You are on page 1of 6

PE and outbound

drive M&A
Transactions 2016

6,000
3,425

4,000

3,118

2,696

2,509

2,406

Retail and consumer


products

While domestic deals accounted for 55% of the total deal


ngdme]$[jgkk%Zgj\]j\]Ydk[gfljaZml]\ka_fa[Yfldqlgl`]
deal value, accounting for 59% of the same in 2015.

8,000

Infrastructure

2,000
0

Financial services

The decline in deal value can be attributed to a sharp


slowdown in the domestic deal activity through the year,
which declined to a cumulative deal value of US$10.9
billion from 513 deals compared to a total deal value of
US$16.2 billion from 493 deals in 2014. The slump in
domestic deal activity was largely due to the absence of
megadeals, which were quite prominent in the previous
q]Yj KmfH`YjeY%JYfZYpq\]Ydg^MK+&*Zaddagf3
CglYc%AF?\]Ydg^MK*&,Zaddagf!&L`]o]Ycf]kkaf
global markets, owing to a weak outlook and downturn
in the commodity cycle, adversely affected the domestic
deal activity. At the same time, 2015 lacked big-ticket
divestments by debt-ridden companies, which were a
ka_fa[Yfl[gfljaZmlgjlgl`]\ge]kla[\]YdnYdm]af*(),&

Exhibit 2: Five most active sectors by deal value in 2015

Pharmaceuticals

The Indian M&A activity softened in 2015 with a total


of 930 deals that were announced with a cumulative
disclosed deal value of US$26.3 billion. While the deal
volume remained at levels similar to the previous year
0/(\]Ydkaf*(),!$l`]\ak[dgk]\\]YdnYdm]\][daf]\Zq
11% from US$29.4 billion in 2014.

US$ million

Technology, retail and consumer products and


infrastructure were the most active sectors through the
year with respect to the deal volume and accounted for
nearly one-third of the total announced deals in 2015.
From a value perspective, the oil and gas sector was at the
forefront, followed by pharmaceuticals, on account of bigla[c]l MK-((eaddagfYf\YZgn]!gmlZgmf\ljYfkY[lagfk&

Oil and gas

Overall Indian M&A activity


softens

Source: EY analysis of Thomson ONE data

Exhibit 3: Five most active sectors by deal count in 2015


Exhibit 1: M&A activities of Indian companies

32.1
27.2

25

28.4

800
29.4
26.3

700
600

20
2011

2012

2013

Deal value (US$ billion)


Source: EY analysis of Thomson ONE data

2014

2015
Number of deals

91

86

84

60
30
0

Financial
services

763

95

<an]jka]\
industrial
products

30

835

90

Infrastructure

825

900

121

Retail and
consumer
products

870

35

120

Technology

930

150
1,000

Number of deals

US$ billion

40

Source: EY analysis of Thomson ONE data

Transactions 2016 |

Cross-border activity marked by


big-ticket outbound deals

Af*()-$,)/[jgkk%Zgj\]j\]Ydko]j]j]hgjl]\oal`Y
cumulative disclosed deal value of US$15.4 billion, representing
Y)/af[j]Yk]afl]jekg^lglYd\ak[dgk]\\]YdnYdm]^jge
US$13.2 billion in 2014.

Inbound activity demonstrated steady momentum:

9lglYdg^*/*\]YdklggchdY[]l`jgm_`l`]q]Yjoal`
a cumulative disclosed deal value of US$10.2 billion
registering a marginal increase of 5% in volume from
*-1\]Ydkaf*(),Yf\Y/\][daf]af\ak[dgk]\\]Yd
value from US$10.9 billion seen in 2014.

The decline in inbound deal value was primarily driven


by the global slowdown, a weakening of commodity
prices and a deceleration in economic activity in
key emerging markets. These factors drove global
buyers to remain cautious about pursuing big-ticket
acquisitions in the country.

L][`fgdg_q$fYf[aYdk]jna[]kYf\af^jYkljm[lmj]o]j]
the most active sectors for inbound M&A activity
in 2015.

Geographical distribution of deals


2014
Count

2015

Value (US$
million)

Count

Value (US$
million)

Domestic

493

).$*(/

513

)($0.1

Inbound

259

)($0-.

*/*

10,150

Outbound

))0

2,361

145

-$*.0

Total

870

29,424

930

26,287

Kgmj[]2=QYfYdqkakg^L`gekgfGF=\YlY

US continued to be the most active cross-border partner


/0afZgmf\3,*gmlZgmf\!$^gddgo]\ZqBYhYf ++
afZgmf\3+gmlZgmf\!Yf\l`]MC )0afZgmf\3),
gmlZgmf\!&

By count

Exhibit 4: Geographical spread of deals in 2015


2014

57%

2015

55%

30%
29%

13%
16%

Exhibit 5: Five most acquisitive nations for Indian


companies in 2015
100

By value

80
2014

8%

37%

55%

2015

20%

39%

41%
Inbound

Outbound

Source: EY analysis of Thomson ONE data

Outbound drove the years M&A activity in terms of value:

78

60
33

40

Domestic

In the oil and gas sector, state-owned ONGC Videsh


eY\]YdYj_]Y[imakalagf alYffgmf[]\lgY[imaj]Y
15% stake in Vankorneft oil project from Rosneft for
MK)&+Zaddagf!lgZgdkl]j]f]j_qk][mjalq&

16

United
States

Japan

United
Kingdom

Singapore

France

Exhibit 6: Five most targeted nations by Indian companies


in 2015
50

L`akka_fa[Yflaf[j]Yk]af\]YdnYdm][YfZ]YlljaZml]\
to a few big-ticket outbound transactions in the
pharmaceuticals and oil and gas sectors.

20

| PE and outbound drive M&A

16

Source: EY analysis of Thomson ONE data

In 2015, cumulative disclosed deal value was US$5.3


billion up 123% in terms of disclosed value from
US$2.4 billion in 2014.

Pharma players made outbound acquisitions to


increase their customer base, expand distribution
reach and broaden their product portfolios.

18

20

40

42

30
14

10
0

United
States

United
Kingdom

Germany

Source: EY analysis of Thomson ONE data

United Arab Singapore


Em

Restructuring attracts attention


as a driver of domestic activity

During the year, we saw three big mergers in the domestic


arena, which were done with an aim to build healthy
balance sheets, simplify group structures and gain
operational synergies:

Vedantas announced mega-merger with Cairn India,


which has a deal value of US$2.2 billion.

Aditya Birla Groups announced merger of its branded


apparels businesses Pantaloons Fashion and Madura
?Yje]flk^gjMK0)0eaddagf&

MHDkYffgmf[]\e]j_]jg^alkY_ja[mdlmj]k]]\
[gehYfq9\nYflYoal`alk]d^^gjMK.10eaddagf&

At the same time, stakes and assets transfers within group


companies were also reported during the year.

BY_jYfHjYcYk`YfZjgm_`llg_]l`]jalklogjY\ag
businesses, Radio City and Radio Mantra, under
the name Music Broadcast to simplify its ownership
structure and consolidate its ad-sales revenues.
9hgddg?jgmhljYfk^]jj]\alk--&/klYc]af9hgddg
Agro to Gujarat Apollo Industries and Apollo
Earthmovers.

A few examples of spin-offs being concluded during the


year include:

Kmrdgf=f]j_qDl\&k]ddaf_alk?]jeYfkmZka\aYjq
K]fnagflg;]fl]jZja\_]HYjlf]jkDH^gj)&(-Zaddagf
to reduce its debt burden.

<D>ka_f]\\]falan]Y_j]]e]flklgk]dd<L;af]eYk
lgHNJ^gjAFJ-(([jgj]k MK/0&)eaddagf!$afdaf]
with its strategy to sell non-core assets to reduce its
debt burden.

Share repurchases were also a prominent aspect across


many deals. Few examples include:

Hjghgk]\k`Yj]j]hmj[`Yk]hdYfZqBmkl\aYdlglYddaf_
to INR165 crores, while shelving its earlier announced
fundraising plans. The company was expected to
utilize the funds as raised for acquisitions, which
it suspended citing high valuations of internet
companies.

Clariant Chemicals bought back shares for US$54


million, with a view to reward its shareholders by
purchasing the shares at a premium to the prevailing
market price, after selling its Kolshet land.

Exhibit 7: Domestic M&A activities of Indian companies


Deal value (US$ billion)

Max India spun-off its business activities into three


listed companies, which will be individually responsible
for the groups main business activities, namely,
life insurance, health and allied businesses and
manufacturing.

20
16

424

452

448

6.2

5.5
2011

2012

2013

Deal value (US$ billion)

500
400

10.9

8
4

513

16.2

13.9

12

493

300
200
100

2014

2015

Number of deals

Oal`Yf]q]gfghlaearYlagfYf\]^[a]f[q$j]kljm[lmjaf_\]Ydk
e]j_]jkYf\klYc]'Ykk]lkljYfk^]jkoal`af_jgmh[gehYfa]k$
khaf%g^^kYf\k`Yj]j]hmj[`Yk]k!]e]j_]\YkYeYbgj\jan]j
of domestic M&A activity during the year. This trend was also
`a_`da_`l]\Zq]p][mlan]kafl`]G[lgZ]j]\alagfg^=Qk;YhalYd
;gf\]f[]:Yjge]l]j$o`]j]YdYj_]hjghgjlagfg^Af\aYf
respondents expressed cost optimization and operational
]^[a]f[qYkl`]hjae]^g[mk^gjl`]ajgj_YfarYlagfk&

Number of deals

Source: EY analysis of Thomson ONE data

Transactions 2016 |

E-commerce: the game changer


across industries
The e-commerce market in India has been growing
h`]fge]fYddqYlY;9?Jg^-(gn]jl`]dYkln]q]Yjk&
Improving access to the internet, burgeoning 3G internet
users, the recent introduction of 4G and the proliferation of
internet-enabled devices such as smartphones and tablets
means an ever-increasing online consumer base in the country.
Improvements in technology used for online payments,
resulting in their growing acceptability, are further helping a
shift in the shopping patterns of consumers from brick-andmortar to online.

Traditional retailers foray into the online


space to capitalize on the trend

L`][gfn]j_]f[]g^gfdaf]Yf\g^af][`Yff]dk[gflafm]\
in 2015 as the changing buying pattern of consumers
who now expect convenience, a much wider product range
and competitive prices as a norm is creating pressure
on traditional brick-and-mortar players to have an online
presence.
This, however, is also creating opportunity for retailers,
Yk_gaf_gfdaf]e]YfkYoa\]jYf\*,'/j]Y[`$Yf\Yf
opportunity to offer personalization. Consequently, we saw
traditional retailers continuing to venture into the online
space either through tie-ups with e-tailers, or through
acquisitions or the launch of their own online portals.

| PE and outbound drive M&A

A few examples of such deals include:

Aditya Birla Groups entry into e-retail through the


launch of its online fashion store, www.abof.com.

Mahindra Groups foray into e-commerce with the


dYmf[`g^alkgfdaf]eYjc]lhdY[]E*9DD&[gelgk]dd
Yddalkhjg\m[lk$jYf_af_^jgeYmlgegZad]klgfYf[aYd
products.

Tata Value Homes tie-up with Snapdeal to offer its


products for sale.

Traditional players also acquired existing e-tailers. This


route helped them leverage the existing brand name of the
target at reduced investments in terms of money and time.
Examples include:

Mahindra Retails acquisition of Babyoye.com, an


e-retailer of baby-related products.

21st Century Foxs acquisition of Screen Magazine


l`jgm_`alkkmZka\aYjqKlYjAf\aYHnl&Dl\&$lg
ljYfk^gjel`]eY_Yraf]aflgY\a_alYd%gfdqhjg\m[l'
platform Hotstar.

Spencers Retail, the supermarket chain owned by the


Goenka Group acquired the online grocery
store Meragrocer.

Quest to expand scale and market share


steers consolidation within e-commerce

The fast-growing e-commerce industry continued to attract


afn]klgjklgl`akk]_e]fl$Yk]na\]fl^jgel`]kljgf_afgo
of PE and VC funds into e-commerce ventures.

As a result, we saw companies with strong balance sheets


taking the inorganic route to consolidate their position in
the market. These players are considering these deals as a
way to increase their market share by adding a customer
base, upscaling their technology and procuring a better
talent pool.

FglYZdq$Yka_fa[YflfmeZ]jg^l`]k]\]Ydko]j]]imalq
deals, since these were considered safe bets by acquirers
compared with all-cash deals. Equity deals divide the risk
of a failed transaction between the shareholders of the
acquirer and the target.

Examples of such deals include:

9[imakalagfg^D]lk_gegDYZkYf\EYjlegZaL][`fgdg_a]k
by Snapdeal to strengthen its mobile presence.

Acquisition of NexTable and Maple Graph by Zomato to


acquire mobility capabilities with an aim to start online
delivery services.

Acquisition of travel mobile development business of


SourceN Inc. by HolidayIQ to boost its mobile presence.

Acquisitions for securing talent are


becoming a norm
Acquiring the right talent was one of the prominent drivers
of deals in the e-commerce sector. There is considerable
demand for tech talent and acquiring them through acquisition
g^[gehYfa]kakYj]dYlan]dq[ge^gjlYZd]oYqlgka_fa[Yfldq
enhance ones delivery capabilities with reduced risk and
investment that comes with a fresh hiring process. Most of
these acquisitions are structured in a way that the team is
hYa\YZmdcg^l`]egf]q)0*,egfl`kY^l]jl`]Y[imakalagf$
thereby ensuring relatively low attrition rates. Prominent
examples of such deals include:

Acquisition of TaxiForSure by Ola Cabs for US$200


million in cash and equity.

Acquisition of Mygreenbox, an online grocery delivery


service, by Grofers.

Acquisition of Appiterate, an analytics platform, and


AdlQuity, a mobile marketing platform, by Flipkart.

Proposed acquisition of Zo Rooms by Oyo Rooms in an


all-equity deal.

Acquisition of Reduce Data Inc., an advertising platform,


by Snapdeal.

Acquisition of Bakfy, a messaging start-up, by


;geegfggj&[ge&

E-commerce players acquired tech-startups to build capabilities, especially in the


mobility domain
Besides acquisitions within the industry, e-commerce players
also sought interest in emerging technology start-ups to
complement growing business needs and build in-house
capabilities. Mobile technology was an obvious key focus area
as an increasing percentage of online transactions are being
conducted on mobile apps. Examples include:

9k]ph][l]\$_an]fl`]ka_fa[Yflhgl]flaYdg^]%[gee]j[]
in India, the majority of the acquisitions were domestic in
fYlmj]&L`akYdkgj]][lkl`]_jY\mYddqeYlmjaf_][gkqkl]e
of the industry. We expect a robust M&A scenario in the near
future, with deals aimed at gaining market share and achieving
top-line growth goals, consolidating vertical segments and
enriching offerings with new innovations, denying competitors
an edge. The e-commerce industry will get a further push from
government programs such as Digital India, wherein providing
high-speed internet and mobile connectivity across the country
and the modernization of India Post are listed as priorities on
the agenda.

Transactions 2016 |

You might also like