Startups Take the Lead in July's PE and M&A Deal Activity: Grant Thornton Bharat

The month of July witnessed a significant surge in private equity (PE) deal activity, prominently driven by start-ups, as reported by the latest edition of the Grant Thornton Bharat Dealtracker, which meticulously tracks PE and merger and acquisition (M&A) transactions for the month.

Notably, start-ups clinched a total of 29 deals amounting to $133 million, representing a substantial 44 per cent of the overall PE volumes. Simultaneously, the PE deals encountered a slight dip, totalling 66 deals with a cumulative value of $1.1 billion. This downturn marked the second-lowest monthly figures since August 2020.

Within the start-up sphere, the retail sector emerged as a force to be reckoned with, dominating deal activity. This was followed by robust showings from edtech, fintech, and enterprise segments, which collectively contributed to an impressive 55 per cent of the total volumes within the start-up realm.

It is particularly worth noting that the month of July bore witness to a prominent presence of business-to-business (B2B) start-ups, a category that commanded a significant share of deals, surpassing 52 per cent. While comparing with July 2022, the average size of PE deals escalated from $12 million to $16.5 million.

The holistic landscape comprised a total of 95 PE and M&A deals, aggregating a substantial sum of $3.1 billion. Despite encountering a 46 per cent drop in deal volume as compared to the corresponding period in the previous year, the market rallied with an impressive 58 per cent surge in deal value. This upswing was largely attributable to the emergence of nine noteworthy transactions, each valued at over $100 million. These nine transactions contributed a staggering $2.1 billion to the market's momentum.

Shanthi Vijetha, partner for growth at Grant Thornton Bharat, emphasised the palpable influence of the global economic slowdown on India's deal activity. This influence has been perceptible since the beginning of the year, resulting in subdued figures when juxtaposed with the vibrant trends of 2022. He affirmed that while cross-border transactions fueled the surge in total deal values, a cautious approach towards private equity investment reduced overall volumes.

Nevertheless, Vijetha remained optimistic, asserting that India's allure as a thriving destination for deal-making and investments is expected to persist, and the latter half of 2023 is anticipated to witness a resurgence in deal activity, notwithstanding the prevailing global macroeconomic conditions.

On the front of merger and acquisition (M&A) deals, start-ups maintained their role as key drivers, albeit with a 17 per cent decrease in volume compared to the corresponding period last year. Nonetheless, July 2023 experienced an astounding 7x increase in deal values, contrasting with the figures from July 2022. This surge was underpinned by a series of 29 deals amounting to $2 billion, where six high-value transactions, spanning sectors like IT, automotive, retail, and manufacturing, commanded attention.

July reported a total of 10 start-up M&A deals, collectively valued at $244 million. The retail segment within the start-up domain held the reins, accounting for 40 per cent of the deals, with a value of $58 million. Meanwhile, the data analytics, big data, and AI sectors spearheaded in terms of values, contributing a notable 41 per cent to the total values within the start-up sector.

An additional highlight for July was the emergence of India's first unicorn startup of the year—Zyber 365 Technologies. Securing an impressive $100 million in Series A funding, this achievement came alongside a valuation of $1.2 billion, granting Zyber 365 Technologies the distinction of being the fastest unicorn in both India and Asia, as highlighted in the comprehensive report.