Value of M&A deals made by India Inc this year is expected to exceed previous year levels provided the Indian economy continues to grow at the rate of 8-10 per cent per annum, global advisory firm PwC said in a report.
"If the Indian economy continues to grow at 8-10 per cent per annum and we are able to make steady headway in improving physical and social infrastructure, it is quite likely that M&A values in 2008 would exceed those in 2007," stated the report on M&A sector in India.
The total value of M&A deals that were announced during 2007, including private equity transactions, touched a whopping $ 72.2 billion. The value was spread over 1,070 transactions, representing a growth of 156 per cent in value terms over 2006.
The total value of private equity deals in India announced in 2007 aggregated $ 15.7 billion spread over 389 deals, representing a growth of 98 per cent over 2006.
The growth of outbound deals, which exceeded $ 33 billion in 2007 and grew by 118 per cent over 2006, seems to continue in 2008 across the board, even as the Tata Group is widely expected to win the bid to acquire US auto giant Ford's iconic British brands Jaguar and Land Rover, the report titled 'India Inc on a roll' said.
Tata Motors has been named as the preferred bidder by the US car giant Ford for the sale of Jaguar and Land Rover, after evaluating interests by two other suitors -- India's Mahindra and Mahindra and private equity firm OneEquity.
Highlighting the various factors that could pose possible roadblocks for the M&A activities, PwC said the ongoing US sub-prime crisis can make borrowings for overseas acquisitions more difficult and costlier.
Besides, rising oil prices and global economic slowdown could dampen the M&A activity. Further the destabilising effect of terrorism in the west and grassroot level militancy in the east could impact the investment climate.
On the positive side, some regulatory changes could give a further fillip to the M&A activity. One such change could be the introduction of new company law regime, that proposes to soften the merger approval process, PwC said.
"We also expect a further liberalisation in foreign investment norms. This could include raising the foreign direct investment cap for petroleum refining from 26 per cent at present to 49 per cent and permission to invest up to 100 per cent in areas related to the civil aviation such as ground handling, maintenance and repair as against 49 per cent," the consultancy firm said.
Regarding the role of Competition Commission of India, it said the thresholds as mentioned in CCI are quite low in context of the size of Indian business today and, if implemented as such, would require that even medium sized deals would have to potentially be cleared by the CCI.
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