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The ongoing crisis in global financial scenario notwithstanding, the value of merger and acquisition deals announced across the world has crossed one trillion dollar mark since the beginning of this year. However, India’s share in this global tally is just about one per cent, or about 10 billion dollar. This is less than half of about 2.5 per cent share in the comparable period of 2007. While the value of year-to-date global deals has declined by 27 per cent from the comparable period of 2007, that for deals involving India Inc has dropped by 71.5 per cent.

According to data compiled by deals tracking advisory firm Dealogic, the global M&A volumes announced so far in 2008 has just crossed $1,000 billion against $1.4 trillion in the corresponding period last year. However, the number of announced deals at 11,286 this year is the record high year-to-date figure, Dealogic said. The number of deals involving Indian companies this year stood at 125 at the end of March, with a total value of $9.64 billion dollar, according to global consultancy firm Grant Thornton. This compares with 148 deals with a total value of $33.85 billion dollar in first three months of 2007.

India’s 2008 tally includes a significant contribution from Tata Motors’ $2.3 billion dollar acquisition of luxury car brands Jaguar and Land Rover from the US auto major Ford. According to industry experts, the crisis in financial markets is acting as a dampener for M&A deals. Although, the valuations of the companies have gone down, the banks are cutting down their exposure to funding the deals.

State Bank of India (SBI) led consortium will raise $3-billion loan by April for Tata Motors’ acquisitions abroad, including the $2-billion Jaguar and Land Rover deal. Apart from SBI, the consortium will include leading entities like Citibank, Standard Chartered, BNP Paribas, JP Morgan, Tokyo Mitsubishi UFJ and Mizuho Financial Group.

SBI has emerged as the leading merchant banker in the country over the past two years and has sealed around 40 deals worth about $27 billion in 2007-08 contributing significantly to the bank’s revenues. Financiers in the consortium will normally receive commissions in the range of 0.50-1% of the deal amount, but it may vary according to the period of funding and the amount to be raised.

SBI may approach leading state-owned lenders such as Bank of Baroda and Punjab National Bank which have a strong presence overseas as well as the capacity to raise funds. Though the amount Tata will have to pay Ford Motors has not yet been disclosed, market source estimate it to be around $2 billion. Apart from funding the Jaguar and Land Rover (JLR) deal, Tata Motors is understood to have plans to utilise the excess amount raised to finance its other strategic plans, including picking up stakes in other companies.

Ford’s decision to the sell the JLR has been interpreted as the company’s incompetency to continue as a profit-making entity in recent years. The company reported a loss of $12.7 billion for the fiscal ended December 30, 2006, which was followed by the sale of Ford’s luxury brand, Aston Martin to a UK-based company for an estimated $848 million in March last year.

The Indian Group’s automotive arm Tata Motors is the preferred bidder of the US car giant Ford for sale of its two British luxury brands, Jaguar and Land Rover. British luxury car maker Jaguar has shown its new models and the planned product cycle to its probable new parent Tata group. The other suitors after evaluating interests are India’s Mahindra and Mahindra and private equity firm OneEquity.

Ian Callum, Director (design) who is responsible for the Jaguar’s new XF and XK model ranges, has shown Tata the new model lines and the planned product cycle. Tata Motors is currently holding advanced-level talks for buying Jaguar and Land Rover from Ford and a final decision is expected to be announced by the end of February. Tatas have pipped Indian automaker Mahindra and Mahindra as well as US-based private equity firm OneEquity, led by former Ford CEO Jacques Nasser, to attain the preferred status to hold advanced discussions for a final deal.

Tata’s purchase of Jaguar and Land Rover for an estimated two billion dollar was “a done deal” between Tata and Ford. However, the actual cost of the purchase will go up if the pension liabilities of these two businesses and the future technology support deal between the Tata Motors and Ford are taken into account. As a result of this Tata Motors has started talks with a host of banks to raise funds to finance the purchase. Calyon Bank, Standard Chartered Bank, ABN Amro, ICICI and SBI are believed to be in talks with Tata Motors. According to the Investment Banking sources the funds will be mobilised on the strength of Tata Motors’ balance sheet.

Ford and Tata Motors are now engaged in negotiating the terms on over a dozen long-term agreements covering the supply of engines, components and technology for the two brands. The takeover of Jaguar and Land Rover will be Tata Motors’ first acquisition in Europe. Ford had bought Jaguar for $2.5 billion and Land Rover from BMW for $2.7 billion.

The management of luxury carmaker Jaguar is “entirely relaxed” about the prospects of Indian conglomerate Tata Group taking over the brand along with Land Rover. Both luxury brands are owned by US carmaker Ford Motors. Ford had named Tata Motors, which is part of the Tata Group, as the preferred bidder for its British marquees- Jaguar and Land Rover, but a final decision for the sale is yet to be taken.

The Tatas, as owners of Anglo-Dutch steelmaker Corus, are already one of the top suppliers for Jaguar and Land Rover. Eventhough there had been frequent tensions in the relationship between Jaguar and Ford, following the purchase by the latter in 1989. Ford had bought Jaguar for about $1.4 billion. Now it is looking for the deal of $2.5 billion with Jaguar.