23 March 2010
After a brief lull in 2009, when India registered just 25 deals in the whole year, Indian companies are becoming more active in international M&A. The out-bound M&A activity includes multi-billion dollar deals and a number of smaller deals ranging from a few million up to $100 million. Corporate India's merger and acquisition (M&A) deal activity in February alone stood at $2.3 billion taking the total M&A kitty so far this year to over $5 billion. Besides, deal valuations are also going up, such as Bharti Airtel’s $10.7 billion offer for Zain telecom’s African businesses.
Bharti Airtel, the No. 1 Indian mobile operator, has entered into exclusive talks with Zain for acquiring its African operations based on an enterprise value of $10.7 billion according to the Indian telecom major. The Bharti-Zain deal is expected to launch Bharti into the league of the world's top 10 telecom operators through increasing the number of customers. This follows Bharti’s failed attempts to merge with MTN, the South African mobile telecom group to create the world’s third largest mobile network in a complex deal, due to lack of approval from the South African government.
Other smaller, but significant, deals include India’s Intelenet Global Services’ acquisition of the back office operations of FirstGroup, the UK transport company. Intelenet, controlled by US private equity group Blackstone, is one of India's largest business process outsourcing companies, with 32,000 employees. As part of the deal, Intelenet paid £45m ($67m) for FirstInfo, which handles the ticketing and other functions of FirstGroup's UK rail operations.
The FirstInfo acquisition also reflects a growing trend among operators in India's multibillion dollar outsourcing industry to increase their presence in the overseas markets they serve, to enable them to get closer to their clients. With near stagnant economic growth in the major markets they serve, the outsourcing companies are also looking to acquisitions as a means to show top line growth.
What these deals indicate is that after a brief hiatus in 2009, when India registered just 25 deals in the whole year - or one-seventh of the total number from emerging markets according to KPMG, Indian companies are back in action with a bang. In 2010, for example, during February, the number of outbound deals more than doubled to 18 from the 8 registered in February 2009. If this trend continues, 2010 will see more action as Indian companies are looking to expand their global presence using M&A as a key component of their global strategy.