While merger and acquisition deals in the first half of the year shrunk by more than 70 per cent, private equity firms remained committed in the first half of 2019. (Photo: Pixabay)

Chennai: While merger and acquisition deals in the first half of the year shrunk by more than 70 per cent, private equity firms remained committed in the first half of 2019.  

In the first half of 2019, the country witnessed merger and acquisition deals valued $17 billion against $64 billion in the same period last year – year-on-year decline of 72 per cent, as per Grant Thornton's Dealtracker report.

Domestic M&A deals more than halved to $11 billion against $23 billion in the year-ago period. Similarly, inbound deals were just $3 billion against $21 billion in H1 2018 and mergers and internal restructuring deals fell from $17 billion to little over $1 billion.

Many macro plus political issues, subdued inflation over US Fed’s rate hike update leading to uneasiness over the US and global economies, US-China trade wars and spike in international crude oil prices amid uncertainties around the US sanctions on Iranian oil imports have hit the M&A momentum.

However, private equity space remained unaffected by these macro-level developments. H1 2019 witnessed investments of over $14 billion against $9.7 billion in the year-ago period. In H1 2019, PE investments saw average deal size of $37 million, marking the highest y-o-y till date.

Among the key trends, PE players formed Special Purpose Vehicles (SPVs) to execute deals, Real Estate Investment Trust market was seen evolving and infra-related sectors launched Infrastructure Investment Trusts (InvITs) on a private placement basis.

“Given rising global concerns around trade wars and slowdown in growth, India is emerging to be a preferred destination with many global investors. The outcome of the latest elections has given a boost to the country’s attractiveness. Deal makers will be focused on the intensity of new reforms to drive growth. On the flipside, earnings announcements, RBI’s stance on policy rates, the Union Budget, crude oil movement, and global growth would be the other factors affecting markets over the next few months along with the ongoing debate around global slowdown, monetary policy actions of global central banks and global trade tensions,’ said Prashant Mehra, Partner, Grant Thornton India.