New Delhi: Hit by a raft of adverse global and domestic factors, the value of merger and acquisition deals involving Indian companies slumped over 40 per cent to $34.4 billion last year, says Ernst & Young.

The number of M&A transactions involving Indian entities also dropped to 806 last year from 1,135 deals in 2010.

Global consultancy firm Ernst & Young (E&Y) said uncertainty over the euro zone debt crisis and sluggish American growth, coupled with domestic factors such as a slowdown in reforms, rising interest rates and moderate growth in the economy, negatively affected the Indian M&A scenario.

India's M&A deal value reached $34.4 billion, which is a significant decline from $60.7 billion in 2010. In terms of deal count, 2011 recorded a total of only 806 deals, as compared to 1,135 deals in 2010, E&Y said.

Cross-border deals accounted for over 85 per cent of the total value of M&A transactions in 2011. There were 385 cross-border deals during the year, which were worth about $29.4 billion. Meanwhile, there were just seven 'billion dollar' deals last year, compared to 12 such transactions in 2010.

?2011 was a difficult year for deal-making in Indian markets,? Ernst & Young Transaction Advisory Services Partner and National Director Ranjan Biswas told PTI.

"Global headwinds such as concerns around euro stability and domestic headwinds such as rising inflation, slowing GDP growth and liquidity pressures have adversely impacted the level of acquisition activity,"he said. Biswas said transaction activity is likely to stay low-key in the early part of 2012, but could rebound later on the back of inbound acquisitions by global companies and increased PE exit activity.

The average deal size for 2011 plunged to $104.6 million from $121.1 million in 2010.

"2011 recorded a total of 177 outbound deals with an aggregate disclosed deal value of $8.8 billion. The share of outbound deals in the total M&A pie in terms of value plummeted to 25.6 per cent in 2011 from a significant 51.9 per cent a year ago," E&Y pointed out.

Adani Enterprises' acquisition of Abbot Point Coal Terminal in Australia ($2 billion) and the GVK Group's purchase of Australia-based Hancock Coal's Queensland coal assets ($1.3 billion) were among the biggest outbound deals in 2011.

In terms of sectors, natural resources and telecom were the favourites when it came to M&A deals last year, E&Y said.

According to E&Y, there were 208 inbound deals with an aggregate disclosed value of $20.5 billion in 2011. This was 25 per cent higher than in 2010 in terms of value.

The major deals include BP Plc's acquisition of a 30 per cent stake in Reliance Industries' 23 oil & gas blocks ($7.2 billion) and Vodafone's buyout of a 33 per cent stake in Vodafone Essar ($5 billion).

"Oil and gas (18 deals with an aggregate disclosed value of $9.2 billion) and metals and mining (46 deals with a value of $2.7 billion) together accounted for 34.6 per cent of the aggregate deal value witnessed in 2011," the global consultancy firm noted.