M&As in India to hit cyclical peak in 2019, says Baker McKenzie
Mumbai: The mergers and acquisition activities in India involving Indian companies are expected to gather pace in coming months following the government’s continued effort in removing regulatory hurdles and simplifying laws to further attract foreign investment.
According to Baker McKenzie, the Indian M&A is likely to reach its cyclical peak of $52.8 billion in 2019 before cooling thereafter as valuations become stretched and the cost of finance rises.
In 2017, the total value of M&A transactions is expected to reach $46.5 billion (944 deals) boosted by Rosneft’s $13 billion takeover of Essar Oil.
The 2017 figure represents a 165 per cent increase in value and a 70 per cent jump in volume from 2016 ($17.5 billion and 553 deals).
The global consultancy firm expects around 527 domestic M&A transactions worth $22.3 billion to get completed in 2018 while 351 cross border M&A deals valuing $25.6 billion are likely to get closed during the period.
It added that the Indian IPO market is also likely to see a flurry of fund raising activity in the coming months as institutional and retail investors look for productive avenues to invest in, in a market with a shrinking interest rate, low bond yields, capped gold investments and real estate investments under scrutiny.
The Indian IPO is set to reach the record-breaking value of $6.8 billion this year following the government’s plan to raise Rs 72,500 crore from disinvestment including Rs 15,000 crore from strategic asset sales.
“I think the flurry of IPO activities is likely to continue for the rest of this year and well into the early part of 2018, as corporate India seeks to take advantage of a surging Indian equity market. As the country prepares for the general elections in 2019, I will not be at all surprised to see a surge of IPOs by private companies in the next few months before the deal window closes,” said Ashok Lalwani, head of Baker McKenzie’s Global India Practice.