India preferred growth market in BRICS, says PwC's John Dwyer

New Delhi: ET interview with John Dwyer and Sanjeev Krishan of PwC

The Big Four dealmakers are finding their niche in the investment bank dominated deals business. PwC's John Dwyer runs one of the biggest deals businesses among the accounting firms, clocking over $5 billion in yearly fees.Dwyer and Sanjeev Krishan, India transaction services and private equity leader, spoke to Vinod Mahanta and Abhishek Nair. Edited excerpts:

PWC India's revenues were up 19.3% year-on-year. How did the Indian deals business fare?

Dwyer: The Indian deals business has done very well. If you look at the last three years, the business has grown double digits, at almost 20% plus in the last three years. But not just the growth, when we talk to clients, there is a different tone, there's a different view, and a certain positivity about our involvement in big situations.

The firm has also invested a lot in deals. So, we've invested in corporate finance, we've invested in deal strategy. We're sure it is going to be a very promising time for India. At this time, India is the preferred growth market in BRICS (Brazil, Russia, India, China and South Africa). There's good political environment and a brand of trust which is much better than what it was two-three years ago, in terms of external investors. It's a more receptive and predictable market.

With slowing global growth, do you see a dampening in M&A activity?

Dwyer: There has already been evidence of that but numbers do fluctuate by the quarter. The last two quarters leading up to September 30, the number of deals done is down by 15-20%. There is a sign of decline globally, as people have paused a bit. But now the position is relatively stable. There's definitely a pause, some of it is because of the political action like the presidential election in the US, some of it is because of Brexit. There was a definite slowdown of business before, into and after the whole Brexit referendum in continental Europe and UK. I would be surprised if that didn't continue for the next quarter or couple of quarters. In the global uncertainty, India stands to benefit because of the stability and attractiveness of the market.

When global corporations talk about acquiring India companies, do the Indian tax and regulatory issues still remain bugbears?

Dwyer: These tax issues started cropping into conversations, two-three years ago but the view is that these things will get sorted. The general consensus is that the present government will see that these issues are worked out. I feel the political environment is more predictable. There's definitely an interest in foreign investment taking place and when you compare emerging-market, fast-growth environment, India ticks a lot of boxes compared to others. So, I feel these kind of issues, relative to other growth markets, are more manageable. And the steady growth rates at 8% and with the liquidity in the market, all of those factors together, suggest that these issues will not impede investments and there will be continued momentum. With respect to investing in any country, there are its pluses and minuses, but I feel the pluses in India are very attractive to a lot of businesses. To find such dynamics in consumerism is rare and that is where India has benefitted largely.

Indian companies have struggled with outbound M&A. Why do you think a large chunk of global acquisitions didn't work out for Indian companies?

Dwyer: The machinery of acquisition that tends to work in a corporate environment is those add-onsin-fills (smaller acquisitions to fill gaps) that repeat themselves time and again. It's not like one big-splash deal but more like adding a new geography, a new technology, a new skill, basically, filling in a gap. They do their diligence very well, they know what they are buying and why. They have a template in the way they approach these deals, and they usually understand the market dynamics very well.

The ones that don't work, and this applies to any corporate, are the ones where the company is not sophisticated in running these processes and don't do acquisitions regularly. And often, if a company's acquisition machinery hasn't worked regularly and the company opts for a big acquisition, it tends to fail. Some companies like GE have really good add-on, in-fill practices, a sophisticated approach to risk, a very deep understanding of the country's market and an accompanying, well-oiled acquisition machinery. You just need to make yourself familiar with the practice, commit some quiet mistakes in the background, keep on building your machinery, but it does come with practice.

The restructuring space in India will witness a lot of action. How are you looking at tapping that opportunity?

Krishan: We see two kinds of opportunities arising for deals businesses in the restructuring space -the first is more transactional, i.e. some divestitures are likely as corporates look to deleverage their balance sheets. The second opportunity is to help management teams avoid value erosion and work with new management teams to create value -some of this work requires operational expertise and our delivering deal value and larger consulting teams will combine to do so. Moreover, we have significant global resources which we can move quickly as opportunities emerge.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.