The takeover mania is hotting up with the year-end moves by two major business groups — the Tatas (for Corus) and the Anil Ambani group (for Hutchison Essar). If these two takeover deals materialise in December, the total value of takeover deals in 2006 will almost hit the $50 billion mark, a record for India Inc.

According to Grant Thornton, there were 80 M&A deals with a total value of about $10.73 billion in September and October 2006. “The total M&A deals so far between January and October 2006 have been about 380 with an announced value of $24.4 billion,” it says.Of these, the number of domestic deals has been 170 with a value of $4.02 billion. The number of inbound cross border deals has been 62 with a value of $4.67 billion and the number of outbound cross border deals was 147 with a value of $15.72 billion. Pharma, infotech, steel and cement sectors have seen the maximum number of deals.

There have been some significant outbound acquisitions by Indian companies — which are flush with funds after reporting 20 per cent plus profit growth in the last two years — in Sept-Oct 2006, the largest being the Tata-Corus takeover plan. Though Tata Steel has revised its offer for the Anglo-Dutch steel maker Corus, Brazilian company CSN has come out with a higher bid worth $ 9.16 billion. “If this deal goes the Tata Steel’s way, the total outbound

investments by Indian companies will exceed $16 billion this year. With this deal India will most likely top all other Asian countries at the biggest in investor in the UK for the fiscal year 2006-2007.” said Bundeep Singh Rangar, chairman of IndusView, an India-focussed cross-broder advisory firm. The Tatas have made a string a takeovers — including that of Daewoo bus unit, Natsteel of Singapore and Tetley of the UK — abroad.

However, if the joint bid by Reliance Communications, Blackstone and three other equity funds for the takeover of Hutchison Essar Ltd fructifies, the deal could even dwarf the Tata-Corus deal. As Hutch has been valued at $13-14 billion, a 100 per cent buyout will involve an equivalent amount. Though investment banking sources are already talking about a $14 billion bid by Reliance-Blackstone, Reliance has not made any official comment on the takeover so far.

On the other hand, the Corus takeover amount is expected to touch $10 billion if one of the bidders revise the offer again. “Although it remains unclear whether the bidding will continue, Tata Steel evidently intends to finance the difference between its latest and initial bid with additional debt, potentially resulting in further downward pressure on the ratings compared with the original offer,” said Standard & Poor’s credit analyst Anshukant Taneja while putting Tata Steel on the rating watch. The entry of private equity funds has added to the takeover fever. There have been a few significant management buyouts in the recent past in the Indian PE industry. Some examples are KKR’s acquisition of 85 per cent in Flextronics Software Systems, Actis’ acquisition of significant stakes in Nilgiris, Phoenix Lamps, Paras Pharma etc and Navis Capital Partners’ acquisition of the Nirulas.

According to Grant Thornton, the PE investments between Jan-Oct 2006 have been valued at $5.93 billion comprising 230 transactions. This is a 250 per cent increase on an annualised basis over the $2.03 billion invested in 2005.

The new year (2007) promises to be an even more exciting one as corporates are gearing up for more M&A deals.