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Mar 07, 2013, 08.15 PM IST | Source: CNBC-TV18

Banking & financial services key for M&A: Grant Thornton

Despite a slow month in terms of mergers and acquisition (M&A) activity, Raja Lahiri, partner, Grant Thornton is not losing his optimistic streak. Lahiri is bullish on seeing activity in the days to come.

However, the overall inbound activity has remained muted because of the overall growth concerns. Inversely, the outbound deal activity also remains subdued.

Raja Lahiri

Partner

Grant Thornton

Despite a slow month in terms of mergers and acquisition (M&A) activity, Raja Lahiri, partner, Grant Thornton is not losing his optimistic streak. Lahiri, who is bullish on seeing activity in the days to come says, "We are already seeing some good activity in the outbound space in certain sectors. Sectors like aviation, broadcasting, media, will see inbound action."

Lahiri says the next big sector for private equity is banking and financial services. "That is clearly drawing a lot of attention as far as private equity is concerned in the non banking financial companies (NBFC) and the insurance broking space," says Lahiri optimistically.

Below is the edited transcript of Lahiri's interview to CNBC-TV18.

Q: This February saw a marked slowdown, atleast on a year-on-year (y-o-y) basis as far as M&As go. What is the story here?

A: Overall, M&A activity has been muted. There is no reason to doubt that. However, if one looks at February 2013, from our analysis we saw USD 2.4 billion of M&A with around 41 transactions. As far as private equity is concerned, we saw a muted month of USD 0.3 billion of deal activity with around 29 transactions.

The flavour of the month was a large deal of Mylan. US buying out Strides Arcolab's injectable business for USD 1.8 billion, is actually the first billion dollar deal of the year 2013. In that context, it is a good month. We have seen big bang deals happening. However, the overall inbound activity has remained muted because of the overall growth concerns. Inversely, the outbound deal activity also remains subdued.

As far as private equity is concerned, we still see continuing action in various sectors. I hope that in the years and months to come, we would see action picking up as we move along in this year.

Q: What was the one big deal that caught your attention? Or any particular sectors that did well for February?

A: The Mylan deal of USD 1.8 billion was in pharma. So, that is the sector which shot up the deal street as far as M&A is concerned. As far as private equity is concerned, we saw the USD 50 million deal of International Finance Corporation (IFC) putting money in Smart Value Homes which is in the mid and low income housing bracket.

The other interesting trend is in banking and financial services. That is clearly drawing a lot of attention as far as private equity is concerned in the non banking financial companies (NBFC) and the insurance broking space. So, these are the key sectors to watch out for.

Q: The Budget is over now, but we heard the Finance Minister talk about the need for investment in the country. In that kind of atmosphere what is your outlook for deal street going ahead?

A: I am pretty positive given what we have seen in the Budget. It is done and dusted. It has gone ahead and as a deal maker, I would say we need to see activity. I am pretty bullish that we would see activity going ahead. We are already seeing some good activity in the outbound space in certain sectors. Sectors like aviation, broadcasting, media, will see inbound action.

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