After several cautious years of mergers and acquisitions (M&A) and investment activity, India is expecting a turnaround in corporate M&A deals as interest in strategic alliances and risk appetite appears to grow, according to a report.

Once again, cash-rich companies are starting to focus on investments, with a strong revival in inbound interest, according to a report by audit and research firm Grant Thornton.

In its report, the agency said in the year to date, there were 560 deals worth $23-billion compared to the 460 deals worth $17.7-billion in the same period in 2013.

While strategic deals in corporate M&A made up 77 per cent of the overall deal activity at $17.8 billion with 273 deals, private equity (PE) accounted for $5.3 billion at 287 deals. The report noted that strategic M&A, excluding internal restructuring, has shown the highest level of activity since 2012, at $14.6 billion with 251 deals in 2014, as against $11.5 billion at 228 deals in 2013, and $8.3 billion with 155 deals in 2012.

The agency reported that inbound deals have increased both in terms of value and volume, while outbound deals have not witnessed many big ticket deals, despite volumes remaining consistent.

While pharma, healthcare and biotech made up for 26 per cent of the deal value, other top sectors were retail and consumer at 10 per cent, energy and natural resources at 10 per cent, and real estate deals at 10 per cent in terms of deal value. IT and ITeS was at nine per cent, the report noted.

Commenting on the report, Raja Lahiri, Partner at Grant Thornton India said, “With the new Government in place and the 2014 Budget, business optimism is high for corporate India. This is demonstrated through the increasing M&A and PE deal action in first six months of 2014. In H1 2014, we have seen 31 per cent growth in value terms and 22 per cent in volume terms.”

Sectors which are expected to see renewed deal activity include infrastructure, energy, consumer and financial services, he added.

Stating that high governance standards have fetched premium pricing on deals and it is imperative for corporate India to drive governance standards some of which are covered by the new Companies Act, Lahiri noted that given the complexities of regulations and some recent corporate governance issues, robust due diligence is the need of the hour.

“We expect valuations to go up given the renewed business sentiments, which would be both a challenge and an opportunity for dealmakers to close deals in 2014,” he added.

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