PE exits, M&A deals, fund raising via IPOs hit 5-year high in 2016: VCCEdge report

633 domestic M&A deals amounting to $32.77 billion played a big role in M&A deals hitting a five-year high of $61.44 billion

VCCEdge report

News Corp VCCEdge, the financial research platform of News Corp VCCircle has released its annual deals report for CY2016.

Capturing funding deal activities encompassing private equity, venture capital, angel/seed investment transactions for the year ending December 2016, the report also offers information on mergers and acquisitions, exits and the funds raised during the year.

Key highlights:

Domestic M&A going strong

  • The number of M&A deals remained robust this year with 1,002 deals recorded, with the value of deals hitting a five-year high of $61.44 billion -– a jump of 159% in value terms from 2015 which saw 995 deals amounting to $23.71 billion.
  • There were 633 domestic M&A deals amounting to $32.77 billion -– a jump of over 278% in value terms and 143 Inbound deals amounting to $18.78 billion -– a jump of over 133% in value terms.
  • Outbound deals recorded this year saw a 16% dip in number at 115 while the deal value declined 8% to $4.9 billion when compared to CY2015.
  • The hike in the M&A deal value can be attributed to the three deals worth $27.7 billion which includes, Essar Oil Ltd, Max Life Insurance Co. Ltd and Reliance Communications Ltd., Wireless Telecom Business acquisitions contributing 45% of the overall deal value.

Exits instill confidence

  • Private equity investors unlocked $6.79 billion worth of investments across 239 exits in 2016 – nearly 17% more in value terms when compared to 2015 and the highest in the past five years.
  • M&A exits were the flavor of the year contributing 43% of the total exit activity closely followed by open market exits at 32%.

Return of the IPO

  • 2016 has been a record year for IPOs, wherein fundraising via IPOs surged to a five-year high with $4.12 billion raised across 93 IPOs when compared to $2.19 billion from 62 IPOs in 2015.
  • Overall Equity Capital Market (ECM) deals constituting IPOs, Follow on Offerings, Rights issue, QIP and Private Placements increased by 18% in 2016 with 116 deals as compared to 98 in 2015, however, capital raised dipped by ~20% from $6.17 billion to $4.99 billion

Angels hold transaction volumes in a tepid year of funding

  • Angel and Seed investors drove the deal activity during the year, contributing 57% of the total private equity investments in 2016. This figure stood at 32% in 2012 and has been rising every year. They accounted for 748 deals amounting to $324 million.
  • The number of PE deals slumped almost 25% to 1309 deals. The value of PE transactions, slumped by 44% to around $12.38 billion from $22.01 billion in 2015.
  • Early-stage investments in start-ups (including angel/seed and VC Series A and Series B rounds) has shown a significant decline of 39% to $1.59 billion in CY2016, as compared to $2.62 billion last year, while deal volume declined by 24% from 1,286 to 984 deals
  • Bridge round accounted for 50 deals worth $40.1 million accounting for 14% of the total venture capital deals proving the challenges in raising fresh round of funding
  • Average deal value slipped to $13.09 million in 2016, as compared to $14.48 million a year ago. Though median deal value saw a slight increase from $0.91 million last year to $1 million this year

Guided by Circumspection: PE Funds Launched

  • There were 50 new PE funds launched during the year with a targeted capital of $5.3 billion – a fall of 11% in number and over 68% in value terms. In 2015 there were 56 new funds launched with a targeted capital of $ 16.9 billion.
  • Of these 50, 34 had a fund size of under $100 million while there were only three in the above $500 million category.

Nita Kapoor, Head – India New Ventures, News Corp, and CEO, News Corp VCCircle, said: “While M&A activity in India perked up in 2016 thanks to a few multi-billion-dollar deals that companies struck either to slash debt or consolidate their market share, what we are seeing is the flow of angel/seed money into enterprises in sectors like fintech, healthcare, education and travel which will continue into 2017. There is a huge funding opportunity for start-ups operating in these sectors that succeed in delivering a good consumer experience.”

 

Fahmin Zain

A crazy startup enthusiast

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