Cross-border merger and acquisition (M&A) deals rose 10% in terms of deal value in the July-September quarter this year compared with the same period last year, said law firm Baker and McKenzie’s quarterly cross-border M&A Index launched on Wednesday. The 1,230 deals in the quarter were worth $375 billion.
India ranks among the top 10 acquirers in the US market for 2015, with 16 transactions valued at $1.7 billion. The majority of those deals are in the life science sector, with six transactions totalling $1.5 billion, as Indian companies seek to increase their scale in the US generic drugs market, said Baker and McKenzie, a Chicago-based firm.
“Indian companies (particularly in the pharmaceutical sector) have been on a acquisition spree and I think this trend will continue in the near term given the low valuation and the need for Indian companies to increase their scale to compete in the increasingly competitive generic markets, as well as to dip their toes into the innovator side of the business. Most of these acquisitions are funded internally as Indian companies are generally cash rich. On the other hand, we are also seeing an uptick in Indian pharmaceutical companies tapping into the debt market for acquisition funding, as money continues to be relatively cheap right now,” said Ashok Lalwani, global head of Baker and McKenzie’s India practice.
The Index, which analyses the number, size and complexity of cross border deals and includes six years of historical data, stands at 231 for period—down from a peak in April-June 2014 of 285, but well above the lowest quarterly figure of 119 for January-March 2010.
Overall deal activity in the year so far is already at $2.91 trillion, well ahead of last year’s pace. Cross-border transactions have so far totalled $1.05 trillion on course to match the 2014 figure of $1.42 trillion. The growth in total deal value is despite a 16% fall in transaction volume, reflecting a 10% increase in the value of mega deals worth more than $5 billion. Growth in cross-border transactions is also complemented by strong growth in domestic M&A deals, which have risen 40% in the year-to-date to $1.86 trillion and risen 35% in the September quarter to $680 billion.
The three largest cross-border deals in the quarter were Teva Pharmaceutical’s $40.5 billion acquisition of Allergan’s generics business, ACE Ltd’s $28.3 billion acquisition of The Chubb Corporation and Altice’s $16.6 billion deal for Cablevision Systems Corporation.
“Within pharmaceuticals globally, companies are looking to effectively manage portfolios and replace many products that have gone off-patent in recent years,” said Jane Hobson, global head of the Healthcare Practice Group at Baker and McKenzie. “We have also seen a great deal of activity in the generics space, an industry with business models different to innovators with more of a focus on managing margins at high volumes, in which creating critical mass through acquisitions has strategic appeal.”
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