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February 2022 witnesses increase in deal volumes and values as compared to CY2021

February 2022 has witnessed an increase, in terms of volumes and values, in comparison to same time last year (February 2021)

Delhi: The omicron wave, followed by the Russia-Ukraine war, has shown its effect on the global economy. Amidst this, India Inc witnessed 190 deals being executed in February 2022 valued at USD 4.5 billion, according to Grant Thornton Bharat’s Dealtracker Report. On y-o-y basis, February 2022 has witnessed 27% and 62% increase, in terms of volumes and values respectively, in comparison to same time last year. Although compared to the previous month (January 2022), February has witnessed 21% decline in volumes and 13% decline in values.

Commenting on the deal activity, Shanthi Vijetha, Partner- Growth at Grant Thornton Bharat said, “Given as to how the Ukraine-Russia situation would unfold, financial markets are reacting with high caution. Further, rising crude oil prices and global inflationary pressures arising from supply disruptions are expected to weigh on domestic inflation conditions. A silver lining has been that February 2022 witnessed the emergence of five unicorns across tech-savvy sectors, and the numbers show that start-ups continue to dominate deal volumes in M&A and PE sectors.”

M&A Landscape

Mergers and acquisitions (M&A) witnessed five-month low volumes at 46 deals valued at USD 1.4 billion. This shows a 7% increase in the deal volumes, while values declined by 4% compared to February 2021. The deal volumes were driven by strategic deals where businesses continue to navigate an evolving economic environment, coupled with digital transformation, process simplification and automation. Despite the increase in volumes, deal values declined by a marginal 4% as February 2022 (USD 31 million) witnessed reduced average deal size compared to February 2021 (USD 34 million).

Domestic deals dominated the M&A segment with over two-third of deal volumes. With 35% of M&A deal volumes, start-up sector continued to dominate the M&A deal activity with 16 deals valued at USD 265 million. The edtech and enterprise application and infrastructure segment led the sector volumes with 19% each, followed by retail tech, fintech and agri-tech with 2 deals each.

PE Landscape

PE investment values recorded USD 3.1 billion in February 2022 across 144 deals. This translated to a significant 108% increase in the deal values and 35% growth in deal volumes, compared with same period last year. The uptrend in the deal activity was on the back of 11 high-value investments valued at and over USD 100 million and 27 deals valued between USD 10 – 99 million, compared to only five and 23 such deals, respectively, witnessed in February 2021. The start-up sector continued to drive the PE deal volumes for February 2022, with 67% share of PE volumes, with investment values of USD 0.8 billion. Fintech segment led the investment volumes in the start-up sector with 21%, followed by enterprise application and infrastructure and retail with 15% each. Edtech, agri-tech and health tech segments also remained active during the month.

Start-up landscape

The start-up sector continued to dominate the deal activity in February 2022 followed by e-commerce and IT sectors, in both M&A and PE deals space, which together captured 83% of overall monthly volumes and 63% of deal values. In addition to the emergence of five unicorns, the month witnessed marquee and high-value deals across telecom (Wireless Telecom Services), retail and consumer (consumer durables), pharma, healthcare and biotech (medical devices and hospitals), banking (NBFC) and IT solutions sectors.