M&As grow at 28% annually

The total value of merger and acquisition (M&A) deals have grown at a compounded annual growth rate of around 28 per cent between 2002 and 2006.

The growth picked up pace over the last two years with the value of such deals increasing from $7.5 billion in 2004 to $21.4 billion in 2006.

The total number of M&A deals also increased from 343 in 2005 to 480 in 2006, a recent report by Grant Thornton, one of the world's largest accounting organisations, released at the Confederation of Indian Industry national conclave on expansions and consolidations said.

The report also stated that from 1995 to August 2006, the largest proportion of outbound acquisitions has been in North America, accounting for 32 per cent of total outbound deal.

This was followed by Europe which accounted for 29 per cent of the total deals. Europe is now emerging as the prime destination for Indian companies making acquisitions abroad.

Bilateral trade between India and Europe is likely to touch $ 100 billion by 2010, on the back of outbound merger and acquisitions (M&As) by India Inc, a study conducted by IndusView, one of Europe's M&A advisory firms, said.

While domestic, inbound (overseas companies acquiring companies in India) and outbound (Indian companies acquiring overseas companies) deals increased in the range from 36-42 per cent. The share of domestic, inbound and outbound deals were more or less stable, with domestic deals at 44 per cent, followed by outbound deals (40 per cent) and inbound deals (16 per cent).

The share of overseas M&As, including inbound and outbound deals, is also increasing. Overseas M&As accounted for 42 per cent of the total M&A deal value in 2002 which increased to 73 per cent in 2006.

Tata Steel's acquisition of Corus at $ 12.1 billion has already set the trend for this year. Hindalco's announcement to acquire Novelis for $6 billion has further fuelled this trend. Vodafone's deal of $11.1 billion for Hutchison's stake in telecom operator Hutchison-Essar spells the trend for inbound investments.

Outbound deals have had a sectoral trend with pharma companies going to the top of M&A league with total deal of a little over $ 2.2 billion. The other sector which has taken the lead is the information technology (IT) sector.

In the energy sector, Oil and Natural Gas Corporation acquisition of equity stakes in a couple of oil blocks in Columbia and Brazil and Suzlon Energy's acquisition of Hansen led the M&A deals.