Merger and acquisitions seem to have become a big casualty of corporates’ debt distress as India Inc learnt it the hard way in 2019 that their first priority was to meet their loan repayment obligations and suitors from abroad also seemed reluctant in wooing distressed targets for any matchmaking.

This has led to a mostly muted scene on India’s corporate deal street this year, after a blockbuster 2018, while economic slowdown fears further came in the way for any significant merger and acquisition deals.

But, experts are hopeful that the scenario might change in the New Year, provided the economy rebounds from its lows.

Liquidity crunch

The domestic deal-making activities were also hit by weak corporate governance and a huge liquidity crunch in 2019, while the global deals were also hard to come by due to various factors including uncertainties caused by the US-China trade war, which left many investors in a wait-and-watch mode.

According to leading law firm Baker McKenzie, the total M&A tally for India in the entire 2019 is estimated at $52.1 billion as the activity is expected to have reverted to more “normal” levels after a record year for deals in 2018. “We expect total M&A to show resilience in 2020, at $44.6 billion, and to speed up from 2021 thanks to business-friendly reforms and a more favourable global backdrop,” Baker McKenzie said in a report.

According to global professional services organisation EY, the overall M&A activity in January-November 2019 stood at $33 billion across 812 deals.

The average M&A deal size in 2019 was $81 million, which is the lowest in the last three years ($199 million in 2018 and $97 million in 2017).

Experts further said investors who are otherwise keen on distress assets are still wary of lengthy processes and potential litigations associated with such assets. Moreover, IL&FS crisis in October 2018 was followed by issues at Jet Airways, DHFL and Cox and Kings, etc in 2019, indicate an overall weak corporate governance scene.

Sector-wise deal values

Sector-wise, manufacturing, energy, start-up pharma, banking, IT, infra, retail and consumer and e-commerce sectors led the deal values in January-November 2019, capturing 91 per cent of the total overall deal values, while the start-up and IT sectors continued to drive deal volumes capturing 36 per cent of the total deal volumes.

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