2021 trends - executive summary

  • Where ‘Covid-19 proof’ was a driving force for transactions in 2020, ‘Covid-19 recovery’ seems to be a key theme for deals in the coming year. As the resumption of manufacturing activity and pent-up demand for discretionary products is expected to happen with easing of lockdown restrictions, sectors such as Industrials, logistics, consumer durables, and specific segments of consumer discretionary products and food services, could see activity increase in 2021
  • Similar to H2 2020[1], we expect there to be a continuation of secondary transactions in 2021, as several scaled-up companies reorganise their shareholding on their path to an IPO in 2021
  • Investments from corporate investors are expected to increase as strategic investors look to access and support the growth of innovative businesses, directly or through their venture capital arms
  • While 2020 had a lower activity level of private equity buyouts[2], as sponsors stayed cautious and evaluated the effects of the pandemic, we expect this to bounce back in 2021 with the economic recovery and attractive valuations driving companies to revive M&A processes

2020 private equity activity [3]

  • In the latter half of 2020, there was a decline in private equity transaction volume (-35%), and value (-23%), versus the same period in 2019 – shown below[4]This decline in activity was due to:
    • Uncertainty caused by the pandemic;
    • Lag effect of delayed deal launches; and
    • Regulatory changes applicable to investments from China[5]

Source: Venture Intelligence Private Equity & Venture Capital Deals Database

  • The heightened liquidity levels globally led to massive inflows of foreign investment in both public markets and private markets. The c.$ 27bn investments in Jio Platforms and Reliance Retail dominated the investment landscape during the second half of the year too [6] [7]
  • The two most active sectors in 2020 were Financial Services and Consumer, Leisure & Retail, contributing to c.44% of the closed deals during that period[8]. This reflects the significant growth opportunity underpinned by the rapid adoption of financial & digital services among Indian consumers
  • The Healthcare sector dominated private equity buyouts as the relative resilience of the industry was more attractive compared to the uncertainty amongst the other verticals. Overall, Healthcare contributed to four of the six buyout deals – the largest being JB Chemicals’ acquisition by KKR ($414m)[9]. This also led to the average deal value increasing from $113m in 2019 to $201m in 2020[10]
  • Industrials benefited from the Covid-19 recovery and resumption of manufacturing activity mentioned above, seeing a resurgence in Q4 2020 and ending with 13 deals compared to 12 in 2019 and a 25% increase in deal value[11]
  • Education (specifically EdTech) was a crowd favourite, securing seven transactions in the H2 2020 (compared to five in 2019)[12], which was driven by the necessity of online learning throughout the lockdown

Source: Venture Intelligence Private Equity & Venture Capital Deals Database

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Sector by sector analysis

Our sector specialists share their observations of M&A activity in the space for H2 2020 and their outlook for 2021.

 

 

 

References

[1] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database

[2] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database

[3] For this analysis, we have considered transactions with value between $15 – 500m and excluded some sectors (Infrastructure, Real Estate, Energy, Mining and Natural Resources)

[4] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database

[5] Source: Government of India, Ministry of Commerce & Industry, Department for Promotion of Industry and Internal Trade, FDI Policy Section, Press Note No. 3(2020 Series)

[6] Bombay Stock Exchange: Press Release by Reliance Industries, Bombay Stock Exchange, 30 October 2020

[7] Bombay Stock Exchange: Press Release by Reliance Industries, Bombay Stock Exchange, 19 November 2020

[8] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database

[9] KKR to buy 54% stake in JB Chemicals for Rs 3,100 crore, Economic Times, 3 July 2020

[10] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database

[11] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database

[12] Calendar year has been used for the purposes of all calculations (2020 refers to CY2020, 2019 refers to CY2019 and so on) Source: Venture Intelligence Private Equity & Venture Capital Deals Database