Notwithstanding the economic slowdown that has impacted the merger and acquisition activities across the world, India is showing resilience even as the focus has changed from aggressive growth to consolidation, says a latest report.
"Despite the global slowdown in deal activity, India is still seeing a steady flow of transactions, however the sentiment is changing from aggressive growth initiatives to consolidation and rationalisation of business strategies," consultancy major KPMG India Corporate Finance Head Rohit Kapur said.
The Indian M&A scenario has begun to reflect a change in sentiment with a fall in the value of transactions consummated, KPMG said in its latest report.
The report has highlighted that there would be a decrease in both appetite and capacity for M&A activities and there would be a continued fall in global merger and acquisition in the second half of this year.
"Findings from our latest Predictor reveal strong evidence that market conditions for M&A transactions will continue to deteriorate. We had hoped that the gradual decline seen earlier this year could be maintained but now all indicators are pointing at a marked fall in the market, across all regions and sectors," KPMG Corporate Finance practice Global Chair Stephen Barrett said.
The Predictor suggests that 2008 deal levels and values for the remainder of the year should continue to fall away, with corporate balance sheets also weakening somewhat.
Meanwhile, data by another deal tracking advisory firm Dealogic has said that though overall the merger and acquisition activities have witnessed some decline, the Asia Pacific region is showing some resilience.
"The five months up to the end of May 2008 saw 15,968 deals globally at a value of 1,421.3 billion dollar in marked contrast to the 19,784 deals recorded in the second half of 2007-at a value of 2,161.3 billion dollar, with Asia Pacific being the only region showing resilience".
The previous KPMG Predictor had indicated that a run of deal activities in Asia Pacific would reduce the severity of the overall global slowdown.
"Now six months on, the deterioration over the last six months in both the forward PE valuations and Net Debt/EBITDA ratios for companies across the Asia Pacific region suggests that M&A activity will be more subdued during the remainder of calendar 2008," KPMG added.
The Global M&A Predictor tracks 12 month forward Price to Earnings (PE) multiples and estimated net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) ratios to track and establish the potential direction of M&A activity.
It comprises 1,000 largest companies in the world by market capitalisation, with a representative weighting of countries and sectors.
