India: Rules Of M&A Game Get Sophisticated

A quarter of a century ago, India made a new and renewed "Tryst with destiny" when she embarked on the path of economic liberalization, a path that the country has vigorously maintained amid the so called "chaotic" democratic setup and for the most part a gloomy global environment. The tectonic shift in the economic landscape and the subsequent pace of cross border investment activity brought teething legal problems. In the last few years however, we have witnessed that the teething legal problems of the last twenty five years are now giving way to more sophisticated and nuanced legal challenges in the M&A space in light of the spate of legal and macro-economic changes.

In recent times, there has been a spate of new legislations such as the companies' law, insider trading law, listing regulations and changes to the foreign investment policy, takeover code, delisting regulations, ownership rules for insurance and banking companies. Before that, in 2011 the country had a new takeover code and a modern anti-trust regime. The changes have been so dynamic that in the last fortnight itself, we have witnessed the passage of a new bankruptcy law, the re-negotiation of the coveted India-Mauritius tax treaty (which also has a direct impact on the India-Singapore tax treaty) and formation of new tribunal to adjudicate corporate law disputes.

These changes have increased the sophistication in deal making in India. Some of the key trends that we are witnessing off late are as follows-:

Key Trends

  1. Corporate & Regulatory Dynamics and Early Assessment- A decade ago, the broad terms of the M&A deal could be finalized in a few meetings between the principals (promoters) and thereafter the advisors would be called on board to execute the deal and complete the paperwork. However, now the controlling shareholders by themselves are not necessarily in a position to have a complete sway over the deal making process. With enhanced corporate governance requirements and potential liabilities, the board is increasingly asserting itself on M&A deals. However, we do see an inverse co-relation between the level of promoter shareholding and the influence of the board i.e. higher the shareholding of the promoter the lesser the independent influence of the board. With the rise of proxy advisory firms and the increase in institutional shareholding/participation, we are also witnessing an increase in the influence of the minority shareholder or the non-controlling shareholders. The stringent corporate governance rules such as the requirement of the "majority of the minority" has given minority shareholder significant ammunition and a seat at the table.

    Board and shareholder dynamics aside, the identification of regulatory concerns is also occupying management time at a very early stage in the deal. For e.g. what information can the potential acquirer receive or target share as part of the deal evaluation? What are areas that would concern the anti-trust regulator and what could be the potential remedial measures? What are different tax consequences? Are there any softer concerns on the public relations front?

    We are seeing that these aspects are now being discussed and considered at an early stage of a transaction and rightly so, as some of these aspects if identified at an early stage may not be insurmountable but if one is caught off guard could expose the parties to enormous monetary and reputational risks.
  2. Qualitative Evaluation –Earlier, an acquirer would appoint legal and financial advisors to conduct customary diligences on the target which would include identifying legal non-compliances and financial discrepancies. While these old practices continue and for the right reasons, we are witnessing an increase in qualitative assessment of the target and its practices especially given the unfortunate corporate scandals in the country which surfaced some years back. The acquirers are now evaluating more closely the background of the controlling shareholders, members of the board, corporate governance practices and financial controls within the target. These exercises are not purely academic or check the box items anymore but there are instances of deals being called off purely on qualitative grounds.
  3. Cross Border Legal Evaluation – In the last few years, Indian companies have increased their overseas business presence at a phenomenal pace. This has resulted in an increased complexity in inbound transactions as well. Today, an acquirer is not just required to grapple with Indian laws while evaluating an inbound M&A but also needs to evaluate if the laws of other jurisdictions would also apply by virtue of the Indian target's direct or indirect business interests in other jurisdictions. We are seeing an increase in global anti-trust, securities law and tax assessments as also an increased focus on compliance with the UK Bribery laws, FCPA etc. some of which have extra-territorial application.
  4. Assessing M&A Litigation Risks- While, M&A's in India are still not matters which are litigated upon aggressively, with the increase in shareholder participation, the hawkish regulatory environment and bid like situations we are seeing an increase in potential M&A litigations. The changes in the judicial process (creation of commercial courts and now national company law tribunal) and the recent non-interventionist attitude of the higher judiciary towards international arbitrations has allowed stakeholders, who would once sit on the fence (for the fear of going through the Indian judicial process), to voice their concerns and if required litigate them.

Areas of Development

While, these trends are indeed going to have a compelling effect on M&As in India, some of the areas that many stakeholders would like to see change and which has hardly seen any serious deliberation from the lawmaker's are-:

  1. Deal Financing & Leveraged Buyouts-: As we have discussed in the past, there are several restriction under Indian corporate and banking laws which makes a leveraged buyout impossible and this has no doubt affected M&A activity in India. This issue would require an open discussion amongst all stakeholders as leveraged buyouts could create economic value especially in an environment where the banks are looking to clean up the pile of NPAs.
  2. Referee Cannot Play the Game & Litigation Funding-: While international litigation funds see India as an attractive jurisdiction, the regulatory impediments have not allowed the concept of litigation funding to fully realize it's potential. With the changing landscape, it will be crucial to evaluate if litigation funding is a natural and necessary development to implement some of the corporate governance reforms. Currently, SEBI appears to be at the forefront of protecting the rights of the minority shareholders, however the referee cannot play the game for too long and the right environment needs to be created for the minority shareholders to enforce their own rights.

Road Ahead

After twenty five years as the dust settles and all stakeholders mature, the next phase of deal making will be complex, sophisticated and as always, exciting.The question is – how prepared are we to play the Game?.

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.