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

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.”