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M&A: India Arrives

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After avoiding the M&A market for two years during the global recession, companies based in India are on the lookout for acquisitions as a means of boosting growth. Cross-border deals across the globe are being boosted by China and India which are at the center of a bidding war for global resources, especially energy and metals. Indian companies are now able to do deals that would have eluded them a few years ago. Of late, Indian companies have been involved in some high-voltage cross-border M&A deals which include the takeover of Zain Africa by Bharti Airtel, Vedanta Resources acquiring Cairn India from Cairn Energy and of course the latest -- Sun Pharma acquiring Israel's Taro.

There is also news of Sahara Parivar being in talks to buy the debt of struggling film studio Metro-Goldwyn-Mayer for $1.5 bn to $2 bn.

According to Ernst & Young's Capital Confidence Barometer, some 54 per cent of the Indian companies surveyed in April said they were likely or highly likely to acquire other companies in the next 12 months.

 Yet another survey conducted by global consulting firms Mercer and Kroll revealed that cross-border merger and acquisition deals involving Indian companies may rise considerably in the next 18 months.

Here are some hard facts in the Indian M&A scenario

M&A value in India in August 2010 grew nearly seven fold to $4.2 billion, up from $629 million in August 2009.

• The number of domestic deals increased from 20 in August 2009 to 27 in August 2010. The value of domestic deals decreased from $521 million to $364 million over the same period.

• In terms of value, the number of outbound deals jumped from $60 million in August 2009 to $3.35 billion in August 2010.

• Inbound deals increased to 10 valued at $442 million in August 2010 up from 8 deals worth $39 million in August 2009.

• Energy, Industrials and Consumer Discretionary were the most targeted sectors for M&A's with deals worth $3.1 billion, $325 million and $310 million respectively.

Deals That Failed

As VCCEdge, the financial research platform of VCCircle, pointed out in a recent report, nearly nine deals worth $27 billion that were crowed about over he last 14 months have been called off since January.

The Ambani brothers accounted for $25 billion of the cancelled deals. The biggest non-starter was big brother Mukesh Ambani-led Reliance Industries' $14.5-billion bid for LyondellBasell.

No.2 in terms of deal value was the failure of the Anil Ambani run Reliance Communications' $10.8-billion merger deal with GTL Infra.

According to SMC Capitals Equity Head Jagannathan Thunuguntla: "The failure of the mega deals was primarily due to valuation concern. Management control issues and strategic unsuitability of the deals was another reason for cancellations."

RIL forayed in the hospitality sector in August by picking up a 14.18 stake in EIH Ltd, promoted by Oberoi group of hotels and resorts. This was his seventh acquisition in the current year.

(Reuters)Early in the year, EIH also witnessed a deal cancellation of $272 million in which Max Hospital's founder and chairman Analjit Singh was interested in 17 per cent stake in the hospitality major.

Other than the Ambani brothers, another significant deal that did not work was Singapore's GIC Special Investments' $84.7-million bid for 6.58 per cent stake in the billionaire brothers Malvinder Singh and Shivinder Singh led Fortis Healthcare.

Naveen Jindal led Jindal Steel and Power (JSPL) was also denied a stake in Zimbabwe Iron & Steel, estimated to be in the range of $600 million- $1 billion as the government did not approve of selling the ailing company to large corporates.

Other transactions that turned sour this year include — US-based Scripps Networks Interactive attempt to buy stake in NDTV Lifestyle, drug major Abott Laboratories' interest in Wockhardt, multiplex chain PVR Cinemas' bid for DT Cinemas and Ingersoll Rand USA's attempt to merge the Indian subsidiary into itself.

Global Biggies

Worldwide M&A has continued to grow for three consecutive quarters and totaled $1.678 trillion, up 21 per cent from a year ago, so far this year.

In the third quarter, M&A activity totaled $599 billion, up 35.6 per cent from a year ago, marking the strongest quarter for worldwide M&A in two years.

Energing markets also arrived in the global M&A scene with BRIC deal activity accounting for 18 per cent of M&A for year-to-date 2010, a record. Overall BRIC M&A is up 65 per cent from year-to-date 2009.

(Reuters)The Potash Corp deal which has the potential to be the largest deal of the year remains in limbo with the company filing a lawsuit against BHP Billiton that seeks to block the mining giant's $39-billion hostile bid and intensifies the month-long takeover battle for the Canadian fertilizer company.

Another unsolicited, megadeal remains unresolved as Sanofi-Aventis has failed to draw Genzyme Corp into talks with its $18.5 billion offer.

The boldest example of topping bids came from Hewlett-Packard Co, which won a bidding war with Dell Inc for data storage company 3PAR Inc with a $2.4 billion offer. The deal valued 3PAR at more than eight times sales, which many analysts slammed as too high for a company that has barely made a profit since it was founded in 1999.

The largest private equity deal of the year, announced last month (August), was Blackstone Group's $4.76 billion purchase of Dynegy Inc.

Click here to view enlarged imageAmong Hopstile bids, Korea National Oil Corp. took control of Britain's Dana Petroleum, paving the way for the biggest hostile acquisition by a South Korean firm

Novartis and Nestlé have wrapped up a $28.3 billion all-cash deal in August that gives Novartis, the Swiss drug giant, a controlling stake in the eye-care company Alcon.

Teva entered into a definitive agreement to acquire Ratiopharm, Germany's second largest generics producer and the sixth largest generic drug company worldwide, for an enterprise value of $3.625 billion.

In May, Abbott Laboratories announced the $3.7-bn acquisition of the generic drugs unit of Indian conglomerate Piramal, in a move which significantly increases the US group's emerging market presence.


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