Indian Mergers and acquisition investments Increases four fold

Outbound Mergers and acquisition investments in India quadrupled in the first half of 2010, due to increased investment takeovers by Abbot Laboratories and Bharti Airtel.  This was a sharp increase, when contrasted to 2009 figures, strengthening the belief that corporates are becoming optimistic about revenue prospects. On the overall, about a sixth of the total business deals, at about $242.1 billion, undertaken in Asia were done by Indian companies, marking a sixth of the 5,078 deals, a percentage increase of 21%.

To cap it all, Bharti Airtel’s acquisition investment in Zain Africa was tops in Asia. According to Thomson Reuters M&A report, about $40 billion was spent in M&As by Indian firms in the first six months of 2010, by far the best performing half ever since 2007. M&A Head at BankofAm Merrill Lynch, Raj Balakrishnan, said the 2010 calendar has witnessed outbound M&A investments increase considerably on the back of impressive economic growth and valuations in India.

He hopes that interest in outbound activity will continue as Indian firms look for expansion globally, with medium sized deals, as well as other huge, over a billion dollar deals. In the investment acquisitions rush, Bharti took the leading role against its rival, Reliance, with the acquisition of Zain Africa in February. On the other hand, the Mukesh Ambani led Group, Reliance Industries, is currently seeking investments in the US shale gas ventures, the most recent being the $1.3 billion purchase of a 45% stake in Pioneer Natural Gas Resources.

On the other hand, inbound M&As into India saw the purchase of Indian companies with Abbot investing a whooping $3.72 billion for the takeover of Piramal Healthcare’s formulations business. On sector basis, the Indian telecoms sector led in the deals with a cumulative $13.8 billion worth of investments, both inbound and outbound.

In the 2008/2009 period, India experienced a lull after the 2004/2007 bull Run that left many firms struggling to keep afloat financially, for instance companies such as Dr Reddy’s Laboratories and Tata Motors.

With its population offering a suitable growth environment, some global major companies have been willing to offer more for Indian companies since it has a burgeoning demand market, subsequently signaling an increase in inbound M&A investments.  However, Inbound M&A deals have been on the decline with regard to valuation resistance but it is expected to make a comeback as global conglomerates realize India’s market potential, said Balakrishnan.

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