"No doubt that there is an increase in the cross-border mergers and acquisitions but they have been primarily in the mid-market segment. Larger deals require access to financing and nothing but the strongest balance sheets will be able to attract financiers," Ernst & Young Partner Transactions Advisory Services Sailesh Rao said.
Rao added that "with just a couple of big ticket deals taking place in the last two quarters (against the average of two big deals a month in 2007 and 2008), one cannot as yet announce the revival of big-ticket outbound deals by India Inc."
In recent times there has been a lot of announcements by Indian firms, including corporate giant Reliance Industries, software firm Wipro, IT major Infosys Technologies and Jindal Steel & Power, which are scouting for acquisitions abroad.
Grant Thornton Partner, Specialist Advisory Services C G Srividya said "interest levels have gone up, and there are many clients whom we are advising both on the inbound and cross border (deals), they are much more aggressive than last year. "However, it is very important to say that it is going to take a long time before we return to the 2007 level, when people were very keen on inorganic growth. While they are still keen but they are playing safe," Srividya added.
The way it looks the year 2010 is all set to overtake the M&A deal tally of 2009 by a huge margin. In just 45-days of this year India Inc has announced M&A deals worth a whopping USD 14 billion, while in the year 2009, corporate India's total M&A kitty stood at a modest USD 11.9 billion.
In terms of the sheer deal size the Bharti-Zain deal would be the third largest deal involving an Indian company after an estimated USD 13.5 billion offer by Reliance to get control of the bankrupt petrochemicals firm LyondellBasell Industries (which is currently, in discussion phase) and the Tata Steel's takeover of European Corus for USD 12 billion.
Experts believe the reason for this significant rise in deal activity by India Inc include high liquidity, the performance of most of these companies have improved, the world markets have also improved, the stock market has done much better so the confidence is back from that perspective.
Deloitte India Financial Advisory Leader Avinash Gupta, however, believes "there is not any major push to do outbound deals by Indian corporate. Reliance-LyondellBasell and Bharti-Zain are huge deals but they are not a trend."
Lot of Deloitte clients are contemplating a 'W' scenario worldwide. Cautiousness is still there, Gupta added.Going forward, PricewaterhouseCoopers Executive Director Partner, Transactions Group Sanjeev Krishan said "the very fact that Indian companies are looking at billion dollar deals means that the emphasis on M&A as a growth vehicle is back."
"While the financing challenges caused by the squeeze in the global credit markets have not gone away as yet, things are definitely improving and this should help outbound M&A," he added.