Mumbai, Dec. 17: India’s cash-rich firms will keep up their hunt for overseas targets in 2011 and may top this year’s record outbound activity as they look for new overseas markets and to secure natural resources to feed surging demand.
Deal volume in India surged three-fold to $67.2 billion this year from $21.3 billion last year, just missing the record $69.4 billion in activity in 2007, according to Thomson Reuters data.
Globally, mergers and acquisitions rose for the first year since 2007, potentially marking the start of a new, multiyear M&A cycle in which emerging economies account for a bigger share of global dealmaking.
Overseas acquisitions accounted for nearly half of the Indian M&A volume in 2010, the biggest year for outbound deals from Asia's third-largest economy, data showed. Bankers expect 2011 to be another bumper year.
“The availability of assets that synergise with Indian businesses with access to financing and Indian corporates' desire to grow across other emerging markets are positive drivers,” said Mr Ravi Kapoor, head of global banking for Citigroup in India.
In this year’s biggest deal, India’s top mobile operator Bharti Airtel paid $10.7 billion for the African telecom assets of Kuwaiti group Zain. Indian makers of consumer goods have also made a string of much-smaller purchases in Africa.
Access to cheap and easy finance for large buyers, a need to expand in new markets, and the rush to tap natural resources are expected to be the main triggers for driving deal volume.
“You will have a much bigger increase in the sub-billion euro deal category where mid-cap industrial companies start looking at buying overseas looking at the benefits of R&D, technology, and distribution,” said Mr Amrit Singh, head of India M&A at Deutsche Bank.
The resources sector will drive dealmaking once again, with companies looking for assets from Africa to Australia, after energy and power firms dominated the M&A table this year, accounting for a third of the total volume at $22 billion as they snapped up coal mines to fuel a spate of new power plants.