Corporate India has put together a whopping $20 billion (Rs 90,000 crore) so far this year to fund its merger and acquisition bills abroad, surpassing all previous full year totals.
Indian companies have announced as many as 147 deals since the beginning of this year, which is almost three times the total outbound M&A deals in entire 2005.
The total number of deals would cost India Inc over $20 billion for the first time in history in a year, according to data provided by global financial information provider Dealogic.
In comparison, the total cross-border deals last year accounted for less than $5 billion, with 45 M&A deals.
The United Kingdom is the most targeted nation with $11 billion through 21 outbound M&A deals, followed by the United States with $1.8 billion via 29 deals.
The proposed acquisition of Corus Group by Tata Group for $9.8 billion would be the largest Indian cross-border M&A deal on record, Dealogic analyst Marco Lee said.
Metal and steel is the most targeted industry with $10 billion via nine deals, followed by Oil and Gas with $2.4 billion through seven deals.
The top five cross border deals this year include the proposed Corus acquisition by Tata Steel with a deal size of $9.8 billion, ONGC's buyout of Brazilian Campos Basin
Oil Fields for $1.4 billion, another takeover of 50 per cent stake by ONGC along with China Petrochemical in Columbia's Omimex de Colombia.
Vijay Mallya-controlled United Breweries' $753 million offer for UK-based Whyte & Mackay and Videocon Industries' takeover of Daewoo Electronics at $721 million also find place in the top five deals in 2006.
ABN Amro leads the advisory ranking with $10.9 billion from three deals, followed by Deutsche Bank with $9.8 billion through one deal.
Analysts believe that the frenzied M&A activity makes perfect sense as they provide access to global markets, synergy with the existing business and lower vulnerability risks.
Besides, they also give a chance to create a global company. ONGC is now a serious player in global oil and gas space with its various acquisitions, while Tata Steel's imminent buyout of Corus would make it the world's fifth largest steel-maker.
Similarly, Ranbaxy has got access to high growth markets like Romania and Eastern Europe with its Terapia buyout, while Tata Tea's Tetley acquisition gave it a foothold in the UK market. Also, the Glaceau deal gives Tetley an opportunity to enter the US market while Glaceau would gain the UK market.
However, there are some potential risks involved with the cross-border M&A deals, feel analysts. It takes quite some time to understand the global markets, while regulatory issues in global markets, particularly in sectors like pharma and energy, could be a dampener.
Cultural integration issues and global economic downturn are also some potential risks. However, the financing for a deal which used to be major stumbling block earlier is no more an issue of concern with private equity funds and banks being always ready to fund the deals.
One example of easy available financing could be Suzlon-Hansen transaction for over Rs 2,500 crore (Rs 25 billion). The acquisition was funded entirely by debt from four banks and the financing process was completed in less than 10 days.
