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The value of announced merger & acquisition (M&A) deals involving Indian companies

amounted to $62.1 billion in 2017, down 3.5 per cent compared to 2016, but still elevated
compared to historical M&A activity, said a Thomson Reuters report.

The report said despite the decline in deal value, the number of announced deals grew 10.6
per cent compared to the previous year. The average M&A deal size for transactions with
disclosed values declined to $84.6 million in 2017 from $102.3 million in 2016. The report
said inbound M&A activity hit a record high of $31.7 billion, up 15 per cent in 2017.

Outbound M&A activity, however, declined sharply by 73.5 per cent to $2.6 billion, making
it the lowest outbound deals year since 2014. This totals to cross-border M&A activity of
$34.3 billion, down 8.1 per cent in value compared to 2016.

Domestic M&A stood at $25.4 billion in 2017, down 0.5 per cent in value from over a year
ago, despite the 18.6 per cent increase in the number of announced domestic deals.
Completed M&A deals involving Indian companies totaled $59.4 billion in 2017, a 78.3 per
cent increase over 2016 ($33.3 billion), while the number of completed deals grew by 27.3
per cent.

The telecom sector accounted for majority of the acquisitions involving Indian companies
with a 29.8 per cent share worth $18.5 billion, a more than a six-fold increase in deal value
compared to 2016, making it the highest annual period of M&A deals for the sector since
2007 ($19.4 billion).

In March, Vodafone Group PLC agreed to merge its Vodafone India assets with the mobile
business of Idea Cellular for an estimated $11.6 billion, through a joint venture, via a scheme
of arrangement. Upon completion, Vodafone will own 45.1 per cent stake and Idea the
remaining 54.9 per cent interest in the joint venture. The pending transaction is currently the
largest India M&A deal so far this year and the second largest-ever telecommunications deal
involving India after the $12.7 billion Hutchison Essar-Vodafone Group deal in 2007.

Financials and high-technology rounded up the top three sectors for M&As, capturing 16.7
per cent and 11 per cent shares of the pie, respectively. Buyside Financial Sponsor M&A
activity targeting Indian companies totaled $7.4 billion in 2017, a 59.1 per cent increase from
2016, but the number of deals declined 8.5 per cent. Private equity-backed M&A in India's
financial sector accounted for 44.2 per cent of the market share worth $3.3 billion, up 182.3
per cent from a year ago. Media & entertainment and consumer products & services followed
behind with 10.5 per cent and 9.1 per cent shares, respectively. FE

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Mumbai

Mumbai, Jan. 3 -- 2017 was a blockbuster year for merger and acquisition (M&A) activity in
India with deal values increasing by 53.3% to $77.6 billion, compared with $50.6 billion in
2016. Deal volumes rose by 2.5% to 614 deals in 2017 compared with 599 deals the previous
year.

Of the 614 deals, 325 were completed, accounting for $24.88 billion, Bloomberg data
showed.

In terms of target industry, the communications sector witnessed 42.7% of deal activity,
worth $33.17 billion across 65 deals, followed by the energy sector with a 21.34% share and
$16.57 billion in deal value. The industrial sector accounted for 10% of deal activity worth
$7.8 billion and the financial services sector for 9.5%, clocking $7.36 billion in deal value.

In 2017, the top five M&A deals accounted for 57% share, registering $44.3 billion in value.

Among the top deals were Bharti Enterprises Pvt. Ltd's acquisition of a stake in Bharti Airtel
Ltd for $16.7 billion from Indian Continent Investment Ltd; the merger of Vodafone India
Ltd and Idea Cellular Ltd, valued at $12.7 billion; the proposed acquisition of Hindustan
Petroleum Corp. Ltd by Oil and Natural Gas Corp. Ltd for $8.5 billion; Adani Transmission
Ltd acquiring Reliance Infrastructure Ltd's Mumbai power business for nearly $3 billion; and
IndusInd Bank Ltd's merger with Bharat Financial Inclusion Ltd, which was valued at $2.3
billion.

In terms of deal type, cross-border transactions accounted for nearly 58%, with a combined
value of $45 billion across 235 deals.

While buyouts accounted for 42.6% of deals with a $33 billion valuation, additional stake
buys accounted for 24.7% share and $19.2 billion in value. Industry experts believe that
while the deal momentum will continue in 2018, there will be several factors to watch out for.

"First, the focus will clearly be domestic markets, unlike overseas acquisitions. The India
growth story has never been so attractive and is requiring greater capital allocation;
remaining focused on India is clearly on top of the agenda for most corporates," said Ajay
Garg, managing director and founder of Equirus Capital.

"The competition for most M&A deals will be private equity investors, who have an
attractive proposition for the existing management team in terms of options/equity upside,"
said Garg.

"Also, regulatory approvals is a big factor in any M&A strategy, starting from Sebi
(Securities and Exchange Board of India) wanting to ensure minority shareholders are
protected, Competition Commission approval and all sectoral regulators looking at which sort
of players and resultant business models emerging, we are going to see far higher timelines
and uncertainty for M&A transaction consummation," Garg added. Published by HT Digital
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After two years of a surge in mergers and acquisitions (M&A) deals, 2017 proved to be a
quiet year for the fast-moving consumer goods (FMCG) sector. The sector not only witnessed
the least number of deals but the cumulative valuation also went down sharply —because of
macro-level policy changes and knew-jerk reactions offered by the government.

In 2015, according to data available from UK-headquartered accounting firm Grant Thornton,
the cumulative value of M&A transactions surpassed ~405 billion. The following year, the
number went past ~460 billion or 13.6 per cent higher year-on-year (y-o-y) as major players
such as Hindustan Unilever (HUL), Emami and Godrej Consumer Products picked up stakes
in personal care product companies. While, HUL completed acquisition of hair care brand
Indulekha for ~3.3 billion from Mosons Group, Emami bought another hair care brand Kesh
King for ~16.5 billion.

However, last year not only the number of deals fell to 16 from 21 in 2016, total valuation of
M&As also came down to ~300 billion — 35 per cent lower y-o-y. During 2015, when the
sector was recovering from a slowdown in the acquisitions space, after the two years of lull,
the total number of deals went up to 17. Last year, no major deals took place in the personal
care space, except Emami acquiring Helios Lifestyle at the end of 2017. According to
Dhanraj Bhagat, partner, Grant Thornton, the deal between Lotte Confectionary and Havmor
ice creams, in which the former acquired the Ahmedabad-based ice cream company for close
to ~10 billion, helped the yearly numbers for M&A deals. Another internal deal, where Tata
Sons raised its stake in Tata Global Beverages by acquiring 43-million shares from sister
concern Tata Chemicals in exchange of ~77.7 billion, also added to the yearly numbers.

According to sources, the ~3.2-trillion FMCG space in the country, which is the fourth
largest globally by market size, is now hoping for a revival in demand and market activities.
“ Last year was particularly bad for us as the twin blows of note ban and goods and services
tax (GST) had to be dealt with. It hardly left us with any time or resources to concentrate on
inorganic growth plans as streamlining operations according to ever changing rules remained
the focus,” said a senior executive from a key FMCG player.

Data collected from annual reports of top FMCG players show the top seven firms hold ~340
billion in reserves and surpluses as of March, 2017. And, cash and cash equivalents of the top
five players surpass ~74 billion. Among them, the two North India-based firms Dabur and
Nestle hold ~35.5 billion and ~21.4 billion in cash.

In a recent interview with this publication, Sunil Duggal, chief executive officer, Dabur India,
had indicated that the company was looking to buy suitable firms that were smaller but
scalable. He also said the company had a budget of ~10 billion for local M&A activities.

Harsha V Agarwal, director, Emami, said, “ We are always on the lookout for appropriate
opportunities — smaller or bigger —and wherever we feel there is a synergetic and strategic
fit with our business plans, we initiate steps to acquire or invest or partner at appropriate
price. In 2018, we will keep on looking in the personal and healthcare sector for acquisition,
investment, strategic partnership or tie-up.”
However, the outlook for 2018 hinges on several factors. Experts say, a lot would depend on
what measures the government takes in the Budget and how they are being implemented, as
recovery of demand would also play a role in revival of deals in the sector.