The volume and value of deals in which overseas companies acquired Indian targets both increased sharply during 2011, despite a drop in overall deal activity in the country.
Research from accountancy firm Grant Thornton shows that inbound M&A for the fast-growing Asian nation grew to $19.3 billion (£12.4 billion) from 105 deals during the ten months to October 2011, up from $7 billion from 70 deals during the same period the previous year.
Anuj Chande, partner and head of Asia at Grant Thornton, says that acquirers are looking towards China and India to buy growth. He adds: ‘With a strong middle class, good education systems and stable democracy, the story looks positive.
‘More than ever UK companies are worried that the struggles in the Eurozone and tough austerity measures will cause years of stagnant growth at home,’ he explains.
Chande adds that businesses in the UK are increasingly taking advantage of the ‘cultural and linguistic advantages’ they have in dealing with India.
During January to October 2011 total Indian deal activity, excluding private equity, posted a value of $33.6 billion from 523 deals, a fall of 22 per cent on totals of $42.9 billion from 511 deals over the same period in 2010.
According to the report, the Indian M&A market cooled during the first ten months of 2011 as the effects of global market uncertainty and the tightening of national monetary policy slowed domestic and outbound deal flow.
Chande explains that although this year largely kept pace with 2010 during the first six months, the effects of the European debt woes, downgrading of US sovereign debt and the altogether ‘rickety’ markets have contributed to the recent fall-off in transaction activity.
The ‘drying up’ of mega Indian M&A deals has affected the yearly totals, Chande adds. During the third quarter of 2011 only one transaction greater than $1 billion was recorded, which has resulted in quarterly totals dipping to $5.9 billion, a 56 per cent fall.
However Chande is bullish about the future of Indian M&A and says that the country, alongside China, is set to play a ‘critical role’ in rebalancing global economic power.
