India To See M&A Deals Worth $52 Billion In 2019: Baker McKenzie Report
India deal activity will remain stable over the next few years, Baker McKenzie says, due to a revival in private investments.
India is expected to see M&A deals worth more than $52 billion in 2019 deal activity in the country is expected to remain stable despite slowdown, globally as well as locally, according to a new report by law firm Baker McKenzie.
"Despite the global headwinds, India M&A is expected to remain stable in the next few years, with private investments reviving against the backdrop of a more favourable business environment," it said. "India deal activity is expected to revert to the 'normal' level in 2019, with total M&A reaching $52.1 billion."
Baker McKenzie’s fifth annual Global Transactions Forecast, jointly released with Oxford Economics, forecasts India's gross domestic product to grow at close to 7 percent annually through 2022. That compares with a global GDP growth rate of 2.8 percent during the same time period.
In initial public offerings, total proceeds (which will be predominantly from domestic IPOs) is forecast to dip from $3.4 billion in 2019 to $2.7 billion in 2020, before picking up again in 2021 to $4.3 billion.
The global law firm cited Canada's Brookfield Infrastructure Partners' $3.66 billion deal to acquire Reliance Industries Ltd.'s Reliance Jio lnfratel unit as an example to illustrate dealmaking activity in India. Announced in July, the acquisition was touted as the single largest private equity deal in India.
“While domestic consolidation will continue to be a key driver in M&A activity, India's business-friendly reforms and high consumption growth potential will help garner interest from both local and foreign investors,” Ashok Lalwani, global head of Baker McKenzie's India Practice, said. “We are hopeful that India will remain one of the world's fastest-growing economies despite the headwinds."
Global M&A deal activity will continue to slow in 2020 due to economic uncertainty and the risk of global recession, according to the report. It projects that valuation of M&A deals globally will decline from $2.8 trillion in 2019 to $2.1 trillion in 2020.
The report also forecast sluggish IPO activity globally. Funds raised via initial share sales are estimated at $116 billion in 2020 from an estimated $152 billion in 2019, a 23 percent drop.
In the Asia Pacific, M&A activity is likely to decline 18 percent—from $634 billion in 2019 to $529 billion in 2020. Proceeds from Asian IPOs is expected to fall 43 percent year-on-year to $36 billion in 2019 and will further to $33 billion in 2020.
The region's weaker performance in 2019 can be attributed to a reduction in Chinese outbound deals due to government restrictions. This, in turn, may dampen economic momentum across the Asia Pacific, Baker Mckenzie said.
"Make no mistake deals are getting done, but the current slowdown is inevitable, considering the continuing uncertainty around trade and regulation," said Ai Ai Wong, chair of Baker McKenzie's Global Transactional Group. "We know that around the world, there are many investors and companies with capital on the sidelines, waiting to move forward with domestic and cross-border deals".