Would 2010 be the year of Acquisitions ?


Twenty Ten seem to have all the right ingredients in place to become the year of Acquisitions – and that too cross-border acquisitions. 2009 was comparatively a lackluster year in terms of M&A activity, understandably so, as the world economy was in doldrums.


2010 has already started with a bang, with news of M&A deals coming out thick and fast. If the blockbuster Bharti-Zain deal goes through, we would already pass the total deal size for past year. In just 45-days of 2010 India Inc has announced deals worth $14 billion, while in the whole of year 2009, India Inc. made deals worth a modest $11.9 billion. Even the Deallogic survey in January pointed that India is the second most targeted country when it came to cross border Mergers & Acquisitions

One of the reasons, why we may see good number of cross-border deals – currently western stock markets are still reeling under pressure and much below the highs they had set before the recession came in. The stock prices are cheap and so are valuations of oversees companies.

Although stock prices of Indian companies are also below their highs, they are currently in much better position than their western counter-parts. Also, the recession has not hit Indian companies as badly – and they do have cash in the bank. I guess, we will see lot of M&A activity this year in the TMT (Technology, Media & Telecom) sector.

This situation will help Indian companies to go shopping abroad and find cheaper deals. Along with Bharti – Zain deal, there is another mega deal that is currently in discussions, such as the estimated $13.5-billion takeover of global petrochemicals major LyondellBasell by Mukesh Ambani-led RIL.

Whats your take? Will we witness the frenetic pace of M&A activity that we saw in 2007 ?

  1. Arun Prabhudesai says

    Yeah, Viral you are right – I think Indian companies have a window of 6-9 months, after which most probably the stock valuation of overseas company will jump making it a expensive buy – I guess we will have to wait and watch how many Indian companies take advantage of this situation and mop up acquisitions…

  2. Viral says

    Dear Arun Prabhudesai,

    I feel outgoing M&A deals from India (Indians buying abroad) would work more optimally for Indian companies when their target company is from under-valued western or developed economies who are still reeling under pressure of just-passed crisis. However, ougoing deals where some emerging market company is the target, the valuations may not be as lucrativeas that in developed economy. Whereas the incoming deals (targetting Indian companies) may not be as lucrative as Indian valuations are no longer cheap.

    However, incoming deals from abroad which may be looking expensive illusively need not be as expesnive in relative terms when compared with the growth prospects in the emerging market universe especially Indian and China.

    That apart, strategically speaking, Indian companies should be looking at acquiring various resource hubs in overseas markets with commodity prices moving up gradually after feeling the heat of demand from China, India and few other emerging economies. More intellignetly, China did this much-needed resource accumulation precisely around the time of global recession at very lucrative prices. Even than, it may not be too late for Indian companies before we see absolute recovery in developed economies.

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