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YOY decline of 46% observed in M&A values due to GST

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As per a report by Grant Thorton, there has been a decline in the corporate India’s merger and acquisition activity and various other cross border activities as well. The M&A activity moderated by approximately 46% to $939 million for August. The numbers were compared year over year (YoY) to August last year, i.e., 2016 for analysis. The firms have switched to wait and watch mode due to the roll out of goods and services tax.

According to the report issued by the assurance, tax and advisory firm Grant Thornton, there were approximately 48 M&A deals worth $939 million in August. In the last year, though the number of deals was equal the value was as high as $ 1.7 billion.

The decline of nearly 46% was seen, and this was primarily because of the absence of various big ticket transactions on the deals. Adding to this, the cross border activities fell by as much as 65% when compared YoY in August 2016.

Prashant Mehra, who is a partner at Grant Thorton LLP confirmed that the decline in the value of the transactions was mainly because the companies were on a wait and watch mode as they wanted to check the progress on the GST implementation.

If the deals were to be analyzed sector wise, infrastructure sector was leading the activity as it had a contribution of over 27% of the total value. This was primarily because of the Dilip Buildcon Ltd’s stake that was sold in 24 road assets to Shrem Group for an EV (Enterprise Value) of $250 million, which was considered the largest transaction for 2017.

August also witnessed some huge tickets that were worth $50 million in various sectors such as agriculture, media, retail, and e-commerce. Sectors such as retail and consumer, start-ups, media, and entertainment have continued to be in the primary focus as per the report.

On a year to year basis from January to August, there have been approximately 280 M&A transactions currently that were worth $32.19 billion. This figure saw an increase of around 49%when compared to the last review. In future, Mr. Mehra added that the implementation of Insolvency and Bankruptcy Code would bring more companies to the table for transactions as these would try to reduce their debt burden and get a good share on their assets.

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Jatin Aggarwal
A guy from the family of commerce background. Having practical experience in the field of taxation, accounting, corporate laws. He is a commerce graduate and pursuing CA (Final). Jatin is responsible for exclusive interviews and opinion based articles about the GST.

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