Deal Street sees 7% rise in value in 2020

Mumbai: Despite the coronavirus pandemic and the resultant ravaging of the global economy, the Deal Street managed to grow 7 per cent in 2020 over 2019 to about $80 billion across 1,268 transactions, thanks to a string of big-ticket deals by Reliance, according to a report.

More than a third of the total deal came through Reliance - into Jio Platforms and Reliance Retail, according to the data collated by PwC India. While Reliance Jio attracted FDI worth $10.2 billion led by Facebook, Reliance Retail also got billions in foreign direct investment (FDI) in the second half. All other FDIs put together totalled just $3.2 billion. Merger and acquisitions (M&As) accounted for over 50 per cent of the total deal value this year, while private equity (PE) activity kept pace with last year, recording investments worth $38.2 billion, which is same as in 2019, says the report which said the numbers pertain to January 1 and December 7.

Excluding the big-ticket deals in the telecom sector, the first half saw a slowdown with investors putting their plans on hold and shifting focus towards cash conservation. Within the PE community, several funds adopted a more cautious approach during the initial months of the year. From the domestic deals, Reliance Retail buying the retail, wholesale, logistics and warehousing businesses of Future Group for $3.3 billion was the largest.

Consolidation continued to drive M&As, accounting for nearly 50 per cent of the value and given the volatility, uncertainty and complexity of the current times, this is expected to be a continuing trend. Inbound deals recorded an 11 per cent increase over 2019. However, over three quarters of the $13.4 billion invested were concentrated in Jio alone. Facebook invested around $5.7 billion in Jio for nearly a 9.9 per cent stake, making it the largest deal virtually completed during the lockdown.

This was followed by a $4.5 billion investment from Google for a 7.7 per cent stake in Jio Platforms. Foreign direct investment worth $30 billion arrived between April and September, which is a 15 per cent increase over the same period in 2019. Expectations exceeded on the PE front as investments worth $38.2 billion were recorded in 2020, amounting to nearly the same level of activity in 2019. Reliance was once again a large contributor to PE deal values and helped in retaining momentum with PE investments in 2019.

Following Facebook, a consortium of funds, including TPG, KKR, General Atlantic, Silver Lake and other PEs, and sovereign wealth funds invested $9.8 billion in Jio. It accounted for 66 per cent of the growth-stage PE investments in 2020, driving growth investments to an all-time high of $15 billion. Similarly, Reliance Retail Ventures saw investments worth over $5.1 billion, resulting in a spike in late-stage PE investments and making 2020 a record year for this type of investment as well.

The year saw $17-billion deals, nearly double of nine in 2019. But, deal volumes have progressively been declining with increasing deal value.

As against this, as much as 2,035 deals worth $63 billion were recorded in 2016, compared with 1,268 deals worth $80.4 billion in 2020. Top-5 M&As of the year included the Jio Platforms-Facebook deal of $5.7 billion for a 9.9 per cent stake, Jio-Google deal for $4.5 billion for 7.7 per cent stake and the $3.3-billion takeover of Future Enterprises by Reliance Retail. The Lummus Technology-Haldia Petrochemicals-Rhone Capital deal of $2.7 billion as another major deal. Telecom replaced technology in the top position by attracting investments worth $11.2 billion, while the retail sector was another new entrant, attracting investments worth $6.5 billion. Both sectors recorded increased levels of investment mainly on account of large-scale investments in Reliance entities.