Monthly Dealtracker - February 2021

Cross-border inbound transactions continued to drive the merger and acquisition (M&A) values in line with the trend in 2020. January reported cross-border transactions aggregating to USD 2.6 billion, constituting about 85% of the total value of M&A transactions. With 24 transactions for the month, domestic transaction volumes outnumbered its 2019 and 2020 numbers as well as the cross-border volumes. The average ticket size of M&A transactions barring the USD 2.5 billion cross-border investment by Total SE, France in Adani Green Energy Limited, remained low at USD 18.26 million as compared with USD 83.61 million in January 2020.

Sector focus: Private equity/venture capital (PE/VC) transactions witnessed a 43% and 64% drop in aggregate values as compared with January 2020 and December 2020, respectively. The absence of transactions in the energy and natural resources sector and big-ticket transactions in the e-commerce and education sectors caused the void. The wait and watch approach, considering the budget announcement by the government in February 2021 to deal with the impact of the pandemic, could also be attributed to the low transactions in January 2021. The start-up, IT&ITeS, e-commerce, retail and consumer, pharma and healthcare sectors continued to magnetise transaction volumes. Energy and natural resources, infrastructure management and real estate sectors were the value drivers for the month. We expect this trend to continue for the year.

Outlook: The government’s focus in the Union Budget 2021 to provide a growth stimulus, by initiating large capital expenditures, encouraging privatisation, introducing structural reforms and asset monetisation, is expected to fuel up the overall transactions landscape with added incentives for investment trusts, the banking, financial and insurance sectors and the infrastructure sector.