M&A Round Up – 1st Quarter of 2018

June 2, 2018
M&A

The party looks like it’s just getting started.

Perhaps we can safely say the curse of 2008 has left the Global Markets because M&A seems to be back and how! $1.4 trillion- that’s how, primarily driven by US tax reform, European economic growth, and an uptick in the industrials sector in the US. Deal value was up but deal volume fell almost 13%. What bodes well is that it’s the highest Deal Value since 2015, and given that 2015 was a good year, 2018 might be one too.

Deal value was driven by Cigna Corp’s $67 billion deal to acquire Pharmacy company Chain express followed by the European deal – Herman utility E.ON SE’s $38.5 billion deal to acquire RWE AG’s renewable energy business Innogy SE. Despite expected fall out from Brexit, Europe saw deal volumes double. The US-led the charge both in terms of value and volume and China followed in second place. Asia, however, saw a small increase of around 11 percent on the deal volume front and what’s interesting is how well India did on the M&A front.Investment Banking Banner

Yes, our deal value fell substantially because the IDEA Vodafone merger was such a large contributor, but our domestic market had its best quarter since 2006. Numbers are confusing because we go by Zephyr, our deal value stands at $ 30 Billion odd but Reuters seems to think our deal volume fell by 9.3% to $20.5 billion in the first quarter of 2018, compared with the same period last year. Deal volume also dropped 8.3%, according to Thomson Reuters data, but Zephyr thinks it has halved.

https://www.bvdinfo.com/getattachment/05a9c343-0b53-4433-a491-b0a4807f77ad/M-A-Review-Global-Q1-2018.aspx

Grant Thornton seems to have a different answer. $18.5 billion in terms of deal value and 118 deals. I think the Zephyr numbers include both PE and M&A. According to Grant Thornton, deal value was up from 105 to 118 deals.

https://www.grantthornton.co.uk/insights/bright-outlook-for-indian-ma-and-private-equity/

I am inclined to believe Zephyr since they are the leaders in M&A deal data.

Despite none of the numbers adding up, the takeaway is still this. if you took out the Idea – Vodafone merger out of the 2017 data – $11.6 billion, it proves that the first quarter of 2018 was indeed a whopper, especially for the domestic market, which despite having fewer deals, grew  1.5 times over the previous comparable time period. Cross-M&A, however, fell 76% but that’s only expected since Idea- Vodafone accounted for much of 2017’s performance anyway.

Now let’s move on to some of our big deals. ONGC buying Hindustan Petroleum leads the pack at $5.7 billion and drove our domestic performance. Does Reliance Jio buy Reliance communications for $3.75 billion even matter? It does to the numbers (and we can always use all the help we can get). Then there’s the really interesting one Adani transmission buying Reliance Infrastructure for $2.3 billion. All three gave a much-needed flip to the domestic market. Apparently, Citibank and SBI caps were the intermediaries for ONGC- HPCL deal which means some folks are going to be exceptionally pleased this June when bonuses are handed out. Unlikely anyone bartered either Reliance transaction.

So that was the first quarter of 2018. You know that the second quarter is only going to get better because of Walmart buying Flipkart for either $20 billion or $16 billion. Fickle little Softbank, making people sit on the edge. Either way, it’s going to be a great 2018. See you in three months!

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