overseas acquisitions. This trend is expected to continue as companies are on the watch for scaling operations in international markets, acquiring complementary business capabilities, and filling the gaps in their existing portfolios through acquisitions at lucrative valuations.

Overall, although there were six high-value M&A deals valued at and over $500 million in Q3 2021 totalling $ 9.2 billion, the majority of the M&A deal values were driven by smaller-ticket deals and those deals whose values were not disclosed.

2021 has seen greater resilience, digital insurgency, and inventions driving the deal activity in recent months. The year witnessed growth every quarter and we expect the trend to continue for the coming quarters. The monthly expansion in services and manufacturing activity coincided with relatively low new COVID-19 cases and enhanced pace of vaccinations across the nation,” said Shanthi Vijetha, Partner, Grant Thornton Bharat.

PE DEALS REIGN SUPREME; STARTUPS STEAL THE SHOW

PE deals had an action-packed Q3 with all-time high deal activity in volumes and values at $17.1 billion, across 486 investment rounds. Both volumes and values saw a 2x increase compared to Q3 2020. Compared to the previous quarter the volumes were up by 44 percent and value saw 24 percent growth. As many as 11 unicorns emerged during the quarter.

Start-ups claimed a major share in deal volumes at 64 percent, while e-commerce trumped in deal values with a 30 percent share. Retail and consumer, education, and pharma sectors remained active together constituting 11 percent of PE volumes. High-value investments were also witnessed in sectors such as IT, telecom, education, banking, media and entertainment, energy, manufacturing, hospitality, and pharma.

IPOs AND QIP’s: IS THERE A TREND REVERSAL?

The year witnessed companies raising the highest amount through the IPO route in over a decade for the YTD period, with 42 issues amounting to $ 10.3 billion. Despite the impact of the COVID-19 pandemic, the country witnessed a record number of IPOs this year. Ample liquidity, robust demand, and investor appetite saw Q3 2021 recording the highest number of issues in any given quarter, since 2011, with 18 issues amounting to $5 billion.

There has been a trend reversal in 2021 compared to 2020 when QIPs dominated the market. YTD 2021 recorded 28 QIPs issues amounting to $ 5.2 billion, 43 percent lower fundraising. Issue volumes, on the other hand, recorded the highest for the YTD period since 2011, Q3 however, saw only seven QIP fundraises.

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