Mergers and Acquisitions
Mergers and Acquisitions: Your Complete Legal Guide to Business Combinations in India
Don’t Let Your Dream Deal Turn into a Legal Disaster. Imagine this:
You’ve just closed what sounds like the perfect merger — with a rival that happens to be a nice complement to your business. Six months later, you’re in a courtroom battling penalties from the Competition Commission that could bring down the whole deal. Your “game-changing merger” has become a ₹10 crore legal disaster. You have sold your business for ₹30 crore after what looked like a clean exit.
Then, liabilities that were hidden come to light. The buyer brings indemnification claims. Instead of funding your dreams, your retirement fund is now funding lawyers.If the legal strategy is right,it can also be immensely rewarding.
Foreign Direct Investment Meaning
What is a Merger?
It is a statutory amalgamation/arrangement under the Companies Act, 2013, by which two or more companies are combined through sanction by the court.
In a merger:
- The companies are amalgamated into a single company.
- One company survives (absorbing merger) or a new company is formed (consolidation).
- To be approved by the National Company Law Tribunal (NCLT).
- You need 75% of your shareholders’ approval as well as creditors’ consents.
- Provides tax-reliefs under the Income Tax Act.
- It involves a formal court-supervised procedure which guarantees impartiality.
- To complete the process, 8-18 months are taken.
What is an Acquisition?
An acquisition occurs when one company buys another, either in whole or in part:
- Buyer acquires control without the formal merger process.
- The target company may continue as a subsidiary or be merged.
- May not require court approval (depending on structure).
- Usually faster to close (2-6 months typically).
- Documentation and process are simpler.
- Different tax consequences from mergers.
- More flexible deal structures are possible.
Mergers and Acquisitions in India: Compliance Requirements
✔ The Companies Act 2013 (the Act) provides the procedural framework for corporate combinations under the umbrella of corporate restructuring, mergers, demergers, and amalgamations.
✔ The Competition Act, 2002, has been enacted to regulate such transactions and has made obtaining its approval mandatory in respect of transactions crossing certain thresholds.
✔ The Takeover Regulations issued by SEBI regulate the acquisition of a listed company through a takeover scheme and protect the minority shareholders with myriad safeguards and enabling them to make informed decisions.
✔ The Foreign Exchange Management Act – also known as FEMA- guides foreign investment in India through Indian companies and overseas investments by Indian companies.
Latest in M&A: What Deals Have Been Done?
Latest mergers and acquisitions in India transactions: Indian M&A market continues to sizzle:
➡️ HDFC Bank-HDFC Ltd Merger (2023) – a mega merger in India worth ₹13 lakh cr slammed our hearts and made the world’s fourth largest bank by market capitalization. The deal met certain hurdles, including regulatory approvals from the RBI, CCI, NCLT, and the shareholders, distilling the long, arduous process of mergers and acquisitions for big deals.
➡️ Reliance-Disney Merger (2024) – ₹70,000 crore media merger of Star India and Viacom18, for a giant in the Indian entertainment industry. CCI cleared with conditions to protect competition in cricket rights and advertising.
➡️ Tata Group Acquisitions – Tata’s recent acquisitions of Air India, Big Basket, Tata’s demonstrated a strategic extension of operations via M&A. Each deal is required in the M&A sphere and in the field-specific regulations.
The M&A Timeline: Your Step-by-Step Guide
Stage 1: Establish strategic objectives and deal rationale
👉 Establish strategic objectives and rationale for the transaction
👉 Find acquisitions or sale prospects
👉 Perform initial valuation analysis
👉 Evaluate the time frame for the regulatory approvals
👉 Formulate a financing plan
👉 Retain legal and financial counsel.
Stage II: Due Diligence
👉 Legal due diligence (body corporate, contracts, litigation, intellectual property, real estate, regulatory)
👉 Financial due diligence (past results, forecasts, working capital)
👉 Tax due diligence (compliance, disputes, structure optimization)
Stage III: Negotiation and Documentation
👉 Term Sheet
👉 Purchase Contract or Scheme of Merger Disclosure schedules and warranties
👉 Indemnity terms and stock in trade
👉 Employment and termination of competition contracts.
👉 Conditions Precedent and Closing Instructions
Stage IV: Regulatory Approvals
👉 Competition Commission submission and permission
👉 NCLT application formers
👉 Securities and Exchange Board of India (SEBI) regulations (for listed companies)👉
👉 RBI/FEMA approvals (for foreign investment)
What We Do for You
Among the leading mergers and acquisitions firms in India, we offer comprehensive legal services:
Strategic Transaction Advisory
- Determine best deal structures
- Evaluate regulatory approval likelihood
- Formulate negotiation strategies
- Design detailed transaction roadmaps
Due Diligence Management
- Perform full legal due diligence
- Manage financial and tax due diligence
- Detect significant risks and liabilities
- Generate actionable due diligence reports
- Recommend risk mitigation measures
Transaction Documentation
- Prepare purchase agreements and merger schemes
- Draft disclosure schedules and warranties
- Bargain over indemnification provisions
- Arrange escrow and earnout agreements
- Draft employment and non-compete agreements
Regulatory Approvals
- Draft CCI notifications and presentations
- Attend to NCLT merger applications
- Assist SEBI with listed transactions
- Facilitate RBI/FEMA approvals
- Acquire sector-specific clearances
Post-Closing Support
- Oversee implementation of integration
- Settle earnout and adjustment disputes
- Administer indemnification claims
- Act non-competitive provisions
- Support ongoing compliance
How Can We Help You
Even if this is your first time thinking about mergers and acquisitions or you’re a well-seasoned buyer, we have the expertise to help you ensure success:
🔖 For Buyers:
- Target ideal candidates for acquisition
- Perform in-depth due diligence, identify potential problems
- Negotiate favorable terms and protections
- Organize tax-efficient transactions
- Receive regulatory approvals on time
- Document your transaction with confidence and clarity
🔖 For Sellers:
- Enhance sale value with effective structuring
- Get your business ready for sale (legal tidying up)
- Control buyer due diligence
- Discuss price and terms
- To your best advantage, minimize post-closing liability exposure;
🔖 For Potential Merging Companies:
- Assess strategic fit and synergies
- Tax-advantageous structuring of mergers
- To the NCLT and beyond
- Obtain Competition Commission clearance
- Align shareholder and creditor approvals
- Develop a strategy for integration post-merger
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Frequently Asked Question
Streamlined private company acquisitions can close in as little as two to three months; complex transactions that are subject to review/approval by the Competition Commission, NCLT, and some other regulators may take six to twelve months or longer.
Mergers are amalgamations (for which NCLT's approval is required) in which two companies are merged into a new/ surviving one. Acquisition by way of purchase of shares or assets may or may not require approval of the court, but approval from regulatory authorities may be required, depending on the industry and the size.
Material documents include the term sheet/LOI, confidentiality agreement, due diligence reports, share purchase/asset purchase agreement, disclosure schedules, shareholders’ agreement, employment and non-compete agreements and certain closing certificates and consents.
The parties generally are permitted to terminate without liability, although the agreements may impose good faith obligations to seek consents or to comply with any reasonable conditions.
Foreign investment in India is governed by FEMA and the FDI policy. 100% foreign investment is permissible in most sectors under the automatic route, barring a few sectors that have a ceiling and/or require government permission. Defense, broadcasting, print media, and some other areas have specific restrictions. We walk you through the relevant FDI rules.