Wednesday, September 03, 2008

Indian Company Acquisitions in the US - 2008 Trends Thus Far

We have been avidly following outbound Indian company acquisitions, and the 2008 numbers thus far are below 2007's strong pace. However, the decrease has not been as dramatic as the media has tended to report.

Grant Thornton's excellent statistics and detailed breakdown of cross-border Indian acquisitions shows that, taking into account all destinations, there were 112 total outbound Indian acquisitions for the first half of 2008 with a value of US$8.5 billion, as compared with 119 total for the first half of 2007 with a value of nearly US$28 billion. While there were only 7 fewer outbound deals in the first half of 2008, the volume dropped by 70%, which Grant Thornton explains was due in part to some very large deals that took place in the first few months of 2007.

We have noted that a large percentage of Indian deals headed to the US are relatively small. While the total numbers of deals have been more constant, the total dollar or rupee volume of deals can be greatly skewed depending on whether a few large deals were closed during the period in question. For the first half of 2008, while the total volume has decreased in the range of 30%, the total numbers have declined by a more modest range of 15%.

In the first half of 2008, Virtus Global Partners reported a total of 34 US-bound acquisitions from India, a drop of 15% as compared with the 40 US deals Virtus reported for the first half of 2007. In the same period, Virtus reports the total volume was US$5.1 billion, a 30% decline from the first half of 2007.

The precise numbers may differ depending on who is compiling the statistics - Grant Thornton reported an added 7 acquisitions for the first half of 2008, for a total of 41 US-bound acquisitions. However, the overall point remains that the number of U.S.-bound deals remains healthy, and while the UK appears to be the country with the largest deal volume, the US leads the way as the top destination for Indian companies when measured by the number of companies acquired.

Many have pointed-out that the relative size of Indian deals is small by global standards. For example, of the 83 US-bound deals from India reported by Virtus in 2007, 76% of the deals were for less than US$25 million.

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