The deal scene started on a low note in January 2019, both in terms of overall deal volumes and deal values, as compared to January 2018. Last month, 36 M&A deals aggregating to USD 2.3 billion and 57 PE/VC deals aggregating to USD 1.3 billion were reported, as opposed to 47 M&A deals aggregating to USD 15.1 billion and 84 PE/VC deals aggregating to USD 1 billion in January 2018.
Inactivity in domestic M&A transactions mostly impacted the M&A report card for January 2019. January 2018 had 4 transactions in the billion-dollar category aggregating to USD 13.9 billion. A drastic fall in the number of such large transactions resulted in domestic transactions declining from USD 12.63 billion in January 2018 to USD 0.39 billion in January 2019. Consolidation for creating leadership position, sale of non-performing business and expansion to new geographies were the underlying themes for key transactions last month.
36% growth in the value of PE/VC investments in January 2019 as compared to January 2018 is primarily because of the number of large-ticket investments, which also reflected in the average ticket size trend, which increased from USD 11.62 million in January 2018 to USD 23 million in January 2019. An increase in large ticket investments also reflects the rise in confidence of the investors and strengthening the role of PE/VC fraternity as growth capital providers.
Sector focus: Focus in the current month was primarily on pharma, healthcare and biotech, manufacturing, IT and ITeS, and banking and financial sectors for M&A transactions, as well as in start-ups, IT and ITeS, e-commerce and banking and financial sectors for PE/VC investments. Real estate, infrastructure, pharma, healthcare and biotech, and manufacturing are expected to be the sectors of interest based on the announcements in the Union Budget 2019.
Outlook: Though the Union Budget has attempted to create a favourable deal environment - as mentioned in our earlier reports - deal activity is expected to be tepid for the part of the year considering the domestic political uncertainty and global economic conditions.
