Ey Transaction 2017 PDF

Transactions 2017
Inbound M&A takes

center stage
Contents
Foreword.................................................................................................................................3
Mergers and Acquisitions (M&A) activity highlights...............................................................4
Sector focus
1. Cement and building products............................................................................................10
2. Financial services..............................................................................................................12
3. Infrastructure....................................................................................................................15
4. Oil and gas.........................................................................................................................18
5. Pharmaceuticals................................................................................................................20
6. Retail and consumer products............................................................................................22
7. Telecom.............................................................................................................................25
8. Technology........................................................................................................................27
M&A Outlook.........................................................................................................................30
Appendices...........................................................................................................................32
Methodology.........................................................................................................................35
2 | Transactions 2017: Inbound M&A takes centerstage

Foreword
Over the past year, the Indian economy has stayed resilient owing to a stable macroeconomic
environment, eased credit conditions and the continued progress on policy reforms. Though
the Indian government’s demonetization of high value currency notes is expected to create
challenges for the economy in the short-term, it should help shore up public finances, while
helping control inflation over the long-term. The Union Budget FY17-18, unveiled recently
includes many progressive measures aimed at stimulating economic growth and further
improving the ease of doing business in India, which could potentially help in making the
business environment increasingly conducive for transactions.
The M&A activity in India over the past year was positive, owing to a large number of big-ticket
announcements that drove total deal value to a record level, when evaluated over the previous
six year timeframe. The cumulative domestic disclosed deal value also registered its highest
level ever.
The cross-border deal activity also saw an increase despite global headwinds, such as Brexit
and policy uncertainty in the US that impacted global currencies and capital markets. The
inbound deal value soared significantly, on account of a US$12.9 billion announced acquisition
of Essar Oil Limited by Russia-based Rosneft-led consortium, which is the largest ever single
foreign direct investment.
The consistent focus on consolidation continued to be a dominating theme for M&A across
sectors including insurance, online retail and telecom. Divestments and restructuring by Indian
companies played a noticeable role in the M&A activity, which was evident from businesses’
incremental focus on de-leveraging balance sheets and streamlining of their operations.
Companies from the power, cement and telecom sectors disposed-off their non-core assets
Amit Khandelwal with an eye on reducing their debt burden and channelling liquidity into their core businesses.
National Director and Partner Digitization also continued to be a major contributor to domestic M&A, with traditional brick
Transaction Advisory Services and mortar and online retail companies, along with financial services players, acquiring
Ernst & Young LLP companies with specialized technology that not only complemented their business models but
also played a critical role in driving future business growth.
Cross-border activity was dominated by mega deals, especially in the oil and gas sector. While
the inbound deal value was up, the volume was muted. However, the outbound activity gained
both in terms of value and volume.
We expect the M&A activity to stay positive through 2017. Domestic activity should
strengthen further due to a continuous consolidation across sectors. Additionally, business
risk imperative to innovate will drive acquisition activity in the technology space. Lastly,
cross-border activity is expected to stay vibrant across sectors like oil and gas, technology,
pharmaceuticals and media and entertainment. All these aspects are expected to lead to
vibrant M&A activity in 2017.
Transactions 2017: Inbound M&A takes centerstage | 3

India M&A
highlights -
2016
Overall deal value records a new • On the cross-border front, the deal value recorded an
increase of 127% y-o-y, reaching US$31.1 billion in 2016
high since 2010 from US$13.7 billion in 2015, on account of four mega-deals
(US$1 billion and above). These mega-deals contributed
• In 2016, the overall M&A activity was robust owing to a about 63% of the total cross-border deal value. However,
resilient domestic economy and stable capital markets. there was a decline in the total number of deals, decreasing
The deal value during the year reached a record high at to 362 from 404 in 2015.
US$56.2 billion (as compared to US$30 billion in 2015) since
2010. This increase in deal value was noticeable across all • The rise in cross-border deal value can be primarily attributed
transactions - domestic, inbound and outbound. to a quantum leap in inbound deal value, which increased
to US$21.4 billion in 2016 from US$9.9 billion in 2015,
• Interestingly, the year saw 60 restructuring deals worth highlighting India’s continued attractiveness for foreign
US$7.7 billion as compared to 44 deals worth US$4.3 billion players.
in the previous year. Excluding these deals, the value for
the year stood at US$48.5 billion, which is still the largest • The oil and gas sector led in terms of the deal value, followed
value over the past six years. On the volume front, the year by the financial services sector. The deal that pushed the oil
witnessed a marginal decline of 2% y-o-y (year-on-year), and gas sector to this leading position in terms of value was
clocking 867 deals, as compared to 887 in 2015. However, the largest deal of the year — the US$12.9 billion announced
the volume witnessed an increase when compared to 2014 acquisition of Essar Oil Limited (98% stake) and Vadinar
(794 deals) and 2013 (762 deals). port by Russia’s state-controlled petroleum giant Rosneft
Oil Company led consortium. From a volume perspective,
• Domestic deals continued to dominate the Indian M&A the technology, infrastructure and financial services sectors
landscape, as home-grown companies chose the inorganic dominated the charts, accounting for nearly one-third of the
route to generate growth in an environment that was total announced deals in 2016.
conducive to deal-making. With 505 deals worth US$25.1
billion, these deals accounted for 58% and 45% of total
volume and value, respectively.

Exhibit 1: M&A activities of Indian companies Domestic activity dominates the Indian M&A
90 1,000
landscape, anchored on consolidation
Number of deals
887 867 900
US$ billion
60 835 The year saw domestic deals worth US$25.1 billion, the highest
794
762 56.2 800 yearly value on record. On the volume front, 2016 registered
30 505 deals, an increase of 5% against 2015. Consolidation deals
28.4 30.0 700
27.2 27.4 by Indian companies formed a significant part of the domestic
- 600 deal activity.
2012 2013 2014 2015 2016
Deal value (US$ billion) Number of deals India’s M&A market witnessed consolidation across sectors as
companies divested distressed assets in an effort to reduce
Source: EY analysis of Thomson ONE data
debt. On the other hand, corporates with stronger balance
sheets were seen deploying funds towards acquisitions and
consolidating their market position. Amidst a business-friendly
Exhibit 2: Five most active sectors by deal value in 2016 climate anchored on a stable macroeconomic environment,
25,000 easing of credit conditions and continued progress on economic
19,615 policy reforms, Indian companies across sectors chose M&A as
20,000
US$ million
a preferred route of growth.

15,000
• Market share expansion: The year saw a robust trend
10,000 7,297
5,239 of mergers that provided companies an opportunity to
4,557 4,041
5,000 strengthen their market position, which has until now been a
0 rare phenomenon in the Indian context. Some key examples
include:
Oil and
gas
Financial
services
Cement and
building
products
Pharmac
euticals
Infrastructure
• The HDFC Life and Max Life merger showcased the

consolidation activity in the insurance space, primarily on
the back of heightened competition, regulatory reforms
and focus on deriving distribution synergies.
• Dish TV India Limited and Videocon d2h Limited agreed

Exhibit 3: Five most active sectors by deal count in 2016
to merge their operations to create a leading cable and
120 satellite distribution platform and pave the way towards
106
92 91 consolidation in the highly fragmented cable and satellite
80 sector in India. The current Dish TV shareholders would be
80
62 the largest shareholders in this combined entity.
40 Consolidation was also a pronounced driver for the activity

in the telecom sector, owing to the need for a larger share
in spectrum for offering 4G data services and the inability of
0 smaller players to cope with high spectrum costs. The year
Technology
Infrastructure
Financial
services
Retail and
consumer
products
Professional
services
saw noticeable deals such as the merger between Reliance

Communication and Aircel, acquisition of Videocon Telecom’s
spectrum in six circles by Bharti Airtel and the acquisition
of Aircel’s spectrum by Airtel, which are expected to lead to
Source: EY analysis of Thomson ONE data further consolidation across the sector.
• Reduction of debt: Consolidation was also evident as a key

theme in few capital-intensive and cyclical sectors such as
• The average deal size for 2016 edged up to US$161 million,
cement and power. Several companies in these sectors sold
which was a significant increase compared to US$97 million
distressed/non-core assets to reduce debt and consolidate
in 2015. This is the highest ever average deal value on
their core operations. The Reserve Bank of India (RBI) has set
record in the Indian M&A market.
a March 2017 deadline for banks to declare their stressed
and distressed assets, which is prompting banks to take a

tough stance on non-performing assets. Few important Exhibit 4: Geographical distribution of deals
examples in this regard are:
2015 2016
• Sale of cement business arm of Reliance Infrastructure to
Count Value (US$ Count Value (US$
Birla Corporation.
million) million)
• Planned sale of Jindal Steel and Power Limited’s 1,000 Domestic 483 16,360 505 25,141
MW power plant to JSW Energy Limited and others. Inbound 258 9,949 204 21,396
Other sectors that are expected to see consolidation in the Outbound 146 3,708 158 9,650
future include healthcare, consumer products and oil and gas: Total 887 30,017 867 56,187
• Consolidation and fundraising are expected to drive deal Source: EY analysis of Thomson ONE data
activity in the healthcare sector. A highly fragmented
market, a focus on expansion and new emerging healthcare
delivery models will likely push the players in this space to
consolidate. Exhibit 5: Geographical spread of deals in 2016
• The consumer products sector also continued to witness 2015 54% 29% 16%
By count
consolidation on the back of burgeoning local competition,

2016 58% 24% 18%
favourable demographics and evolving expectations of
consumers.
• Within the oil and gas sector, exploration and production 55% 33% 12%
2015
By value
(E&P) companies continue to evaluate restructuring their

asset portfolios with the objective of monetizing/reducing 2016 45% 38% 17%
leverage amidst the prevailing low crude price environment.
Domestic Inbound Outbound

Cross-border deal value doubles in 2016,
thanks to big-ticket M&A transactions • Outbound activity also takes a leap, sustaining the
momentum over the previous year
The year 2016 recorded 362 cross-border deals with a
cumulative disclosed deal value of US$31.1 billion. While the • On the outbound front, the year clocked 158 deals with
deal volume registered a decline of 10% y-o-y, value witnessed a cumulative disclosed deal value of US$9.7 billion —
an increase of 127%. In 2015, deal volume and value stood at registering an increase of 8% in terms of volume and 160%
404 deals and US$13.7 billion, respectively. in terms of deal value respectively (146 deals constituting
US$3.8 billion in 2015.)
• The US continued to be the most active cross-border
partner (50 inbound; 43 outbound deals), followed by the • In terms of deal value, the oil and gas sector led the
UK (21 inbound; 23 outbound deals) and Singapore (16 outbound activity this year, owing to two mega deals.
inbound; 8 outbound deals).
• A consortium formed by Oil India Limited, Bharat
• Inbound activity emerges as a key contributor Petro Resources Limited and Indian Oil Corporation
Limited signed an MoU to acquire 23.9% stake in
• Inbound deal value registered an increase of 115% y-o-y,
JSC Vankorneft and 29.9% stake in LLC Taas-Iuriakh
reaching US$21.4 billion in 2016 from US$9.9 billion in
Neftegazodobycha from Rosneft for a total of US$3.3
2015. The significant jump in inbound deal value can be
billion.
attributed to US$12.9 billion Essar-Rosneft-led consortium
deal. • ONGC Videsh secured an approval to acquire a total of
26% stake in Russian oil company JSC Vankorneft from
• On the volume front, technology was the most active
Rosneft for US$2.2 billion.
sector for inbound M&A activity in 2016, followed by
infrastructure, and the media and entertainment sector.

Technology and pharmaceuticals were the most active Exhibit 7: Five most targeted nations by Indian
sectors in terms of volume from an outbound M&A companies in 2016
perspective in 2016. While companies in the technology 50
sector made outbound acquisitions to build competencies 43
in new technologies, specifically so for the SMAC domain, 40
the pharmaceuticals players took the inorganic route for 30
23
market and product expansion.
20

10 8 8 8
Re-emergence of mega deals in 2016
0
The year witnessed an increase in disclosed deal value,
US
UK
UAE
Germany
Singapore
primarily on the back of 12 mega deals (3 in 2015). This is the
highest number of mega deals recorded post-2010. Notably,
these deals accounted for 61% of the total deal value. The
majority of these deals were domestic in nature (8 out of 12),
accounting for 26% of the deal value, indicating solid business
confidence in the domestic markets. Two mega deals each were
witnessed on the inbound and outbound front. Restructuring deals gain traction during
Notably, three cross-border mega deals took place in 0il and
the year
gas sector, worth a combined value of US$18.4 billion. Leading Significant restructuring activity was seen during the year,
Indian oil companies have signed a number of deals with focussed on achieving portfolio optimization, operational
Russian players, adding commercial depth to the strategic ties efficiency and unlocking value for the shareholders.
between India and Russia. These deals reflect the government’s
resolve to push big-ticket oilfield acquisitions abroad with an A total of 60 restructuring deals with an aggregate disclosed
eye on boosting India’s energy security. value of US$7.7 billion were recorded during 2016, as
compared to 44 such deals worth US$4.3 billion in 2015. These
Exhibit 6: Five most acquisitive nations (in terms of deals constituted around 7% of the deal volume seen in 2016,
volume) of Indian companies in 2016 as compared to 5% in the previous year.
60 Mergers and stake/asset transfers within group companies were
50
a common phenomenon during the year. Some supporting
40 deals include:
21 20
20 16 • Dalmia Bharat and OCL India, two group companies of
12
Dalmia Bharat Group, approved their merger, a move that
0 will create the fourth largest cement maker in the country
Japan
France
with an installed capacity of 25 million tonnes per annum.

UK
US
Singapore
• Siemens Limited approved the sale and transfer of its

healthcare undertaking to Siemens Healthcare Private
Source: EY analysis of Thomson ONE data Limited, a subsidiary of Siemens AG, for US$454 million,
with the objective to focus on its core businesses - power
generation and transmission and industrial automation.
• Fortis Healthcare Limited’s (Fortis) Board approved the

demerger of its diagnostic business that housed its
majority-owned subsidiary SRL Limited. The demerger
shall be followed by SRL’s merger with Fortis’ listed
subsidiary Fortis Malar Hospitals.

• The State Bank of India has approved its merger with its Online players are focusing on aqui-hiring
five associate banks and Bhartiya Mahila Bank. The deal
will create a global sized bank with an asset base of over
players in the digital space to gain access to
US$555 billion, rivalling the largest banks globally. skilled talent
A few examples of spin-offs being concluded during the year Companies are increasingly buying technology start-ups not
include: only to support their products/apps or the websites, but also to
gain the talent/teams that work for these entities. The primary
• Aditya Birla Group plans to merge its subsidiaries Grasim
focus is on identification of teams working on unconventional
Industries Limited and Aditya Birla Nuvo Limited in an
ideas/concepts and new-age technologies and get them on
attempt to create a stronger entity. It also plans to spin
board by acquiring their companies. It is this section of tech
off one of its financial services business with a focus on
mavericks that the large online players are targeting. Mostly,
unlocking shareholder value.
the start-ups are in the technology and e-marketplace that can
• Talwalkars Better Value Fitness’ Board approved the complement and augment to the business models of the big
demerger of its gym business into separate company, e-commerce companies. Prominent examples of such deals
Talwalkars Lifestyles, in order to deliver management include:
efficiencies and a sharper focus on its business operations.
• Myntra has acqui-hired Cubeit, a Bengaluru-based start-up
Share repurchase was also a prominent aspect across many that facilitates content aggregation on mobile devices.
deals. The year saw various repurchase transactions by Public
• Fintech startup Lendingkart Group has acqui-hired
sector Units due to the government’s push to utilize their
KountMoney, an online lending marketplace for personal
surplus cash in either capex or share buyback. Few examples
loans, to boost its technology and data analytics capabilities.
include:
• Voonik Technologies Private Limited launched a marketplace
• NMDC agreed to buy back over 800 million shares worth
for premium boutiques and designers Vilara by acqui-hiring
US$1.1 billion, most of which will go to the government,
online occasion-wear brand Zohraa. It also acqui-hired Styl
which owns 80% stake in the company.
and Picksilk to strengthen its core offerings in technology
• Bharat Electronics agreed to buy back upto 16.6 million and product.
equity shares worth US$325 million.
• National Aluminium Company Limited decided to buy back Online players are also making acquisitions
644.3 million shares or 25% of the paid-up capital from to expand market share
public shareholders for INR28.35 billion.
Consolidation continued to reign across deal activity in the
e-commerce segment as players sought to expand their scale
Digitization and disruptive technologies of operation, increase market share and gain access to new
driving new wave M&A technologies. Against this backdrop, online players increasingly
concentrated on acquisitions to meet the growing demand for
Increased focus on innovation enabled by an advances in online shopping and counter competition. Examples of such
technology and digitization is disrupting business models across deals include:
industries. At the same time, burgeoning internet penetration,
coupled with changing customer behavior and expectations, • PayU, an online payments company owned by South Africa’s
is creating pressure on traditional brick and mortar players to Naspers, acquired Mumbai-based payments technology
develop an online presence. As such, the corporate strategy of player, Citrus Pay, for US$130 million in an all-cash deal.
India Inc. will likely be guided by acquisitions in the digital space With this acquisition, PayU will be able to add more than 30
that enables them to keep pace with unprecedented disruption million people to its user base.
and sector convergence. During the year, we saw large IT • Flipkart-owned Myntra bought its rival Jabong in a US$70
companies acquiring emerging technologies as they sought to million all-cash deal to create India’s largest online fashion
introduce new capabilities, expand their digital businesses and destination.
innovate existing product offerings.
• Online food delivery platform Foodpanda’s acquisition of
Delivery.com’s Hong Kong business aimed at driving higher
growth in one of its key markets.

• Online classifieds company Quikr India Private Limited’s towards a cashless economy and digitization of financial
acquisition of Grabhouse, a Mumbai-based online home services. Demonetization is now expected to act as a catalyst
rental startup run by Cryptopy Technologies Private Limited, towards the digital payments ecosystem. People are signing up
to strengthen its realty business vertical. for e-payments and mobile wallets for their daily transactions.
Digitization will also lead to greater financial inclusion across
Offline players (across industries) focus on the country by compelling the rural population to use mobile
banking for accessing payment, savings, insurance, credit
buying online brands to tap e-commerce services and micro-finance.
market potential
We expect to see digitization deals gathering pace in the mobile
Recognizing the need to enhance their mode of operation, wallet space following India’s demonetization policy. It is being
home-grown brick-and-mortar players have also entered seen as an opportunity by key players in the mobile money
the online space through the inorganic route. The changing market such as Paytm, MobiKwik, FreeCharge, ItzCash and
buying pattern of consumers – who expect to augment their Payworld as consumers gradually adopt alternative payment
convenience in terms of time and effort, a much wider product mechanisms.
range and competitive prices – coupled with increased internet
Digitization and cross-sector competition/convergence
penetration is increasingly forcing traditional players to make
have attracted heightened attention owing to the enormous
a shift to online platforms. As a result, traditional retailers are
disruptive potential across industries. Companies are looking
venturing into the online space either through tie-ups (with
beyond organic development to explore growth through
e-tailers), acquisitions or launch of their own online portals.
acquisitions, JVs and alliances. This new form of dynamic and
Some examples include:
increasingly automated partnering in the business-to-business
• Tata group’s Titan bought an undisclosed majority stake in (B2B) market represents significant potential for growth that
the online jewellery store CaratLane. The move will give combines greater agility with lower costs. Looking ahead, we
Titan a toehold in the online segment, and CaratLane will get expect robust M&A activity unfolding in this space, with deals
access to Tata’s luxury jewellery line Tanishq. aimed at strengthening the market position anchored on high
growth prospects, consolidation of business-verticals/segments
• Daily Delite India Private Limited, which runs three
and enriched offerings that harness new innovations.
supermarkets in Delhi, acquired a fresh fruits and vegetable
e-tailer, Delhimandi.com for an undisclosed amount. Exhibit 8: Domestic M&A activities of Indian companies
• Pune-based casino and hotel operator Delta Corporation 30 483 505
452 448 431 500
Number of deals
Limited agreed to acquire Gaussian Networks Private
US$ billion
400
Limited, the operator of online poker site adda52.com for 20
25.1 300
around US$27 million, marking its entry in the online gaming
space. 16.2 16.4 200
10 13.9
100
6.2
Mobile wallets see heightened activity, 0
2012 2013 2014 2015 2016
0
stemming from demonetization

Deal value (US$ billion) Number of deals
The government’s demonetization move has set the stage for Source: EY analysis of Thomson ONE data
a spurt in digital payments, paving the way for India’s journey

Sector focus
Cement and
building products
Consolidation and deleveraging a non-availability of wagons, have put significant pressure on

companies’ profitability, thus making it unviable for many of
rules the M&A landscape these to operate.
The year 2016 was a promising one for the cement sector, The sector saw big consolidation deals where debt-ridden
which recorded 17 deals with a total disclosed value of US$5.2 players divested their assets to repay loans. Leading domestic
billion, the highest yearly deal value on record. When compared players with healthy balance-sheets took advantage of this
to the previous year, the deal value increased more than three situation and bought such stressed assets to build capacities, in
times while the deal volume also grew by 21% y-o-y (14 deals in anticipation of demand improving in the future. Key examples
2015). The sector’s M&A activity was dominated by domestic include:
deals as the industry continued to witness consolidation • Sale of cement business arm, Reliance Cement Company
activity. Notably, domestic deals accounted for 82% of the Private Limited, of Reliance Infrastructure to Birla
sector’s deal volume. Corporation. for US$707 million, in a deal that will help
The cement industry includes a large number of cement Anil Ambani-led group to lower its debt burden.
manufacturers with many of these having small manufacturing • Orient Cement, a firm owned by the Chandra Kant Birla
units with an unfavourable cost structure. Cement players group, has agreed to acquire 74% stake in Bhilai Jaypee
have continued to add capacity over the last decade, anchored cement and Nigrie cement grinding unit in Madhya Pradesh
on expectations around India’s growth and its infrastructure from Jaypee group companies at an enterprise value of
needs. This has resulted in a significant oversupply of cement, around US$293 million. The deal will help the Jaypee group
leading to a low capacity utilization rate and consequent to trim some of its debt.
operational inefficiencies. On the contrary, the demand in the
industry remains sluggish, owing to a slump in the real estate During the year, we saw reorganization of a few big-ticket deals,
and housing market. Other operational challenges that include due to regulatory hurdles. One of the clauses of mines and
a rise in production costs (freight, energy and limestone) and minerals development and regulation (MMDR) act did not allow

the seller of the cement asset to transfer captive mines to the
buyer of the cement plants, unless these mines were granted
through auction. This led to the withdrawal of major M&A deals
such as UltraTech Cement-Jaiprakash Associates and Birla
Outlook
Corporation-Lafarge India. To deal with the mining transfer Consolidation will continue to drive
logjam, companies restructured terms of the deal and decided M&A activity
to put their entire cement business on block. Examples include:
The Indian cement sector has been facing muted
• Announcement of the purchase of Jaiprakash Associates’ growth over the last few years. While near-term
21.2 million tonne cement assets spread across five states, headwinds such as the recent demonetization move
by UltraTech Cement for US$2.4 billion. by the government may exert pressure on the demand
for cement in the short-term, the long- term outlook
• LafargeHolcim’s agreement to sell its interest in Lafarge India
for the sector looks positive on the back of a revival in
to Nirma for an enterprise value of US$1.4 billion. The deal
the investment cycle that’s expected to occur with the
is an important step in LafargeHolcim’s larger CHF 3.5 billion
government’s thrust on the infrastructure sector. In
divestment programme for the year.
addition, a slowdown in the pace of capacity addition
Nevertheless, in May 2016 the Indian Parliament passed the will also lead to an improvement in plant utilization
amendment in MMDR act to allow the transfer of captive mines rates over the coming years. Furthermore, the housing
which have been allotted through a route other than auction market, the biggest demand driver of cement, which
to the buyers, which will remove the regulatory hurdles as accounts for about 67% of the total consumption, is
mentioned above and facilitate deal-making in the sector. expected to improve in the near-term. In the Union
Budget FY17-18, the Indian government has stated
Exhibit 9: M&A deals in the cement and building its plans to build 1 crore houses by 2019 to provide
products sector homes to the homeless and those living in makeshift
houses. Additionally, National Housing Bank will
8,000 17 17 20
refinance individual housing loans worth INR20,000
Number of deals
US$ million
6,000 14
5,239 crore during FY 2017-18. Hence, factors such as lower
4,000 mortgage and government initiatives such as “Make in
India”, “Housing for all by 2022” and the “Smart City”
2,000 1,147 1,154 programs should enable a pick-up in housing activity,
0 0 with potential to positively impact the demand for
2014 2015 2016
cement. We can expect a narrowing of the demand-
Deal value (US$ million) Number of deals supply gap over the coming years, thereby providing
Source: EY analysis of Thomson ONE data better pricing leverage to the industry players.
On the M&A front, consolidation is expected to be the

biggest driver of deal activity in the sector, primarily
2014 2015 2016
due to divestment deals focused on de-leveraging
Number of deals
balance sheets. Big players should keep on evaluating
Domestic 13 11 14 opportunities to build capacities through deep-value
Inbound 3 3 1 acquisitions with the sectors’ dynamics expected to
Outbound 1 – 2 improve in the future. Furthermore, regulatory and
policy shifts pertaining to mining rights are expected to
Total 17 14 17
support this trend and aid stalled M&A deals in
the sector.
Deal value (US$ million)
Domestic 1,071 768 5,231
Inbound 72 386 7
Outbound 4 – 1
Total 1,147 1,154 5,239

Sector focus
Financial services
Regulatory reforms supported promoting the insurance industry and the need to upscale to
bring cost efficiency and increase customer base are the key
by growing digitization spurs drivers behind this trend. Given the push required to drive
growth in the sales of insurance policies, distribution network
deal-making becomes pivotal for the success of the business. During 2016,
In 2016, the financial services sector saw its highest ever yearly we saw certain deals/tie-ups taking place between insurance
deal value on record, at US$7.3 billion — a more than two-fold companies and banks to achieve a cost efficient distribution
increase as compared to 2015. However, the deal value was network and reach a wider customer base. These deals are
largely inflated due to two mega deals, which contributed expected to trigger further consolidation in the sector over the
around 83% to the total disclosed value. One of these deals coming year. Few examples include:
was an internal restructuring exercise carried out by the Aditya • HDFC Standard Life Insurance Company Limited, Max
Birla Group. On the whole, there were 8 internal restructuring Life Insurance Company Limited, Max Financial Services
transactions seen in the sector, accounting for around half of Limited and Max India Limited have agreed to merge their
the total disclosed deal value. Even on the volume front, the operations. As a part of the proposed transaction, Max
sector witnessed significant activity, registering 91 deals as Life will be merged into Max Financial Services, followed
compared to 75 in the last year. Dominant segments within the by a demerger of the life insurance undertaking from Max
sector included NBFC (27 deals; US$100 million), insurance (11 Financial Services into HDFC Life (the new merged entity).
deals; US$3.3 billion), capital markets (12 deals; US$83million) Max Financial, holding the residual business, will be absorbed
and payment solutions (8 deals; US$130 million). by Max India.
• Axis Bank Limited acquired a 4.99% stake, increasing its

Consolidation in the insurance segment is on stake to 5.99%, in Max Life Insurance Company Limited for
the cards US$13.9 million.
The market environment has been quite conducive for There were some deals in the health insurance space, anchored
consolidation in the rapidly growing insurance industry. on foreign financial players’ continued interest in the India
The heightened competition, regulatory reforms aimed at market, either by entering into a joint venture or by acquiring

an additional stake in their existing business ventures. Health • Suryoday Micro Finance has raised an undisclosed amount
insurance sector in India offers tremendous opportunities of fresh equity capital from a clutch of domestic investors,
given India’s demographics such as an aging population and including IDFC Bank, HDFC Standard Life and a couple of other
increased life expectancy. Other factors which will also lead to a family offices.
rise in healthcare spending include rapid progression of medical
Increased usage of new technologies in the financial services
technology, increasing incidences of lifestyle diseases and
sector is playing a crucial role in achieving financial inclusion.
favourable regulatory interventions. Some examples are:
Also, improved access to high speed internet will continue to
• German firm Munich Re announced to buy an additional transition consumers towards digital transfers, thus attracting
23.27% stake (raising the stake to 49%) in Apollo Munich companies to enter/expand their presence in the mobile payments
Health Insurance from its joint venture partner, Apollo solutions space. In addition, the recent demonetization by the
Hospitals for US$24 million. government has provided a push to the country’s emerging digital
payments market. Few of the supporting deals are:
• South African financial services group MMI Holdings has
agreed to form a 49:51 health insurance JV with Aditya • PayU, the digital payments provider owned by South Africa’s
Birla Group. Naspers Group, acquired Indian payments technology player,
Citrus Pay, for US$130 million.
Increased efforts to drive financial inclusion • Domestically, marketing technology firm Hansa Cequity bought
boosts deal activity in microfinance Inloyal, a mobile wallet, to grow its product and platforms
business.
and fintech
Microfinance was an active segment in 2016, considering that Exhibit 10: M&A deals in the ﬁnancial services sector
financial inclusion remains at the heart of the government’s
10,000 91 100
policy agenda. Given the saturated nature of urban markets
Number of deals
and the government’s continued efforts to promote inclusive 8,000 75 7,297 80
US$ million
growth, significant growth opportunities could be seen for 6,000 49 60

players operating in the rural banking space. This was evident 4,000 40
3,369 2,687
during the year, with Indian banks buying microfinance
2,000 20
providers to cater to the financial needs of unbanked and
unserved segments of the country. This move also helped the 0 0
2014 2015 2016
banks to fulfil the obligations set out by the RBI on priority
sector lending. Prominent examples which support this Deal value (US$ million) Number of deals
trend are:
• Kotak Mahindra Bank Limited agreed to purchase 99.49%
equity shares of BSS Microfinance Private Limited, for
US$20.8 million. 2014 2015 2016
Number of deals
• IDFC Bank acquired a 9.99% stake in ASA International India
Microfinance for about US$1.3 million. Domestic 34 39 72
Inbound 14 35 12
The year also saw NBFC’s, which have received small finance
bank (SFB) license, engaging in capital raising activities via Outbound 1 1 7
stake sale to domestic investors as a mean to reduce foreign Total 49 75 91
shareholding to comply with the RBI’s norms. In the latter half
of 2015, RBI had granted an in-principle approval to ten entities Deal value (US$ million)
(out of which eight were micro finance institutions) to set up Domestic 3,185 718 7,077
SFB’s, which are required to reduce their foreign shareholding
Inbound 181 1,869 211
below 49%, to become eligible to apply for a final SFB license.
Outbound 3 100 9
Leading examples are:
Total 3,369 2,687 7,297
• Utkarsh Micro Finance Private Limited has raised fresh
capital of around US$59 million from several domestic Source: EY analysis of Thomson ONE data
institutional investors.

Outlook
The sector will continue to attract
investor’s attention
Deal activity in the financial services sector will be
majorly driven by payment solution companies, NBFCs
(in particular micro finance players) and insurance
companies. We are likely to see a renewed interest in
the fintech space post demonetization, which will lead
to greater technological innovations, creation of newer
business models and offer a strong support in helping
the country become a less-cash economy. Furthermore,
recently proposed excise and customs duty exemptions
in the budget for Miniature POS machines, iris/
fingerprint scanners, etc. should also drive adoption
of cashless facilitating techniques. Thus, a surge in the
adoption of digital payments over the coming years will
boost the business of online wallet firms, providing an
impetus to M&A activity.
We expect to see fund-raising by NBFCs and micro

finance companies as well as consolidation in the micro
finance space. The rapid growth in the microfinance
segment is likely to encourage private sector banks
to tap the opportunity thrown by underserved rural
sector of the country. Furthermore, the government’s
continued efforts to encourage inclusive growth is
expected to accelerate deal-making in this space.
The booming insurance sector is also expected to see

consolidation and shareholding changes, driven by the
change in FDI regulations. Increasing opportunities
could be seen in the insurance sector on the back of
rising competition, lower penetration and supportive
regulatory measures. Seeking to attract more foreign
investment, the government relaxed FDI norms for
the sector in March 2016, by permitting overseas
companies to buy 49% stake without prior approval.
Earlier, for FDI up to 49%, the approval of the Foreign
Investment Promotion Board was required. This is likely
to drive transactions pertaining to changes in existing
shareholder patterns and attract fresh investments in
the sector.

Sector focus
Infrastructure
Cleantech and logistics segment increasing focus on clean energy sources. To encourage
private players to enter the segment, the government is
continue to provide solid ground offering various incentives such as generation-based incentives
(GBIs), capital and interest subsidies, viability gap funding and
for M&A activity concessional finance.
The Indian infrastructure sector clocked 92 deals with an Both local and foreign renewable energy players have shown
aggregate disclosed deal value of US$4 billion in 2016. an interest in acquiring clean energy portfolios in India. As per
Compared with 2015, deal value surged by nearly 78% from media reports, Japan’s Sumitomo Corporation and France-
US$2.3 billion, while deal count remained largely stable (93 based EDF have plans to set up manufacturing facilities in India.
deals in 2015). The increase in deal value was primarily due to The World Bank has also committed to invest nearly US$1
two mega deals recorded in 2016, as against no such deal in billion India-based solar energy projects. At the same time, the
the previous year, in the power sector. US-based PE player IFC agreed to invest US$125 million in Hero
Within infrastructure, the power segment (especially cleantech) Future Energies Limited, the renewable energy arm of the Hero
hogged the limelight as it cumulatively accounted for 53% of Group, to fund construction of its solar and wind power plants.
the total volume and 86% of the total M&A value of the sector. Domestically, the Adani Group opened the world’s largest solar
Logistics and transportation was another active segment, plant in Tamil Nadu in 2016, and Tata Power announced that it
constituting 23% of the total M&A volume. aims to generate as much as 40% of its energy from renewable
sources by 2025. NTPC also announced plans to become the
Clean energy continues to remain at the country’s largest renewable energy company.
forefront Industry wise, the renewable energy market is fragmented,
with a large number of small players. With the rapid growth
India’s heavy reliance on imported fossil fuels, a persistent
of the sector, large players are more interested in acquiring
shortfall in power supply and a global shift towards green
new and smaller players to increase their capacities. The
energy are acting as key triggers for the government’s
inorganic route is seen as a convenient way to expand
compared to time-consuming pre-development work and

existing competitive bidding of the projects. Hence, we could With the tech-savvy gen-next population increasingly shopping
see more of consolidation deals going forward. Key examples of online, third-party logistics firms are riding high on the
consolidation deals include: e-commerce boom. E-retailing has driven investment and value
in the logistics sector, which has spawned a new class of third-
• Sembcorp Green Infra, a subsidiary of Singapore-based
party operators. Examples include:
Sembcorp Industries Limited, acquired a 74% stake in
Mulanur Renewable Energy Private Limited for around US$24 • New Delhi-based truck aggregator Moovo acquired smaller
million. rival GoGoods to expand its geographic network within India.
• ReNew Power Ventures acquired two cleantech assets — • Online take-away delivery firm Foodpanda acquired the Hong
Shruti Power Projects Private Limited and Helios Infratech Kong assets of the US-based Delivery.com as it consolidates
Private Limited in separate transactions. its position in key markets while shedding assets elsewhere.
• Tata Power Company Limited acquired the renewable energy

business of Welspun Enterprise Limited at an enterprise value Exhibit 11: M&A deals in the infrastructure sector
of US$1.4 billion.
10,000 120
Number of deals
On the other hand, the sector also witnessed deals where sellers 93 92 100
8,000 85
US$ million
divested their assets to pare debt. While many companies have 5,624 80
6,000
entered the power segment over the last decade; issues such 4,041 60
as land acquisition hurdles, regulatory approvals, and delay 4,000
2,273 40
in environmental clearances have stalled many big projects 2,000 20
and led to cost escalation. This, coupled with highly-leveraged 0 0
balance sheets due to aggressive capex plans and adverse 2014 2015 2016
financing conditions, is exerting a drag on the already-indebted Deal value (US$ million) Number of deals
companies. Few examples of deleveraging deals include: Source: EY analysis of Thomson ONE data
• Orient Green Power Company agreed to sell its 20 MW
biomass plant in Maharashtra to Singapore-based Sindicatum
Captive Power for US$12.1 million. 2014 2015 2016
• SunEdison Inc. agreed to sell its Indian assets to Greenko Number of deals
Energy Holdings. Domestic 49 66 60
Inbound 29 21 25
Expansion drove deals in the logistics
Outbound 7 6 7
segment Total 85 93 92
Global as well as local players acquired Indian logistics
companies to strengthen their product offerings and expand Deal value (US$ million)
geographic coverage. With rising demand for transportation and Domestic 4,868 1,757 3,397
warehousing services especially by e-marketers, logistics is an Inbound 720 437 644
emerging segment with potential for growth. Some of the deals
Outbound 36 79 –
supporting this trend are as below:
Total 5,624 2,273 4,041
• Hong Kong-based Kerry Logistics Network Limited bought a
50% stake in Indev Logistics Private Limited, a Chennai-based
logistics company, for expansion purposes.
• Indian conglomerate TVS Group, through its subsidiary Rico

Logistics, acquired an undisclosed majority stake in the
UK-based Circle Express to strengthen its same-day delivery
capabilities.

Outlook
Government’s thrust on the sector will
propel deal activity
The infrastructure sector is highly responsible
for propelling India’s economic development and
enjoys intense focus from the government. The
government has taken several initiatives to ensure
rapid infrastructure development — earmarking nearly
US$14.3 trillion on roads and highway projects, plans
to develop 100 smart cities, and railway investments
worth US$140 billion over the next five years. As
expected, infrastructure was also the key focus of
the Union Budget FY17-18. The Finance Ministry
recognized railways, roads and rivers as the lifeline
of the country by announcing a proposal to introduce
new Metro Rail policy and new Metro Rail. These policy
frameworks for innovative models of implementation
and financing would facilitate greater private
participation and investment in the sector.
Accordingly, deal-making activity is expected to

increase in the sector, especially in the roads and
highways segment. Fund raising will continue to drive
deal activity in the infrastructure segment, with a push
from lenders and/or need of sponsors to deleverage.
Infrastructure investments trusts (InvIts) could be an
emerging theme in 2017 due to their ability to provide
low-cost financing for the sector.
At a sub-sector level, we will continue to see heightened

deal activity in renewables and roads/highways
space. Deal activity is likely to remain strong in the
power segment as several operational portfolios in
the renewable segment come up for sale/private
investment, and industrial players continue to shift their
focus to cleaner sources of energy. At the same time,
the logistics segment will likely see a rise in activity,
thanks to the rising popularity of online shopping and
government initiatives. The approval of the GST bill is
also expected to change the dynamics of the logistics
sector. The implementation of GST will likely open
opportunities for logistics players by allowing them to
aggregate state-based warehouses into large, regional
warehouses that offer cost and operational efficiencies
in big markets.

Sector focus
Oil and gas
Oil and gas sector tops the On the inbound front, Russia’s Rosneft-led consortium
announced to acquire a 98% stake in Essar Oil Limited for
sector value charts with billion US$12.9 billion, through two separate agreements. The first
agreement saw the sale of 49% interest to Petrol Complex
dollar-plus deals Private Limited (a subsidiary of Rosneft) and the second
The year 2016 was a blockbuster for the oil and gas sector. included the sale of the remaining 49% to Kesani Enterprises
A total of 18 deals having a disclosed deal value of US$19.6 Company Limited (owned by 2 consortium players ) at an
billion were recorded, the highest deal value ever for the sector, enterprise value of US$10.9 billion. The buyers also agreed
on the back of the announced US$12.9 billion Essar-Rosneft to acquire Essar’s Vadinar Port for an additional US$2 billion,
deal. The sector also registered the most robust deal value taking the total deal value to US$12.9 billion and making it the
across all sectors. single largest foreign investment in the Indian refining sector
till date. This transaction was the biggest M&A deal in India and
also the largest outbound deal for Russia in 2016. The all-cash
Cross-border transactions involving Russian deal is expected to close in the first quarter of 2017. This
sale would enable Essar to trim its debt and support Rosneft’s
companies drove the sector’s activity
strategy to penetrate in South Asia for Russian downstream
Russia has been a long-standing partner of India with strong investments.
bilateral ties. The Indo-Russian relations have strengthened
During the year, we also witnessed some big-ticket outbound
over the years, with increasing cooperation across diplomatic
deals, driven by India’s consistent focus on ensuring its
and business areas including national security, trade, science
energy security. Deal-making in the sector was dominated by
and technology. In 2016, we saw a big push in Indo-Russian
public sector undertakings, since the government has been
ties with several big-ticket M&A deals in the oil and gas sector.
encouraging state-owned companies to aggressively pursue
Russia was a strategic partner in four cross-border oil and gas
acquisitions of energy assets overseas.
transactions — as an acquirer nation in one inbound deal and as
a target nation in three outbound deals.

Key examples include:
ONGC Videsh secured an approval to acquire a 26% stake

Outlook
•
in Russian oil company JSC Vankorneft from Rosneft for
US$2.2 billion.
Quest for energy security is expected to
• A consortium led by OIL India Limited, Indian Oil Corporation drive overseas acquisitions
Limited and Bharat Petroleum Corporation Limited signed
agreements to acquire stakes in two Russian oilfields for a Seeking to secure energy sources, Indian Inc. will
total of US$3.26 billion. The acquisitions include - a 29.9% continue to make major overseas investments in oil
stake of Russia’s Taas-Yuriakh oil field in East Siberia from and gas assets. At the same time, the global market is
Rosneft for about US$1.24 billion and a 23.9% stake in flourishing with low-priced deep value assets as many
Rosneft’s Vankor project for around US$2.02 billion. players with stretched balance-sheets are looking to
monetize their assets, in the wake of persistently low
Exhibit 12: M&A deals in the oil and gas sector crude oil prices. Therefore, M&A activity in oil and
gas sector is likely to stay healthy in coming years as
25,000 100
national oil companies will continue to scout for E&P
Number of deals
20,000 19,615 80 assets in CIS, Latin America and Africa.

US$ million
15,000 60
On the domestic side, we can witness consolidation in
10,000 40 the E&P space. As per media reports, the government
16 18
5,000 9 20 is considering a merger of 13 state-held oil companies,
574 2,175 such as Oil and Natural Gas Corporation (ONGC), as
0 0
2014 2015 2016 well as IOC, BPCL, Hindustan Petroleum, GAIL, among
Deal value (US$ million) Number of deals others, into one big company that could compete with
the big global players. A merger of this size should alter
the industry dynamics and possibly trigger gradual
acquisition of relatively smaller players.
2014 2015 2016
Number of deals
Domestic 7 4 9
Inbound 2 2 4
Outbound 7 3 5
Total 16 9 18

Domestic 72 2,159 1,219
Inbound 6 – 12,936
Outbound 496 16 5,460
Total 574 2,175 19,615

Sector focus
Pharmaceuticals
Cross-border activity dominated The recent change in FDI regulations also augurs well for deal
sentiment, given that, brownfield investments of upto 74% (as
the sector against 49% earlier) are now allowed under the automatic route.
Two large inbound sterile injectable deals were announced this
The pharmaceuticals sector witnessed 51 deals being year, both of which have been in the making for a long time:
announced in the year 2016, with aggregate disclosed deal
value of US$4.6 billion. Outbound and domestic transactions • China-based Shanghai Fosun Pharmaceutical (Group)
drove most of the deal activity, with 21 deals each. In terms of Company Limited announced the acquisition of an 86% stake
disclosed deal value, outbound and inbound activity stood at in Gland Pharma Limited for up to US$1.26 billion.
US$2.1 billion each. Domestic deal-making was concentrated • US-based Baxter International Inc. entered into an agreement
in smaller value bands with an aggregate deal value of US$342 to acquire Claris Injectables Limited, a wholly owned
million, of which US$272 million (4 deals) worth of deals were subsidiary of Claris Lifesciences Limited, for US$625 million.
restructuring deals.
On industry sub-segments, sterile injectables led the pack with

Indian pharma majors continued their quest
nearly US$2 billion of deal value, followed by other generic for market and product expansion overseas
formulations with an aggregate deal value of US$1.6 billion.
The trend of comparatively larger (by Indian standards)
There were two deals in the CDMOs/CROs segment worth
overseas acquisitions that was kicked off in 2015 continued
US$258 million, and 7 relatively smaller deals (worth US$42
in the year 2016 as well. Indian players continued to look for
million) in the biotech segment.
access to under-penetrated markets and expand their product
Inbound interest in sterile injectables offerings. The major outbound deals announced during the year
were:
continued
• Intas Pharmaceuticals Limited, through its wholly owned
India continues to enjoy a prominent position in the global subsidiary Accord Healthcare Limited, entered into an
generic pharma space, due to the large number of USFDA agreement to acquire Actavis UK Limited and Actavis Ireland
approved sites coupled with low capex and operating costs. Limited from Teva Pharmaceutical Industries Limited for an
enterprise value of US$767 million.

• Dr. Reddy’s Laboratories entered into an agreement with
Teva Pharmaceutical and an affiliate of Allergan plc to
acquire a portfolio of eight ANDAs in the US for US$350
million.
Outlook
Given recent policy announcements made in the
• Sun Pharma forayed into the Japanese prescription market US on drug price controls, bidding processes for
by acquiring 14 brands from Swiss drug firm Novartis for generics, a potential “border adjustment tax”, and
US$293 million. degrees of outsourcing/ offshoring by US Pharma
• Lupin Limited strengthened its position in Japan by acquiring companies, we remain cautiously optimistic on the
21 products form Shionogi & Company Limited for US$150 US-India inbound deal corridor at this time. While
million. it is true that India continues to offer competitive
advantages to US pharma companies as a development
A bunch of smaller deals were announced by Indian pharma & manufacturing base for Generics, it remains to be
companies in emerging markets: seen as to what impact the aforementioned policy-
• Sun Pharma, through its wholly owned subsidiary, related announcements might have on inbound deal
announced to acquire 85.1% stake in Russia-based JSC sentiment in the short to medium-term. On the other
Biosintez, for US$60 million. hand, 2017 might be a promising year for outbound
activity from India to the US, given that US valuations
• Strides Shasun acquired a 51% stake in Australia-based have significantly corrected and there aren’t too many
Generic Partners for US$17.7 million. In another transaction, US-based acquirers with adequate financial strength.
Strides Shasun announced the acquisition of a majority stake This presents Indian pharma companies with a much-
in Kenya-based Universal Corporation for US$14 million. needed opportunity to step in and close portfolio gaps
at reasonable prices.
Exhibit 13: M&A deals in the pharmaceuticals sector
6,000 120 While the Japanese government has been vocal on the
need for broad-based introduction of generics, it is yet
Number of deals
4,557 100
4,137 to reflect at a ground level. Nonetheless, we believe
US$ million
4,000 80
3,116 that the opportunity will open up in the medium to long-
60
term. This promise continues to inspire Indian pharma
2,000 53 51 40 companies to build/consolidate their positions in Japan.
48
20
Back home, domestic consolidation in the industry will
0 0
2014 2015 2016 continue. The pace of such consolidation, as always, will
Deal value (US$ million) Number of deals continue to be dominated by succession and wealth-
diversification related considerations, even though
Source: EY analysis of Thomson ONE data business fundamentals such as price controls and the
lack of product pipelines will also play its part.
2014 2015 2016
Number of deals
Domestic 20 21 21
Inbound 12 11 9
Outbound 16 21 21
Total 48 53 51

Domestic 3,543 209 342
Inbound 384 1,155 2,099
Outbound 210 1,752 2116
Total 4,137 3,116 4,557

Sector focus
Retail and
consumer
products
Domestic activity continues to top in per capita income. Significant activity was seen in the online
retail space that was driven by companies’ efforts to strengthen
the M&A charts their business models by combining offline and online platforms
and the consolidation seen in the sector. The sector might face
The retail and consumer products sector recorded a decline in short-term headwinds as the recent demonetization initiative
both, deal activity and deal value. The year witnessed 80 deals might have a negative impact, though temporary, on the sales
having an aggregate disclosed deal value of US$635 million, of online retail companies which are heavily dependent on cash
as compared to 97 deals with a total value of US$2.4 billion on delivery payments. However, in the long run, it will push the
in 2015. The dip in deal value was primarily due to missing consumers to opt for digital transactions, thus boosting the
big-ticket deal (US$500 million and above) activity in 2016, overall growth for the industry.
while the last year had seen two such transactions. Similar to
the trend seen in previous years, domestic deals continued Maximum activity was witnessed in the online fashion
to dominate the M&A activity in terms of volume, accounting marketplace and online restaurants/booking portals.
for nearly 63% of the total activity in the sector. On the value • Online fashion is in vogue. Online fashion provides an
front, domestic and inbound deals lead the show, contributing immense opportunity for new and existing players in the
53% and 46% to the total deal value, respectively. Prominent market. Considering it constitutes the highest volume
deals were seen across sectors, such as online retail, food and of online sales in India, Indian online fashion players are
beverage (F&B) and personal care and homecare. acquiring their peers to capture a larger market share and
derive synergies. On the other hand, brick and mortar
Online retail segment continued to dominate players are entering this space through acquisitions. Few
sector’s M&A examples include:
E-retail dominated the M&A activity of the sector, with 26 • Flipkart-owned, Myntra, bought its rival Jabong in a
deals having a disclosed value of US$200 million. It sustained US$70 million deal that created India’s largest online
the momentum witnessed last year with greater internet and fashion destination.
mobile penetration, a rise in online shoppers and an increase

• Titan Company Limited agreed to buy a majority stake Exhibit 14: M&A deals in the retail and consumer
in the online jewellery chain Caratlane.com for US$53 products sector
million.
6,000 120
Number of deals
97
• Online baby care store FirstCry (BrainBees Solutions 5,000 92 100
US$ million
80
Private Limited) has acquired the franchise division of 4,000 3,393 80
Mahindra Retail Private Limited, for US$54.3 million – a 3,000 2,415 60
move that is expected to help the company significantly 2,000 40
expand its offline presence. 1,000 635 20
0 0
• Online food industry is witnessing consolidation due to 2014 2015 2016
intense competition and a slowdown in investments. Deal value (US$ million) Number of deals
Amid the e-retail euphoria, food technology remained one
of the most talked-about segments in 2016. The culture of
eating outside is now accompanied equally by the comfort of
getting the food delivered at home, thereby providing a push
to the online food market. Online restaurant booking, online
2014 2015 2016
food ordering and delivery market is mushrooming with the
changing lifestyle of modern urban households, resulting in Number of deals
the abundance of many “me-too” players. Thus in order to Domestic 60 68 50
strengthen their presence and deepen their service/product Inbound 16 22 13
offerings, the players are making acquisitions or entering into
Outbound 16 7 17
partnerships with rivals. Few examples include:
Total 92 97 80
• InnerChef has acquired Bengaluru-based EatOnGo (on-
demand meal service) and Gurgaon-based Flavour Labs (a Deal value (US$ million)
food truck company).
Domestic 171 1,284 338
• Hello Curry Private Limited has acquired The First Meal to Inbound 3,110 1,131 292
enter the breakfast and meal box segment. Outbound 112 – 5
Total 3,393 2,415 635
Domestic activity dominates F&B Source: EY analysis of Thomson ONE data
The F&B segment continued to be one of the active segments

– 20 deals with US$34 million value – registered on the back of
favorable demographics. Within the segment, deals were widely
scattered across packaged food and food essentials including
sugar, rice and oil. The packaged food industry is seeing a
greater push, on the back of increasing disposable income of
the consumers, improving standards of living and a shift in
food habits. In order to capitalize on the opportunities offered
in this growing segment, domestic and international players
are exploring the inorganic route to expand their offerings and
cater to a larger market. Few examples include:
• Restaurant chain Sattviko has acquired Delhi-based packaged

food maker FYNE Superfood for an undisclosed amount to
boost its packaged products business.
• The Board of Directors of Bannari Amman Sugars Limited

have approved the proposal to takeover Madras Sugars
Limited by way of a merger.

Outlook
Strategic consolidation of online and offline We will continue to witness action in the personal care
retail players is likely to sustain momentum and homecare markets in an urge to increase their
in the coming year geographical presence. Indian companies, especially the
ones with strong balance sheets will continue to scout for
Overall, we expect online retail, F&B and consumer overseas opportunities in the emerging markets of Africa
durables and appliances to continue capturing M&A and South East Asia.
headlines.
The sector could also witness domestic transactions
With an increasing focus on digitization and the recent where sponsors look to monetize their brands
demonetization move of the government, online opportunistically. We expect players to engage in
transactions are likely to see an upsurge – thereby modifying their portfolios, exiting non-core segments
providing a push for deal-making in e-retail space in the and expanding into new product categories.
long-term. On one hand, traditional retailers are entering
the online space, and on the other hand, online retail In addition, the recent announcements in the Union
players such as Flipkart, Snapdeal and Myntra are willing Budget will likely augur well for the inbound investments
to enter brick and mortar space – thus the convergence in the sector. In particular, the announcement of
of “brick and mortar” and online “click” is going to be a abolishment of Foreign Investment Promotion Board in
prominent theme in 2017. In an attempt to serve greater the coming year should make FDI vide the approval route
customer base and cater to the heightened competition, a smoother process, especially benefiting Single Brand
we are likely to witness significant action around retailers Retail Trading (SBRT) and Multi Brand Retail Trading
adopting an omni-channel strategy, in order to thrive and (MBRT) companies looking to invest in India. Further, the
survive in the fiercely competitive environment. Indian Finance Ministry has indicated liberalization of
FDI norms in the coming year, which may be expected to
Consolidation and fund-raising is expected to drive the include further liberalization with respect to mandatory
activity in the F&B space in order to benefit from the sourcing requirements for FDI in SBRT exceeding 51%,
segment’s high growth and also to counter increasing requisite conditions for FDI in MBRT, e-commerce entities
competition from new players. We also foresee deals in etc to attract further FDI in this sector.
consumer durables and appliances segment as growing
expectations of customers and fast evolving lifestyle will
force players to look for technological advancement and
scale expansion for providing value added services in a cost
effective manner.

Sector focus
Telecom
Consolidation is the talk of Telecommunications’ issuing guidelines to allow mobile phone

companies to trade spectrum among themselves also facilitated
the town such consolidation. Key examples include:
The telecom sector recorded a healthy deal activity with 19 • Bharti Airtel entered into a definitive agreement with
deals having a total disclosed deal value of US$2.4 billion Videocon to acquire the rights to use 1800 MHz spectrum in
in 2016. M&A activity was largely distributed between six circles for US$659 million.
domestic (9 deals; US$1.2 billion) and inbound deals (7 deals; • Airtel has agreed to acquire rights to use 4G airwaves of
US$1.1 billion) with outbound deals (3 deals; US$0.1 billion) Aircel in eight telecom circles for US$524 million.
contributing the least. Bharti Enterprises was the most active
player in telecom M&A with eight deals worth US$2 billon. The During the year Indian telecom operators also explored the
player was seen making deals in spectrum and mobile-tower possibilities of monetizing their tower investments to fund
segments. their core businesses. The deals were aimed at reducing capital
expenditure on passive infrastructure and promoting sharing of
Intense competition drove the deal activity towers to enhance operational efficiencies. A few transactions
in this space included:
Deals for spectrum acquisition in the Indian telecom sector
were primarily driven by a need to consolidate 4G spectrum • Bharti Airtel Africa agreed to sell 950 mobile towers in the
by the players, owing to robust growth in data usage and also Congo to telecom infrastructure company Helios Towers
heightened competition due to the entry of new operator - Africa.
Reliance Jio. Additionally, given the cost of acquiring new • Bharti Airtel agreed to sell around 1,350 towers to American
spectrum and the growing competition also led to mid-market Tower Corporation in Tanzania through its subsidiary Airtel
players to look at consolidation to realize synergies and Tanzania.
gain market share to address competition from the bigger
players. Regulatory reforms such as the Department of

Largest consolidation deal witnessed
between Reliance Communication (RCOM) Outlook
and Aircel
Continued consolidation imminent
The merger between Reliance Communication RCOM’s (wireless
business) and Aircel was another notable event deal in the The telecom sector is expected to see more intensive
sector’s deal landscape in 2016. This merger also happens to consolidation activity in the coming months as several
be the sector’s largest consolidation deal so far. The RCOM- telecom operators in the country are reeling under
Aircel combination is expected to create a strong operator debt pressures which restrict their ability to acquire
clearly ranked amongst India’s top four telecom companies more spectrum and expand their footprints and may
by customer base and revenues. The transaction is likely to look to sell their assets. The current market scenario
be closed in early 2017 and will need regulatory, court and is highly competitive with high spectrum costs and
shareholder approvals. aggressive pricing. Mid-tier and smaller players may
opt for tie-ups/alliances with their bigger peers, as the
mobile penetration has almost peaked in the country
Exhibit 15: M&A deals in the telecom sector and hence, size alone can help them sustain themselves
10,000 19 20 in this fierce business environment. We could also
16 see unprofitable telecom operators making an exit.
Number of deals
US$ million
8,000 15
13 Additionally, they will now be able to monetize their
6,000 under-utilized spectrum, thus giving them ability to
10
4,000 realize their investments thus far. Given the operator
2,424
1,548 7,895 5 consolidation, we also expect 2017 to see continuing
2,000
monetization of tower assets by telecom companies and
0 0 independent tower operators, on the back of mounting
2014 2015 2016
debt-pressures.
Deal value (US$ million) Number of deals
2014 2015 2016

Number of deals
Domestic 4 5 9
Inbound 8 8 7
Outbound 1 3 3
Total 13 16 19

Domestic 8 5,885 1,214
Inbound 1,300 2,004 1,083
Outbound 240 6 127
Total 1,548 7,895 2,424

Sector focus
Technology
Technology continued to lead the powerful and enables companies to improve their production,
efficiency and overall quality.
deal activity in terms of volume • IT players are increasingly acquiring SMAC capabilities
The technology sector recorded 106 deals having a cumulative to innovate their capabilities: SMAC is gathering a lot of
disclosed deal value of US$2.1 billion in 2016. Compared attention among technology players as increasing internet
with the previous year, deal volume declined by 8% (115 deals penetration is pushing players to innovate their capabilities.
recorded in 2015), while deal value rose by 49% (US$1.4 Within the technology sector, deals are aimed primarily
billion in 2015). Building on the previous year’s trend, deals at growing market share, enhancing service offerings and
with undisclosed value characterized the sector’s M&A activity addressing customers’ changing digital behaviors. Examples
in 2016 (72 deals out of 106). On the cross-border front, the include:
US continued to be the most active partner with the highest • Wipro Limited acquired Appirio Inc., a US-based cloud
number of inbound and outbound transactions. The US was services firm, for US$500 million.
engaged in nearly 50% of the cross-border transactions with
India (32 deals out of 62 deals). • US-based Boomtrain Inc. entered into an agreement
to acquire Nudgespot, a Bengaluru-based artificial
SMAC applications — redefining the way intelligence—driven messaging platform, for an undisclosed
businesses operate amount.
• Kellton Tech Solutions Limited acquired Bokanyi

SMAC (social, mobility, analytics and cloud) technologies
Consulting, a US-based player serving in enterprise, cloud
continue to hold attraction for the technology sector.
and analytics space.
Organizations are adopting SMAC as an all new integrated IT
model that helps them to be more productive and collaborative, • SMAC being adopted across industries: SMAC is
not only to address competition, but also connect them to revolutionizing business processes across multiple industries
customers and respond on a real-time basis. While each of the as players are embracing new technology formats to ensure
four SMAC components is capable of improving a business on operational efficiency, cost optimization and offer additional
its own, integrating them into a “stack” makes them much more services to their customers. As a result, companies operating

in other sectors are making acquisitions in the SMAC • Infosys Limited bought an undisclosed minority stake in the
segment primarily to acquire talent and gain access to new US-based Waterline Data Science Inc. for US$4 million.
product or service innovation.
• L&T Infotech acquired AugmentIQ Data Sciences Private
With the new-to-net population gaining internet exposure on Limited, a start-up offering IP-based, big data and analytics
mobile phones, mobility has taken center stage within SMAC. solutions.
Online retail players have been quite active in acquiring
emerging mobile software developers, as they are striving to
build in-house capabilities for a robust mobile presence. This Exhibit 16: M&A deals in the technology sector
is resulting in flourishing deal activity in the sector. Key deals 4,000 160
that highlight this trend include:
Number of deals
115
3,000 106 120
US$ million
• Voonik Technologies Private Limited acquired Dekkoh, a 98
fashion discovery platform. 1,976 2,083
2,000 80
1,398
• Apollo LogiSolutions Limited bought a controlling stake 1,000 40
in Wifin Technologies (India) Private Limited, a Chennai-
based mobile applications and solutions company. 0 0
2014 2015 2016
• Zomato’s acquisition of Sparse Labs, a logistics technology Deal value (US$ million) Number of deals
startup specializing in helping restaurants track delivery Source: EY analysis of Thomson ONE data
drivers.
Analytics is also gaining prominence across sectors. With the

rise of mobile, social media and cloud, businesses nowadays 2014 2015 2016
have access to considerable data. The ability to analyze such Number of deals
huge data can help companies to synthesize business, correlate Domestic 37 46 44
and process this data to drive predictive analysis. Such
Inbound 39 35 29
companies’ deals investing in analytics that were announced
Outbound 22 34 33
this year include:
Total 98 115 106
• US-based LiquidHub Inc acquired Gurgaon-based Annik
Technology Services Private Limited to strengthen its
presence in Data management and analytics space.
Domestic 679 95 227
• Fractal Analytics attracted large investment of US$100 Inbound 1,086 462 461
million from Khazanah Nasional Berhad, the strategic
Outbound 211 841 1,395
investment fund of the Government of Malaysia, during the
year to expand its analytics offerings. Total 1,976 1,398 2,083
• Nihilent Technologies Limited acquired ICRA Techno Source: EY analysis of Thomson ONE data
Analytics for US$10 million to expand its expertise
in analytics, data engineering, and business process
management.

Outlook
Deal activity to remain positive as
players seek to innovate and grow in the
digital world
SMAC technologies will continue to drive the growth of
Indian IT Industry. Given the benefits of SMAC, large
cash-rich players will likely keep scouting for targets
specializing in SMAC to gain intellectual property, talent
pool and add emerging technologies to their portfolio
of traditional services. In addition to SMAC, we will also
see more deal activity in the areas of IOT as the world
moves to more connected devices including cars and
also consumer goods etc.
Deals in the IT services sector may get clouded by
adverse visa policy of the new US government as that
will increase the cost and affect competitiveness of
Indian companies. Nevertheless, financial and strategic
investors will continue to focus on SMAC companies
as the global IT spend increase in this segment. There
will be more emphasis on platform based technology
companies as the world moves to the cloud and SAAS
based models. At the same time, there has been a
heightened interest among PE players to look at the
majority buyouts as compared to traditional minority
plays. We expect that PE will continue to remain
aggressive in the services segment as it provides scale
plays as compared to SMAC. Furthermore, digital
disruption is only going to evolve even faster in the
times ahead. The growth forecast looks positive, with
the government adopting several initiatives, including
Digital India and Smart Cities, to promote the push
towards digitalization.

M&A outlook
India’s M&A to stay strong further strength across sectors. We could also see big-ticket
divestments by debt-laden companies, especially in capital-
The ongoing momentum in M&A activity is expected to continue intensive sectors such as power, cement, real estate and
as we progress through 2017, notwithstanding the short-term telecom among others, as banks take a stringent view on
drag that demonetization could exert on the economy. The M&A non-performing assets. In addition, the market will see an
environment in the country remains conducive on the back extensive focus on deals/strategic alliance/partnerships to
of a strong long-term economic outlook and healthy capital build technological capabilities and gain a competitive edge
markets. At the same time, easing of credit situation, along through online/mobile presence, data analytics competencies
with the government’s thrust on the country’s infrastructure etc., as new technologies continue to disrupt businesses across
will provide a boost to the capex cycle, thereby resulting in industries. In particular, the financial services sector is likely to
higher private investments. In addition, once the impact from see major action in the digital space as the economy transitions
demonetization stabilizes, a gradual recovery in domestic towards the cashless model.
demand along with steady progress on reforms, such as GST Outbound investments will continue to be led by the oil and gas
and Minimum Alternate Tax, should boost corporate earnings sector in the next year as well. India’s quest to secure supplies
and help businesses to create a war chest for inorganic growth. of natural resources is expected to gather pace, with the
Domestic activity is expected to remain robust. With scale government taking steps to encourage Indian players to acquire
expansion becoming a critical element of Indian corporates’ oil, gas and coal assets overseas. Furthermore, the ample
strategy agenda, consolidation deals are likely to gain availability of deep-value assets at attractive prices, amid global

economic uncertainty and low crude oil prices, will also help growth opportunities outside the US and Europe. The Finance
Indian oil and gas companies to close acquisitions. Minister in the Union Budget FY17-18 cited an FDI increase of
36% over the previous year, indicating that overseas investors
The pharmaceuticals and technology sectors are also expected
are responding to the positive outlook on India. An emphasis on
to be quite active on the outbound front as companies look to
ease of doing business continues, evidenced by the proposal to
build high-end technical capabilities, expand service/products
abolish the FIPB and further liberalize the FDI policy. The efforts
portfolios and strengthen market position. Pharmaceutical
of the government are consistent to provide certainty, clarity
companies are also looking to gain access to newer markets
and a fillip to inbound investment.
such as Japan, Africa and CIS, through acquisitions as the pace
of growth slows in the traditional exports markets. Moreover, Trends that drove an increase in deal value, anchored on large
markets like Japan provide a huge opportunity for Indian transactions and consolidation across several sectors, are
players due to significant patent expiration expected over the expected to stay strong. The year 2017 is likely to witness an
next couple of years and a low generics penetration. increase in stock deals between listed and private companies,
largely to provide exit opportunities to shareholders, as there
Inbound activity, which saw strong traction in 2016, should
are a limited number of acquirers willing to evaluate all-cash
carry the momentum in the current year. While global buyers
deals. Furthermore, it also helps manage value expectations
are expected to be selective, owing to policy uncertainty in
between transacting shareholders. Overall, 2017 looks quite
the US and stressed economic environment in Europe, their
promising with regard to domestic, outbound as well as inbound
interest in Indian businesses will remain alive as they look for
deals.

Appendices
Exhibit 17: Quarterly deal activity
40 253 300
248
233 223 229
209
Number of deals
30 197
200
US$ billion
162
20
12.1 12.9 13.9 21.8
100
10 7.5 7.6
4.0 6.4
0 0
Jan-Mar 15 Apr-Jun 15 Jul-Sep 15 Oct-Dec 15 Jan-Mar 16 Apr-Jun 16 Jul-Sep 16 Oct-Dec 16
Deal value (US$ billion) Number of deals

Exhibit 18: Top 10 deals of 2016
Geography Month Target Target Acquiror Acquiror Value (US$ Target Sector
Country Country million)
Inbound Oct Essar Oil Limited India Trafigura Holding BV, Netherlands, 12,907 Oil and gas
(including Vadinar Rosneftegaz Russia
refinery)
Outbound Mar Taas-Yuryakh Russia Investor Group (Oil India 3,262 Oil and gas
Neftegazodobycha OOO, India Limited, Bharat
Vankorneft’ AO Petroleum Corporation
Limited and Indian Oil
Corporation)
Domestic Aug Max Financial Services India Housing Development India 3,194 Insurance
Limited - Life Insurance Finance Corporation
business Limited
Domestic Feb Jaiprakash Associates India UltraTech Cement India 2,424 Cement and
Limited - Cement Units Limited building products
(6)
Outbound Mar Vankorneft’ AO Russia Oil & Natural Gas India 2,198 Oil and gas
Corporation Limited
Domestic Jul Lafarge India Private India Nirma Limited India 1,400 Cement and
Limited building products
Domestic Jun Welspun Renewables India Tata Sons Limited India 1,382 Infrastructure
Energy Privated Limited
Inbound Jul Gland Pharma Limited India Shanghai Fosun China 1,260 Pharmaceuticals
Pharmaceutical
(Group) Company
Limited
Domestic Oct Krishna Godavari Oil India Oil & Natural Gas India 1,195 Oil and gas
Field Corporation Limited
Domestic Nov Videocon d2h Limited India Dish TV India Limited India 1,186 Media and
entertainment

Exhibit 19: Deal activity by industry
2015 2016
Taget vertical Deal count Deal value (US$ Deal count Deal value (US$
million) million)
Aerospace and defense 6 280 5 325
Agriculture 12 598 11 700
Automotives 28 557 27 76
Cement and building products 14 1,154 17 5,239
Chemicals 27 255 30 420
Diversified industrial products 80 728 56 806
Education 17 31 18 12
Financial services 75 2,687 91 7,297
Healthcare 30 482 32 1,177
Infrastructure 93 2,273 92 4,041
Investment companies 9 200 4 42
Media and entertainment 56 1,226 56 1,801
Metals and mining 25 721 26 2,166
Oil and gas 9 2,175 18 19,615
Paper and forest products 4 512 7 66
Pharmaceuticals 53 3,116 51 4,557
Professional services 53 196 62 261
Real estate 45 723 29 785
Retail and consumer products 97 2,415 80 635
Technology 115 1,398 106 2,083
Telecommunications 16 7,895 19 2,424
Textiles 6 37 15 117
Travel services 16 361 14 1,542
Miscellaneous – – 1 –

Methodology
Transaction Annual is
based on EY’s analysis
of Thomson ONE’s M&A
data
• The data compiled is for the period 1 January 2016 to 31 • The deals extracted have been classified for analysis on the
December 2016. The report highlights announced deals following basis:
and indicates their status — either pending or completed.
• Industries based on EY’s sector classification.
Terminated deals have been excluded from it.
• Inbound, outbound and domestic based on the target/
• Data was obtained from Thomson ONE through an “M&A”
acquirer countries.
customized search, where India was either a target or seller
or an acquirer. • Deal size brackets based on announced deal values.
• Deal values have been taken as indicated in Thomson ONE • The numbers have been rounded off where otherwise
(accessed February 2017). All the amounts are in US dollars indicated.
(unless otherwise stated). The conversion rate of non-US
• Total disclosed value of the deals does not include the
dollar deals is in accordance with Thomson ONE guidelines;
acquired debt of the targets.
foreign exchange rates are in accordance with deal
announcement dates.
• Instances of multiple deals involving mandatory open

offers, stake acquisitions in tranches or mergers have been
combined into a single deal.

35
Notes

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Transactions 2017

Inbound M&A takes

2 | Transactions 2017: Inbound M&A takes centerstage

Transactions 2017: Inbound M&A takes centerstage | 3

4 | Transactions 2017: Inbound M&A takes centerstage

a preferred route of growth.

• The HDFC Life and Max Life merger showcased the

• Dish TV India Limited and Videocon d2h Limited agreed

40 Consolidation was also a pronounced driver for the activity

saw noticeable deals such as the merger between Reliance

• Reduction of debt: Consolidation was also evident as a key

Transactions 2017: Inbound M&A takes centerstage | 5

consolidation on the back of burgeoning local competition,

(E&P) companies continue to evaluate restructuring their

Source: EY analysis of Thomson ONE data

6 | Transactions 2017: Inbound M&A takes centerstage

with an installed capacity of 25 million tonnes per annum.

• Siemens Limited approved the sale and transfer of its

• Fortis Healthcare Limited’s (Fortis) Board approved the

Transactions 2017: Inbound M&A takes centerstage | 7

8 | Transactions 2017: Inbound M&A takes centerstage

stemming from demonetization

Transactions 2017: Inbound M&A takes centerstage | 9

Consolidation and deleveraging a non-availability of wagons, have put significant pressure on

10 | Transactions 2017: Inbound M&A takes centerstage

On the M&A front, consolidation is expected to be the

Transactions 2017: Inbound M&A takes centerstage | 11

• Axis Bank Limited acquired a 4.99% stake, increasing its

12 | Transactions 2017: Inbound M&A takes centerstage

growth, significant growth opportunities could be seen for 6,000 49 60

Transactions 2017: Inbound M&A takes centerstage | 13

We expect to see fund-raising by NBFCs and micro

The booming insurance sector is also expected to see

14 | Transactions 2017: Inbound M&A takes centerstage

Transactions 2017: Inbound M&A takes centerstage | 15

• Tata Power Company Limited acquired the renewable energy

• Indian conglomerate TVS Group, through its subsidiary Rico

16 | Transactions 2017: Inbound M&A takes centerstage

Accordingly, deal-making activity is expected to

At a sub-sector level, we will continue to see heightened

Transactions 2017: Inbound M&A takes centerstage | 17

18 | Transactions 2017: Inbound M&A takes centerstage

ONGC Videsh secured an approval to acquire a 26% stake

20,000 19,615 80 assets in CIS, Latin America and Africa.

Deal value (US$ million)

Transactions 2017: Inbound M&A takes centerstage | 19

On industry sub-segments, sterile injectables led the pack with

20 | Transactions 2017: Inbound M&A takes centerstage

Deal value (US$ million)

Source: EY analysis of Thomson ONE data

Transactions 2017: Inbound M&A takes centerstage | 21

22 | Transactions 2017: Inbound M&A takes centerstage

Domestic activity dominates F&B Source: EY analysis of Thomson ONE data

The F&B segment continued to be one of the active segments

• Restaurant chain Sattviko has acquired Delhi-based packaged

• The Board of Directors of Bannari Amman Sugars Limited

Transactions 2017: Inbound M&A takes centerstage | 23

24 | Transactions 2017: Inbound M&A takes centerstage

Consolidation is the talk of Telecommunications’ issuing guidelines to allow mobile phone

Transactions 2017: Inbound M&A takes centerstage | 25

2014 2015 2016

Deal value (US$ million)

Source: EY analysis of Thomson ONE data