| Deal summary – April | Volume | Value (USD million) | ||||
|
Year
|
2018
|
2019
|
2020
|
2018
|
2019
|
2020
|
|
Domestic
|
18
|
22
|
8
|
2,034
|
245
|
2,014
|
|
Cross-border
|
19
|
15
|
7
|
1,848
|
500
|
5,861
|
|
11
|
9
|
4
|
1,083
|
328
|
5,832
|
|
|
8
|
6
|
3
|
765
|
172
|
29
|
|
|
Mergers and internal
restructuring |
4
|
1
|
15,274
|
5
|
||
|
Total M&A
|
41
|
37
|
16
|
19,156
|
745
|
7,880
|
|
PE
|
83
|
78
|
57
|
2,624
|
2,377
|
886
|
|
Grand Total
|
124
|
115
|
73
|
21,780
|
3,122
|
8,766
|
There were 73 transactions aggregating to USD 8.8 billion reported in April. Though the deal values indicate a growth story as compared to the same month last year or March 2020, the volumes reflect the impact of COVID-19 on both Mergers and acquisitions (M&A) and private equity (PE). Aggregate M&A and PE deal volumes reported 37% and 22% fall respectively compared to deal volumes in April 2019 and March 2020.
Facebook’s strategic investment in Jio Platforms and two transactions by NTPC Limited in THDC India Ltd and North Eastern Electric Power Corporation Ltd. took the M&A deal values for the month to USD 7.9 billion. However, low volumes reflect how the market participants have been restrained due to COVID-19 crisis. M&A transactions reported for the month can also be seen as a reflection of the limited transactions that couldn’t be finalised pre-COVID-19. Consequently, there is a possibility of renegotiations, failures and delays in the transaction cycle.
PE/VC transaction values and volumes saw a significant downtrend reporting a 27% and 63% fall in volumes and values respectively, as compared to April 2019. The gradual decline in volumes since January 2020 and significant decline in average ticket size compared to March 2020 indicates the sluggishness in PE/VC activity in the near-term.
Sector focus
Telecom and energy and natural resources sector topped the M&A deal chart in value terms. The highest number of M&A deals in any sector did not exceed two. Start-up funding led the PE/VC volume charts, followed by e-commerce and education sectors. The current situation highlights the importance of technology in business continuity plans and day-to-day routine. IT and ITES, e-commerce and tech-enabled solution companies are expected to be frontrunners in demanding reasonable valuations. However, current market condition will also create several transaction opportunities across sectors depending on business fundamentals and financial health of companies.
Outlook
Market participants are currently focused on addressing challenges related to employee safety, operational stability and cash flows. Therefore, the deal activity is expected to be low in the short-to-medium term. However, the sluggishness will eventually augment consolidation, deals at attractive valuations and thereby accelerate deal activity.
