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Despite the second wave of COVID-19, deal activities rose to 856 deals in 2021, with 20% increase in deal values compared to H1 2020
Delhi: Deal activities set a record with a 42% growth in deal volumes in H1 2021 heralding the much-needed economic recovery. The first half of 2021 recorded 856 transactions aggregating to USD 43 billion with an average deal size of USD 50 million according to Grant Thornton Dealtracker. At the same time, there has been a 20% increase in the deal values compared to H1 2020. The record jump has been triggered by major deals in energy, banking and financial and IT/TeS sectors.
Uncertainty following COVID-19 had cast a gloom in the first half of 2020, however investor interest climbed during the second wave as it was fiscally less disruptive despite its detrimental impact on public health and mobility. Market confidence was restored in H1 mainly due to the rapid normalisation of economic activities and expectations of a post-pandemic boom aided by various reform measures by the government.
Riding on the positive wave, investors are hoping to gain from strong liquidity and a bullish secondary market that witnessed a steep rise in new retail investors. Adding to the 24 initial public offerings (IPOs) worth USD 5.3 billion, online delivery platform Zomato launched its IPO on 14 July. In a strong vote of confidence from the market, the USD 1.3 billion IPO by the platform was fully subscribed on the first day. Moreover, the domestic primary market is all set for major gains in H2 2021 with as many as 30 companies lining up to float IPOs.
“H1 2021 has set an encouraging tone as domestic M&A and PE/VC deal activity has significantly gone up. COVID-19 has accelerated multiple trends - be it digital transformation, the convergence of emerging tech, the emergence of direct-to-consumers trends, or focus on healthier living - these trends have spurred the deal activity. With the vaccination drive gaining momentum and pent-up consumption demand driving growth and economic recovery, we can expect the deal momentum to be strong in H2 2021,” said Shanthi Vijetha, Partner, Grant Thornton Bharat.
Moving away from the uncertainty witnessed in 2020, the high number of deals in H1 2021 translated into higher private equity (PE) deals and mergers and acquisitions (M&A) deals. There was an increase in both deal volumes and aggregate values in M&A and PE deals compared to H1 2020.
Domestic M&A surge
The first half of the year witnessed an upward trend in M&A deals in contrast to H1 2020 when the world came to an abrupt halt owing to the COVID-19 pandemic. While the economy was hit during the second wave and subsequent lockdowns, the work-from-home model, digital payments, online delivery models and e-commerce kept the economic activities afloat.
“Deal momentum continues to be robust in H1 2021 driven by PE and VC deals which are evidently led by new-age sectors such as technology, digital, e-commerce, etc. In my view, these sectors will continue to see an upswing in deals. We have already seen 10 unicorns being created and backed by PE/VC funding and I believe that we will continue to witness this momentum across the digital businesses around health tech, edtech, fintech, social commerce, e-gaming and e-commerce. Capital is pivoting to these new-age businesses and ESG theme will continue to grow bigger in deal themes.” said Raja Lahiri, Partner, Grant Thornton Bharat.