India: Mega M&A Deals: Conspicuous By Their Absence In India!

2015 has already seen a record number of "mega M&A deals"1 globally including the recent mega takeovers of SABMiller and EMC Corp by AB InBev and Dell respectively.2 However, by all counts and even by Indian deal market standards mega M&A deals have been absent historically and more particularly this year in India.3 As per the report published by the Securities Exchange Board of India (SEBI), the largest open offer this year thus far was valued at around INR 132 crores (USD 20 million).4 While, the level of anti-trust scrutiny is never a conclusive parameter to deduce whether mega deals are present in a given market, nevertheless they provide some indication on the nature of the M&A market. In India since the inception of the merger control framework5, out of the 264 cases reported to the Competition Commission of India (CCI) only 2 cases have undergone a detailed scrutiny (also referred to as Phase II investigations) which at the very least indicates the absence of large strategic deals in India. In this interactive, we try and explore the possible cause(s) that is plaguing the mega M&A deal market in the context of India.

I. Factors that facilitate a Mega Deal Market

While it is difficult identify the factors that facilitate mega deals with any degree of certainty, existing literature in the field indicates that (a) a robust macro-economic outlook in the medium to long term, (b) upward stock market movement, (c) level of competition in a market/industry and (d) availability of credit (both on the corporate balance sheet and other external sources of funding) are the some of the key factors that form the bedrock for the creation of a mega deal market.

II. Is a Market for Mega Deals Necessary?

This interactive is not an endeavor to argue that "mega" or "large" M&As are necessarily good for the economy or any of the stakeholders. In fact there is existing literature which suggests that mega M&As destroy value for the acquiring shareholders and that most large M&As fail.6 Having said that in the larger scheme of things an environment for large M&As may be a "necessary evil" as such M&As typically reflect the corporate morale and consequently provides some form of anecdotal evidence on the macro-economic outlook. Large M&As can also help create strong and stable companies. For example, during the 2008 global financial crisis the US Government actively brokered deals in the larger interest of the economy and the financial system.7

The limited point is that whilst we have no empirical evidence to suggest that mega deals are beneficial for a target country (and the same is outside the scope of this interactive), there should be no reason for the law makers in a free economy to not provide companies various restructuring options including the ability to undertake large strategic M&As, leverage buyouts, take private transactions etc.

III. What is Precluding Mega Deals in India?

The medium to long term macro-economic outlook for India has remained mostly promising and after the general elections last year, the outlook has only improved exponentially. However, the euphoria on the macro-economic front has not resulted in any high value deals especially this year. Intuitively this raises several questions- Is the macro-economic environment as good as it is made out to be? Are Indian companies in a growth phase as opposed to a consolidation phase? Are there other factors that are impeding large deals?

While there is no denying the fact that most Indian companies are in the growth phase as opposed to a consolidation phase, there is no reason to believe that the two cannot co-exist. For e.g. there are several industries were large strategic M&A are desperately required such as telecom. Similarly, there are several public companies that could (and are required to) be restructured, delisted, strengthened and listed again through a typical leverage buyout transaction.

It is extremely difficult to empirically prove the factors that are precluding such large deals in India especially given the presence of large buyout firms. However, it appears that (a) large block of promoter holdings in Indian companies, (b) non-availability of cheap and external credit and (c) other regulatory factors are impeding the growth of a robust M&A market. It is difficult to imagine that large promoter holdings are alone precluding large deals as promoter holdings in Indian companies has been declining over the years and now there are several "blue chip" companies that have dispersed shareholding with no identifiable promoter. Therefore, by deduction it appears that regulatory factors and availability of external credit could be impeding the growth of the M&A market in India.

While, several structures (both onshore and offshore) have been used including asset acquisition for deal financing, it is no secret that external sources of financing for M&A deals (especially acquisition of shares of a public listed companies which are typically the target for large M&As) are extremely difficult if not impossible because of regulatory policies or the sluggish implementation of the existing policies.8 Indian companies have raised capital from the equity markets through qualified institutional placements (QIPs) or private placements to fund M&As. Globally equity financing is not typically used for funding large M&As as it proves to be expensive. Indian corporates have also tried to tap the global capital markets for meeting their investment needs but because of end-use restrictions on the use of such capital for M&As, this avenue also does not provide the necessary source of currency for funding large M&As. These avenues are likely to freeze further given the imminent tightening of the global credit markets.

The major disappointment, however, has been the availability of debt financing. The bond market especially "junk bonds" which has been a major source of M&A financing globally is at a very nascent stage in India9 and therefore has not been able to provide the funding support for large M&As. Further, while the bond market has grown over the years, the demand has been more for investment grade bonds as opposed to "junk bonds". In the absence of a robust bond market one has to rely on bank financing. The prudential norms prescribed by the Reserve Bank of India (RBI) does now permit banks to finance acquisition of shares and therefore this source of financing is also not available in India.

Apart from the credit environment, the foreign investment norms on creation of security in favour of a non-resident or pledge of securities by non-residents makes it extremely difficult for traditional buyout firms to finance a large M&A deal in India. Additionally, the new Companies Act, 2013 does not allow a public company to provide security for the acquisition of its own shares and consequently restricts the ability to undertake a typical leverage buyout.10

It is imperative that some of the regulatory barriers are removed to create a robust M&A market and provide both foreign and domestic firms wider ammunition to restructure their businesses and fully realize the inorganic growth potentials. Both the RBI and SEBI realize this and therefore have taken some small steps in this direction. RBI recently permitted leveraged buyout of "stressed companies".11 SEBI, on its part has relaxed the norms for delisting of listed companies and consequently created an enabling environment for "take private transactions".12 While small steps are being taken to create an enabling environment for M&As and other types of restructuring opportunities, a more concerted effort from the Government and all concerned regulators such as RBI, SEBI, CCI etc. is necessary to achieve a more robust M&A market in India.


1 There is no formal definition of what constitutes a 'mega deal'. However, typically a deal for a purchase consideration of USD 1 billion or more is considered as a 'large'/'mega' deal. Having said that, the definition could differ from one jurisdiction to another depending on the market capitalization of the companies in such jurisdictions.

2 James Fontanella-Khan and Arash Massoudi, "Megadeals for 2015 hit record high", New York and London, September 18, 2015, available at (last visited October 14, 2015). This article evaluates the inbound M&As and not outbound M&As involving Indian companies as outbound M&As are governed are typically governed by the laws of the host/targets jurisdiction and are mostly driven by non-domestic factors.

3 Kanika Datta, "M&As: Waiting for the Bing Bang", New Delhi, October 7, 2015, available at (last visited October 14, 2015).

4 Details of Open Offers made under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and SEBI (Substantial Acquisition of Shares and Takeovers), Regulations, 2011, available at (last visited October 14, 2015). Under the Indian takeover laws, the minimum mandatory open offer size has to be a minimum of 26% of the voting capital of the company and the offer price cannot be lower than the negotiated price for the principal transaction that triggers the open offer, therefore the size of the offer is typically a good indicator to deduce the value of the deals.

5 S. 5 and S. 6 of the Competition Act, 2002 which are the principal provisions relating to the notification of M&As was brought into force on March 4, 2011.

6 "Mergers: Why Most Big Deals Don't Pay Off", BusinessWeek, 14 October 2002; "A Brave New World of M&A: How to Create Value from Mergers and Acquisitions", The Boston Consulting Group, July 2007; G. Alexandridis, K.P. Fuller, L.Terhaar and N.G. Travlos, "Deal Size, Acquisition Premia and Shareholder Gains", January, 2011, available at (last visited October 15, 2015).

7 Timothy F. Geithner, "Stress Test: Reflections on the Financial Crisis", May 12, 2014; Andrew Ross Sorkin, "Too Big To Fail", October 20, 2009.

8 Narendra Chokshi, "Challenges Faced in Executing Leveraged Buyouts in India", April 2, 2007, available at

9 Sunder Raghavan, Ashok Sahoo, Angshuman Hait and Saurabh Ghosh, "A Study of Corporate Bond Market in India: Theoretical and Policy Implications", March 4, 2014 available at

10 S. 77 (2) of the Companies Act, 2013

11 Since some of the restrictions on implementing a leverage buyout are beyond the regulatory domain of the RBI, the classic leveraged buyout is still a challenge. However, this has to been as a dilution on the prudential restrictions on banks to finance share acquisitions.

12 NDA Hotline, "Going Private Transactions: Set For A Boost", available at

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.