M&A Critique - December 2019

As we enter 2020, country’s GDP growth is lowest in the past 25 quarters and maybe getting worse, economy gasping for breath as consumption and demand is declining. But we see a dichotomy, while economy’s in dire need of revival the indices are reaching new heights. It seems that lot of sectoral industries are at the tipping point of consolidation especially steel, cement, telecom, PSUs banks and e-commerce to name a few. Normally, we see consolidation when there is an upward trend of economy, but we are seeing lot of acquisitions this year even in the downturn trend of our economy. Main reasons for the deals are assets and company available at a reasonably cheaper valuations and also implementation of Insolvency & Bankruptcy Code triggering sale of distressed assets. Going ahead, the market leaders in their sectors will be looking to either increase or retain their market share at such times and we see a lot more deals happening the new year. We wish all our readers a Happy & Healthy New Year. 

We have seen some restructuring in the Apparel business and covered these deals of Aditya Birla Fashion and Arvind in our earlier issues. In this article we are seeing the demerger announced by Raymond group to separate its Lifestyle Consumer Business and its other business including the Realty and Auto components Manufacturing business. This transaction should help the lifestyle business to create interest of other investors and look at it as a separate business whilst simplifying the corporate structure a little bit.

BSNL and MTNL are our nation’s oldest telecom service providers owned by the government. They have been facing problems since the time the telecom sector was opened for the private players and the govt. has tried to consolidate their services atleast 3 times in the past and they have decided to attempt to revive the companies for one last time. Govt. announced that it will have an option of VRS payout option to reduce the biggest expense, rebate in GST, raising funds via Sovereign Bonds and giving administrative rights to operate the 4G spectrum to turnaround the companies in the next few years.

Consolidation in retail industry is trending with e-commerce changing the market. Flipkart’s acquisition by Walmart and multiple acquisitions by Reliance retail are few examples. Future Consumer group started the process of restructuring from last few years by segregating the consumer retail business from the future retail. Taking this trend ahead, Future Consumer has shown interest in acquiring Identified Business of Athena Life Sciences Pvt. Ltd which has brands in personal care, women hygiene and ayurveda products.

On 15th Nov, the Supreme Court set aside the NCLAT order and  cleared the decks for Essar Steel’s takeover by Arcelor Mittal. The decision can be considered a flagbearer for the intent of Insolvency & Bankruptcy Code since it was introduces in 2016. Although it took more than 800 days to accept the resolution plan, the financial creditors of the company shall recover almost 92% of their total exposure. The judgement also gives clarity on roles of CoC, Adjudicating Authority, Personal Guarantors and preferences of Financial & Operational Creditors.

Alongwith Regular Features……