Munjals, Patni deals cap India's best year in M&A

Munjals’ deal to buyout Honda in their joint venture and Patni families’ efforts to sell their software company will cap the best year for Indian mergers and acquisitions (M&As ) at more than $70 billion.

Deal volumes in 2010 broke the record $69.4 billion clocked in 2007 — when Tata Steel bought the Anglo-Dutch Corus Group —after the Hero Group last week said it would buy its Japanese partner in the world’s largest two-wheeler maker, Hero Honda.

Total M&A volume in 2010 from 1,262 announced deals was $67.2 billion as on December 14, data compiled by Thomson Reuters and ET research shows. This excludes recent transactions such as Lanco Infratech’s purchase of Griffin Coal for $800 million, the Hero deal valued above $1 billion and smaller ones such as French asset management giant Natixis buying a fourth of IDFC’s asset management business for $60 million.

The sale of Patni Computers, which has been dragging for years and after many false starts, is expected later this week. It could push the M&A value beyond $70 billion, the data shows. In the Asia Pacific region, excluding Japan, M&A value is at $557 billion, lower than the $610 billion in 2007.

Overseas acquisitions by Indian companies this year too has set a record. Indians, led by Sunil Mittal of Bharti Airtel, have purchased foreign assets worth $30 billion, compared with $23 billion in 2007. The appetite for foreign acquisitions among Indian companies in a relatively tight credit environment indicates confidence.

“Coming out of the crisis, there was a dearth of deals in 2009,” said Jaideep Khanna, managing director, India, at Barclays Capital. “Bharti re-established India’s outbound M&A paradigm early this year, acquiring Zain.”

Conglomerates such as Birla, Mahindra, Essar , Vedanta , Adanis and GVK, and the state-run Coal India are expected to lead takeovers in 2011.

“There will be many more deals in the energy vertical next year,” said Ganeshan Murugaiyan, head of investment banking at UBS in India.

Energy and power deals more than tripled compared with 2009. There were 77 deals worth about $23 billion, a third of the total transactions. Oil and Gas accounted for more than 80% of the activity, growing 20 times to $18.1 billion, led by Vedanta’s bid for Cairn India at $9.5 billion, the $4.8-billion purchase of Venezuela’s Carababo block by the consortium of state-run oil companies, and Reliance Industries’ shale gas acquisitions in the US.

Telecommunications, which secured deals worth $14.8 billion, was the second-busiest sector, lead by Bharti’s $10.7-billion buyout of Zain Africa . The energy and power sector, along with telecommunications, accounted for 63% of India’s outbound M&A in 2010.

There could be a couple of more deals in the telecom tower segment next year, said Rohit Chatterjee, head of investment banking at JP Morgan in India. “It is clear who the buyers are and who the sellers are,” Chatterjee said.

Nigeria was the most targeted region by Indian companies in 2010, largely because of Bharti buying Zain Africa. On sheer number of deals, US was the most targeted region, some 25% of India’s overseas acquisitions happening there. UK pipped US to top in inbound M&A , as companies there purchased Indian companies worth $7.7 billion, compared with $5.2 billion from the US.