2016 M&A Round Up – II

January 11, 2017

Continuing Part I

Goldman Sachs remains top dog.

Despite missing out on the two largest deals of the year- the $108 billion AT&T deal for Time Warner and Bayer’s $66.3 billion deal for Monsanto, Goldman Sachs still managed to lead the global M&A Volume ranking in 2016 and worked on $919.7 billion of deal activity accounting for 25% market share. This means it was still part of six of the eight biggest deals.

Record five year high for India M&A
While Global performance was lack luster, Indian M&A rebounded with a bang and Mergers and acquisitions deals in the country hit a record 5-year high at $61.44 billion, around Rs 4 trillion, according to news reports. News CorpVCCEdge reports that volume remained high at 1,002 up from 995 deals in 2015. But the kicker was the value which was up 159 percent from$23.71 billion in 2015. Even more interesting was that Indian Domestic M&A contributed to more than half of the value and more than 67 percent of volume as 633 domestic M&A deals accounted for $32.77 billion. Once you drill down, however, you see that three deals accounted for this massive jump – Essar Oil Ltd, Max Life Insurance Co Ltd and Reliance Communications. Private equity investors exited a total of 239 investments and pocketed $6.79 billion, which is almost 17 per cent more in value terms year on year and also the highest in the last five years. And after what feels like an infinite rut for IPO’s, the Equity Capital Markets bounced back with a five year high and $4.12 billion was raised across 93 IPOs.

Indian Private Equity- More bark than bite

PE deal volume fell by almost 25 percent to 1309 deals, with deal value crashing 44 percent to $12.38 billion. Start up funding contributed to 57 percent of total private equity investments and while bankers expect to see more seed money flowing into sectors like Fin Tec, Healthcare, Education and Travel, early stage investments showed a significant decline of 39 percent to 1.59 billion which shows that most reports were more hype than real action.

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Investment banking fees hit record lows.

It looks like the good days of 2006 might never return for bankers even as M&A deal volumes and values seem to be making a comeback. Investment banking fees fell 7 percent worldwide in 2016, dragged down by a 23 percent fall in equity capital market fees. What’s even more surprising is that despite Indian M&A enjoying a record year in 2016, fees dropped 11 percent and banks earned a measly $440 million in revenue with most of that going to foreign banks.

2017 to be as good or bad as 2016

While capital is available and cheap, bankers fear the consequences of geopolitical events but state that CEO confidence is at a high. With regard to Indian M&A, everything depends on the budget in March, which might see more reforms. We will just have to wait and see. We will analyze forthcoming 2017 trends in the next few posts.



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