DEALS-Natural resources seen driving India M&A deals in 2011

* New markets, raw materials to trigger outbound deals

* Inbound deals seen picking up momentum in 2011

* 2010 M&A deal volume tripled to $67bln; outbound at record

By Sumeet Chatterjee

MUMBAI, Dec 17 (BestGrowthStock) – India’s cash-rich firms will
keep up their hunt for overseas targets in 2011 and may top
this year’s record outbound activity as they look for new
overseas markets and to secure natural resources to feed
surging demand.

Deal volume in India surged three-fold to $67.2 billion
this year from $21.3 billion last year, just missing the
record $69.4 billion in activity in 2007, according to Thomson
Reuters data.

Globally, mergers and acquisitions rose for the first year
since 2007, potentially marking the start of a new, multiyear
M&A cycle in which emerging economies account for a bigger
share of global dealmaking.

Overseas acquisitions accounted for nearly half of the
Indian M&A volume in 2010, the biggest year for outbound deals
from Asia’s third-largest economy, data showed.

Bankers expect 2011 to be another bumper year.

“The availability of assets that synergize with Indian
businesses with access to financing and Indian corporates’
desire to grow across other emerging markets are positive
drivers,” said Ravi Kapoor, head of global banking for
Citigroup in India.

In this year’s biggest deal, India’s top mobile operator
Bharti Airtel paid $10.7 billion for the African
telecom assets of Kuwaiti group Zain . Indian makers
of consumer goods have also made a string of much-smaller
purchases in Africa.

Access to cheap and easy finance for large buyers, a need
to expand in new markets, and the rush to tap natural
resources are expected to be the main triggers for driving
deal volume.

“You will have a much bigger increase in the sub-billion
euro deal category where mid-cap industrial companies start
looking at buying overseas looking at the benefits of R&D,
technology, and distribution,” said Amrit Singh, head of India
M&A at Deutsche Bank (DBKGn.DE: ).

The resources sector will drive dealmaking once again,
with companies looking for assets from Africa to Australia,
after energy and power firms dominated the M&A table this
year, accounting for a third of the total volume at $22
billion as they snapped up coal mines to fuel a spate of new
power plants.

“There is a huge requirement to buy raw material security
for people who are doing business in commodity, whether it is
oil, gas, coking coal, iron ore and those kinds of things,”
said Kapoor.

A consortium of five state-run Indian firms is considering
a bid for Africa-focused Riversdale Mining , sparking
a potential takeover battle for the Australian firm, already
being courted by Rio Tinto . [ID:nL3E6NE07J]

Locally, the biggest opportunity may be consolidation in
India’s crowded telecoms sector, where 15 cellular players
slug it out and deal-making lately has occurred mostly among
owners of telecoms towers.

“One of the key themes sectorally is telecoms
consolidation which depends on the changes to the M&A
guidelines, which we anticipate taking place in the first
quarter,” said Frank Hancock, managing director, advisory for
Barclays in India.

“Second is energy security – particularly in areas such as
coal. We are expecting a lot of outbound coal transactions.”

INBOUND DEALS

Bankers expect overseas companies to look aggressively for
opportunities in India in 2011, as they sharpen their focus on
fast-growing emerging markets with sectors such as consumer
goods and pharmaceutical likely to be in focus.

The challenge in India has long been a lack of willing
sellers, although there have been recent exceptions.

This week, British firm Reckitt Benckiser agreed to
buy privately-held Indian ointments and personal care company
Paras Pharmaceuticals for about $726 million. [ID:nSGE6BC045]

That followed Laboratories’ $3.72 billion purchase
of the branded generics business of India’s Piramal Healthcare
in May. [ID:nSGE64K09P]

“International players are realising that slowing growth
in their home markets absolutely requires them to be in
markets like India,” said Topsy Mathew, managing director,
M&A, at Standard Chartered in India.

“I think next year is going to be a big year in inbound
activity by international majors to increase their foothold in
India or establish their foothold in India,” he said.
(Reporting by Sumeet Chatterjee; Editing by Anshuman Daga)
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DEALS-Natural resources seen driving India M&A deals in 2011