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M&A and PE deal activity - looking ahead
As the uncertainty and the challenging times continue, the Indian M&A and private equity (PE) deal arena is likely to belong to players who are in it for the long run. Taxand India discusses what to expect in the year ahead.
Corporate M&A will be driven by the core strategy of realising long term sustainable growth and driving transformation. The sectors where the growth levers are dynamic like technology, pharma, healthcare, etc. could drive the deal volumes. The larger bets are likely to be placed to execute on the consolidation theme aimed at enhancing the market reach (auto, energy) or by state sponsored initiatives to gain access to natural resources.
The private equity investors have been deploying the dry power raised last year, which has caused a flurry of activity. This year the execution of large buy-out transactions or control deals as a strategy has been more pronounced. The approach has been to manage risks through strategic and operational control and create value by deploying specific sector expertise to foster growth. India is presenting several sector specific value creation opportunities more specifically in technology. The PE investments have also been propelled by the types of exits taking place in India today which have increased over the last 5 years, and we are seeing greater diversity in exit strategies.
As we enter the last quarter of the financial year, the overall deal activity is likely to be at status quo. Any meaningful change is predicated on the promise and execution by the “new” political and economic ring masters, post the general elections in India.
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We have come to the end of Q3 FY14 which saw PE deal value increase by 25% sequentially, while the value declined by 15%, and M&A deal value was sustained by 6 big ticket deals. Proceeding into the year ahead and certainly for Q4 FY14, the overall mood will be watch before you leap.