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Director Notes
No. DN-V3N10
MAY 2011
Outbound Mergers and Acquisitions by Indian Firmsby Afra Afsharipour
Changes to India’s laws governing Indian multinational corporations since the 1990shave had a significant impact on both the number and structure of cross-borderacquisitions by Indian companies. This report discusses the legal reforms implementedby the government to help facilitate overseas acquisitions by Indian firms, the subsequentincrease in outbound mergers and acquisitions, and the regulatory impediments that
still exist to mergers and acquisitions by Indian firms.
India is one of the fastest growing economies in the world and
is predicted to become the third largest economy after the
United States and China. India’s economic transformation
has allowed Indian firms to gain significant attention in
the world economy, particularly as acquirers of non-Indian
firms. This report outlines the rise in outbound mergers
and acquisitions (M&A) by Indian firms. It then focuses on
several of the areas of Indian law that affect outbound M&A
by Indian firms and the regulatory framework within which
Indian firms operate when undertaking outbound M&A.
Overall, legal reforms in India have played an important
role in setting the stage for outbound acquisitions by
Indian firms. Moreover, Indian law has shaped outbound
acquisitions both in terms of transaction structure and size.
However, legal constraints on M&A activity by Indian
firms continue to impose substantial restrictions not only
on the methods used by Indian multinationals in pursuing
outbound acquisitions, but also on the future potential
of Indian multinationals.
Chahart 1t 1
The Rise in M&A Activityhe Rise in M&A Activity
2006 2007 2008 2009 2010
Total outbound deal value (USD billions)
Source: Dealtracker Yearly 2010, Grant Thornton India.
0
5
10
15
20
25
30
35
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India’s economic transformation has included substantial
M&A activity by Indian firms. The rise in general M&A
activity has included a rapid expansion of outbound
acquisitions by Indian firms.1 While Indian firms have
long been active in outside investments, they are now able
to compete with the strongest multinationals of developed
countries.2 Once absent from discussions about cross-border
M&A, Indian firms’ outbound M&A activity is now well-documented in the business news.3
Indian firms’ outbound M&A activity gained traction
beginning around 2000 and picked up considerable speed in
2005.4 By 2005, Indian firms’ outbound M&A deals generated
$9.5 billion, representing 58 percent of the country’s deal value
for the year.5 Of the outbound deals in 2005, the majority of
Indian firms’ acquisitions were concentrated in Europe and
North America.6 India’s outbound M&A deals and value
skyrocketed in 2007 with the rise of cross-border mega-deals.7
In 2007, six of India’s top 10 outbound M&A deals totaled
more than $30 billion in value, five times that of the previousyear.8 Moreover, there is some evidence that in 2007 and 2008,
outbound acquisitions by Indian firms exceeded inbound
investment by foreign multinationals into India.
Mega-deals by Indian firms include:
• T Sl’ $12 ll Al-Dh
vl, C;
• Hl’ $6 ll h U.S.-C
Nvl, h wl’ l p l
ll p;
• Szl E’ ph 33.85 p k
G w k RE Pw $1.7 ll.
With the advent of the global credit crisis, Indian M&A
activity slowed considerably in 2009. However, 2010 saw a
significant recovery, with total outbound deals valued at
approximately $22.5 bill ion. Outbound deals accounted for
45 percent of total M&A deal value in 2010, compared to
12 percent in 2009. Both the number and value of outbound
deals were significantly larger in 2010 than in 2009. Outbound
deals in 2010 also appeared to be in line with predictions
that Indian firms would veer away from targets in developed
economies to targets in emerging economies, as well asin the other BRIC countries, Brazil, Russia, and China.9
See Table 1.
Table 1
abl 2010 Oubund M&A Tanan
Acquirer Target Sector US $ millions Deal type Target’s nation Consideration
Bh Al Z A BV Tl 10,700.00 AA (v
)All h
Hj Gp KBL Ep PvBk Bk &Fl Sv 1,863.00 A Bl All h
H Z L(V R)
Al A Pl –Z
Ml & O 1,340.00 A U K All h
L Ih L G Cl M 845 A Al All h
F Hlh L Pkw Hl LPh, Hlh
& Bh685.3 S k Sp All h
Sh I Pw Gv H hl Hpl 648.6 A U K All h
E MlR L
T ClCp LLC
M 600 A U S All h
E A HlZw I
Sl CpMl & O 500 A Zw All h
Jl Sl & Pw LSh I
Sl C LLCMl & O 464 A O All h
JSW E L CIC E Cp M 415 A C All h
Source: Grant Thornton India, Dealtracker Yearly 2010
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There are a number of important business reasons
underlying the interest of Indian firms in outbound M&A.
“Unlike Western companies, which use M&A primarily
to increase size and eff iciency, emerging [multinationals]
acquire firms to obtain competencies, technology, and
knowledge essential to their strategy.”10 For Indian firms,
acquiring established companies provides a consumer base
and market shares in competitive markets, as well as theability to consolidate manufacturing costs and diversify
products.11 Furthermore, acquiring established businesses
in developed economies provides Indian multinationals
access to other necessary business resources, such as raw
materials, technology, and intellectual property.12
Economic Liberalization
and Outbound M&A
The feasibility of outbound acquisitions by Indian firms
can be traced to an economic liberalization process that
commenced in the early 1990s.13 Economic liberalization
and globalization have given Indian multinationals relatively
easy access to multiple sources of funding, including
domestic and foreign capital markets. Legal reforms during
the liberalization period involved “the wholesale scrapping
of legislation facilitating government intervention in
markets and the introduction of a more market-facilitative
legal infrastructure.”14 During liberalization, the Indian
government facilitated the upsurge of overseas acquisitions
by relaxing regulations for the outbound flow of capital.
Relaxed regulations enabled Indian corporations to sell
securities and raise financing abroad with more ease.15
Further, the government lowered India’s import tariffs,
creating domestic competition which in turn compelled
corporations to access markets abroad.
Tanfman f va nvmn law Significant
reforms related to overseas investment have facilitated the
current wave of Indian outbound acquisitions.16 Starting in
early 2000, the Indian government took steps to overhaul
its foreign exchange regime.17 Enactment of these legal
reforms has been critical to the ability of Indian firms to
carry out outbound acquisitions.18
In June 2000, the government passed the Foreign ExchangeManagement Act (“FEMA”),19 making outward remittances
of overseas acquisitions possible.20 FEMA was heralded
as a great change in Indian law and facilitated the global
economic transformation of Indian firms.21 FEMA allows
quite a bit of flexibility to adapt to market conditions with
discretionary powers exercised by the government and
the Reserve Bank of India (“RBI”), India’s central bank.22
For example, the RBI has been able to continuously relax
regulations pertaining to joint ventures and wholly owned
subsidiaries.23 FEMA gives the RBI the power to specify
which capital account transactions are permissible and to
provide a limit on the amount of foreign exchange that will
be admissible.24
In March 2003, the government signif icantly revisedthe “Automatic Route” (i.e., without prior government
approval) for overseas investment.25 By 2010, Indian
firms were permitted to invest up to 400 percent of the
companies’ net worth.26 While the ability to invest up to
400 percent of an Indian company’s net worth is certainly
a benefit for conducting outbound M&A, it is also a
restriction on an Indian company’s investment activity
abroad.27 This limitation, along with an inability to pledge
Indian assets for guarantees or debt financing without RBI
approval (which is rarely given in practice), is an important
limitation on size and scope of outbound M&A from India.
As part of the legal reforms regarding foreign exchange,
the Indian government also liberalized the amount of
remittances that could be sent to India from foreign acquired
companies.28 These reforms allow Indian companies to
invest abroad either through the automatic route or with
the approval of the RBI.29 Interestingly, the number of
Indian banks establishing branches abroad has increased
with the rise of outbound M&A activity.30 Thus, Indian
corporations can “borrow offshore specifically for cross-
border investments and without government approval.”31
A glbal apal Although Indian multinationals
have engaged in numerous outbound acquisitions, the
vast majority of the transactions have been structured as
friendly, all-cash acquisitions of the target company, with
few using shares as consideration.32 Economic and business
incentives influence transaction structures, but they are not
the only determining factors. As discussed below, a number
of regulatory restrictions imposed by Indian law limit the
ability of Indian firms to acquire other firms by any means
other than all-cash transactions.33
The use of cash as the primary form of consideration is not
surprising because many of the largest Indian companies
are cash-rich.34 In addition to existing cash reserves and
relatively low leverage, some Indian firms have been able to
obtain additional cash from global capital markets because
of relaxed regulations that have allowed them to sell
securities and raise financing abroad.35
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Traditionally, access to capital has been significantly easier
for Indian firms outside of India. Some Indian firms have
been able to list on foreign exchanges to increase their
ability to raise debt.36 Indian firms have been able to use
American Depository Receipts to ease access to foreign
capital markets and to use Global Depository Receipts
to facilitate M&A activities in foreign markets.37 Banks
have also become somewhat comfortable funding Indianmultinationals’ cross-border M&A because of the growing
success of India’s outbound acquisitions.38
Indian law continues to placesignificant burdens on firms that attempt M&A transactions, whichmay drive Indian firms to undertakeacquisitions abroad and also may
limit their ability to be creativein undertaking diferent types o acquisition structures.
While Indian firms have been able to raise acquisition
financing abroad, they have faced difficulty in raising
acquisition financing in India due to regulations that restrict
the ability of Indian banks to provide acquisition financing.39
The RBI prevents banks from providing loans for the purchase
of shares to ensure the safety of Indian banks.40 The RBI
has allowed banks to provide financing for some outboundacquisitions, but these are subject to RBI guidelines and
require the bank to ensure that such acquisitions are beneficial
to the borrowing company.41 The RBI also prevents a bank’s
total exposure to the capital markets.42 These restrictions
“make it virtually impossible for a financial investor to finance
an LBO [leveraged buyout]” using an Indian bank.43 Thus,
most Indian multinationals who have used the LBO structure44
to raise bank financing use the laws of the jurisdiction of
the target company. Many Indian companies, including
Tata Tea, Tata Steel, UB Group, Suzlon Energy, Essar Steel
Holdings, and Tata Motors, have used LBOs in making foreign
acquisitions by setting up offshore special purpose vehicles
(“SPV”) and obtaining financing abroad.45
The typical structure is for the Indian acquirer to set up an
SPV by providing some equity financing and then to raise
large amounts in the SPV through senior debt and mezzanine
financing for which the target company’s assets will be
provided as security.46 Thus, Indian multinationals are able to
avail themselves of funding structures to carry out outbound
acquisitions that are not available for domestic acquisitions.47
Legal Rules Governing M&A Transactions
Indian law continues to place significant burdens on
firms that attempt M&A transactions, whether domestic
or outbound. Such burdens may drive Indian firms to
undertake acquisitions abroad to escape the confines of
Indian corporate law, and also may limit the ability of
Indian firms to be creative in undertaking different types
of acquisition structures.
Th Cmpan A Merger transactions in India are
governed by the Companies Act, 195648
which sets forth acomplex set of procedures in Sections 390–395.49 Indian
companies that aim to undertake a cross-border acquisition
using a merger structure may be subject to the rules of the
Companies Act, as well as the merger rules of the target
entity’s jurisdiction. The cumbersome merger process under
the Companies Act has come under criticism.50 Due to
the complexities involved in effecting a merger under the
Companies Act, outbound acquisitions using the merger
structure are rare.
Mg anan und h Cmpan A In order
to undertake a merger transaction, section 393 of theCompanies Act requires the acquirer to prepare a “scheme”
or “arrangement” of amalgamation. Under the Companies
Act, a merger is considered to be an arrangement made
between the company and its members.51 To effect a merger
each of the merging companies must submit an application
calling for a meeting of each company’s creditors and
shareholders to the relevant regional High Court with
jurisdiction over the company.52 Generally, the courts will
permit a single joint application for convening a meeting by
the two merging companies involved in the arrangement,
although the application will need to be f iled in court by
way of two separate petitions, one for each company.53
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The Companies Act requires that merger transactions be
approved by the shareholders of each constituent firm.54
Under the Companies Act, this would technically include
shareholders of both the acquiring Indian company and
the foreign target entity. In addition, creditor approval is
needed for any creditors of either of the merging firms.55
The Act requires class meetings for each of the classes
of shares, as well as each of the classes of creditors (e.g.,secured, unsecured, and trade).56 Under Section 391(2) of
the Companies Act, a majority representing three-fourths
in value of the creditors and shareholders of the company
present and voting at the meeting must vote in favor of the
transaction. Under some circumstances, however, the court
can dispense with the meeting.57
Overall, a merger process involves the shareholders of each
of the merging companies, the courts, and each company’s
creditors.58Thus, the merger approval process can be quite
lengthy, ranging from six months to one year.59 In addition,
“shareholder or creditor objections can significantlylengthen the process.”60 Some commentators have stated
that the court’s jurisdiction under Section 394 of the
Companies Act is supervisory; the court is not allowed to
second-guess the economic wisdom of the deal.61 While the
duties of the sanctioning court are largely procedural, the
sanctioning court can prevent a deal that runs contrary to
the public interest.62 Some commentators have argued that
this public interest test seems to have more strength when
a foreign company attempts to acquire an Indian f irm,
suggesting that the court is more comfortable with Indian
firms acquiring foreign assets.63 However, the courts have
not explicitly made such pronouncements to date.
With respect to merger transactions, the Companies Act
places severe restrictions on the surviving entity from the
merger transaction.64 A cross-border merger of a “foreign
body corporate” (foreign corporation) into an Indian
Company is permissible, but rare in practice. The cross-
border merger of an Indian company into a foreign body
corporate is not permissible under the Companies Act.65
However, an Indian company can merge with the Indian
establishment of a foreign company.66 The Companies Act
provisions governing amalgamation may apply to cross-
border amalgamations. Section 394(4)(b) of the CompaniesAct requires that the “transferee company” be a company
within the meaning of the Companies Act (i.e., an Indian
company); however, a “transferor company” may be any
body corporate, whether or not it is a company within the
meaning of the Companies Act. A “body corporate” is
defined in Section 2(7) of the Companies Act to include a
company incorporated outside India.
“A forward looking law on mergers
and amalgamations needs to alsorecognize that an Indian companyought to be permitted with a foreigncompany to merger. Both contract based mergers between an Indiancompany and a foreign company andcourt based mergers between suchentities where the foreign company is
the transferee, needs to be recognizedin Indian Law. The Committeerecognizes that this would requiresome pioneering work betweenvarious jurisdictions in which suchmergers and acquisitions are beingexecuted/created.”
Source: Ian Cmm Rp, 2005.
The Companies Act also imposes restrictions on an Indian
buyer when investing in a target company in excess of 60
percent of the buyer’s net worth or 100 percent of its free
reserves. In such transactions, under Section 372A of the
Companies Act, the buyer must receive prior shareholder
approval. This provision has been criticized by Indian
industry groups, including the Confederation of Indian
Industry, who note that such an approval requirement
“necessitates disclosure of vital details about the proposed
acquisition company to the shareholders, including the
price being paid. As a result, sensitive and confidential
information, which could be of critical importance tocompeting bidders, becomes available in the public domain
even prior to submitting a bid to the target company.”67
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Amp fm h Cmpan A Over the past
decade, the Ministry of Corporate Affairs (MCA) has
made several attempts to modernize India’s company law.
As a result of more than five years of comments and review,
a legislative overhaul of the Companies Act is currently
pending in the Indian Parliament.
The first significant effort to reform the Companies Actwas launched in December 2004 when the MCA convened
the Irani Committee, chaired by J.J. Irani, a director
of Tata Sons, Ltd.68 In its report, the Irani Committee
“observed that the process of mergers and acquisitions in
India is a court-driven, long and drawn-out process that
is problematic.”69 The committee recommended that the
merger process allow for:
• l (.., wh v),
• - M&A h wl p
I p p
v-v,
• I hhl v
l I h (pll l
p) h h wl h
p hl wh
h I.70
Despite publicity regarding the committee’s recommendations,
the Indian government has been unable to translate them
into legislation.71 The Companies (Amendment) Bill was
introduced in the Indian Parliament in October 2008,72
but failed to become law. In August 2009, the Companies
Bill, 200973
a duplicate of the earlier version, was introducedin the Lok Sabha (the lower house of parliament in India).74
However, passage has been deferred, and the Companies Bill is
expected to be further amended as a result of an August 2010
report by the Standing Committee on Finance of Parliament.75
While the Irani committee indicated that it would recommend
allowing transaction structures where a non-Indian company
could be the surviving entity, the government, in its proposed
amendment of the Act, “decided not to allow the merger of
Indian companies with foreign companies,” concluding that
“. . . merger of an Indian company with a foreign company
would lead to a situation where shareholders of the Indian
company hold shares . . . in the foreign company,” which thegovernment saw as a migration of an Indian company to other
jurisdictions.76 The Companies Bill, 2009 would also limit the
amount of step-down subsidiaries (subsidiaries of subsidiaries),
which would put Indian corporations at a disadvantage in
corporate structuring and effecting mergers and acquisitions.77
Th Takv Cd While the provisions of the Takeover
Code do not apply directly to outbound acquisitions, the code
has had significant indirect influence on Indian companies.
On the one hand, Indian firms launched outbound deals with
a deep understanding of the complexities of takeover rules,
since most Indian firms that undertook outbound M&A
gained considerable experience in M&A transactions generally
by first undertaking domestic acquisitions.78 On the otherhand, in part due to the Takeover Code’s extensive restrictions
on hostile acquisitions, Indian firms have been reluctant to
undertake hostile outbound acquisition.79
“Given that laws in India are not sympathetic to hostile takeovers,Indian firms until now have sought to make global acquisitions in a sot
manner, ater obtaining the buy-in o the potential target’s management.”
Source: India’s Global Powerhouses: How They Are Taking on the World.
The Indian Takeover Code has come under significant
criticism for its entrenchment of promoters (controlling
stockholders) and its failure to provide a market for
corporate control.80 The takeover regulations, initially
intended to create a market for corporate control, were
modeled after the takeover-friendly UK City Code of
Takeover and Mergers (“UK City Code”).81 Although the
Securities and Exchange Board of India (“SEBI”) modeledthe Takeover Code after the UK City Code, it diverges
from its predecessor in some important aspects and in its
practical effect.82 The UK City Code is generally known
to be takeover-friendly because of its strong inclination
to protect shareholder interests while deprioritizing
management entrenchment.83 In contrast, India’s Takeover
Code has a distinct bias towards entrenched management
and controlling shareholders.84 The Takeover Code allows
several methods through which controlling shareholders
can “consolidate their holdings and successfully resist”
a takeover.85 For example, despite the mandatory offer
requirements under the code, the Takeover Code permits
“creeping acquisitions” by holders of a company’s stock,
so long as they hold between 15 percent and 55 percent of
the company’s shares.86 The creeping acquisition provision
in the Takeover Code allows such shareholders to acquire
up to 5 percent of the company’s stock each year without
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making an open offer.87 That provision is especially useful
to promoters because it allows them to slowly increase their
shareholdings (and as a corollary, their control over the
corporation) by up to 5 percent each year without having to
pay any premium for these shares.
As a result of the Takeover Code’s substantial restrictions
on hostile takeovers, Indian firms have generally beenunfamiliar with this acquisition route.88 While Indian
multinationals have signif icant experience in domestic
M&A activity, almost all of these transactions have been
friendly deals.89
Of course, legal restrictions on hostile takeovers are not
the sole reason for the reluctance of Indian multinationals
to engage in hostile takeover activity. Some Indian M&A
experts have expressed the view that culture plays as
significant a role in the dearth of hostile takeover activity.90
According to these experts, Indian firms did not want to
be tainted with the hostile acquirer label and felt that theycould achieve their acquisition goals more efficiently by
persuading the target’s management to come to the table.
Lman n k-wap anan India’s complex
regulatory regime has led to much difficulty for Indian
firms that use shares as consideration in an acquisition
(i.e., a stock swap transaction).91 Instead, Indian firms are
relegated primarily to using cash as consideration.92 As
opposed to cash deals, stock-swap deals are more difficult
and risky to implement because of the significant role
of the government in such deals.93 Lawyers involved in
Indian firms’ outbound M&A consistently agree that the
need for such approval and valuation has led to significant
regulatory uncertainty in stock-swap deals.94 In the long
term, it is neither desirable nor sustainable for Indian firms
to continue to use solely cash in outbound acquisitions.95
Under Section 81(1A) of the Companies Act, in a stock-
swap transaction, the Indian acquirer would need to pass a
special resolution permitting the issuance of shares to the
shareholders of the foreign target.96 A publicly listed Indian
firm issuing shares in an acquisition transaction may also
trigger certain disclosure obligations under the Takeover
Code and risks triggering the public offer provisions of the
code in the event of the issuance of securities over a certain
amount.97 Publicly listed Indian acquirers using shares
may also be subject to the SEBI (Disclosure and Investor
Protection) Guidelines, 2000 (“SEBI DIP Guidelines”)
regarding pricing.98
Acquisition by swapping the equity shares of a foreign
target for the shares of an Indian company may also require
approval from the RBI and, for some deals, the Foreign
Investment and Promotion Board (“FIPB”).99 For example,
under Regulation 7 of the Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident Outside
India) Regulations, 2000 (“FEMA regulations”), once the
relevant court has approved the merger transaction, theacquirer may issue shares to the shareholders of the target
entity who are not Indian residents, subject to the condition
that the percentage of nonresident holdings in the acquiring
company does not exceed the limits for which approval has
been granted by the Reserve Bank of India (RBI) or the
prescribed sectoral ceiling under the foreign direct investmen
(FDI) policy set under the FEMA regulations.100 If the
new share allotment exceeds such limits, the company will
have to obtain the prior approval of the FIPB and the RBI
before issuing shares to the nonresidents.101 However, foreign
investments in sectors or activities that may use the RBI’s
automatic route do not require prior approval of the FIPB.102
Irrespective of the amount, transferring shares to
nonresidents of India is an incredibly arduous process
that involves the need to obtain valuation of the shares
along with approval of the RBI (even when these powers
have been delegated to an authorized dealer — a bank
authorized to deal in foreign exchange).103 The authorized
dealer must be a merchant banker registered with SEBI or
an investment banker or merchant banker outside India
registered with the appropriate authority (irrespective of
the amount).104
Despite the rapid liberalization of the Indian foreign
investment regime in the early 1990s, impediments to FDI
still exist in certain sectors in the Indian economy.105 Under
these FDI limitations, persons residing outside of India and
foreign corporations may only own or control up to a certain
percentage of Indian corporations operating in identified
sectors.106 Specifically, FDI sectoral caps have been in place
for “defen[s]e production, air transport services, ground
handling services, asset reconstruction companies, private
sector banking, broadcasting, commodity exchanges,
credit information companies, insurance, print media,
telecommunications, and satellites.”107 The FIPB, whichformulates foreign investment policy, and the RBI are the
primary regulatory authorities charged with implementing
and enforcing these FDI limitations.108
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The FDI caps limit the structure of acquisition transactions
for Indian firms and their ability to use their own shares
as consideration in overseas acquisitions.109 The Ministry
of Commerce and Industry’s 2011 Consolidated FDI
policy provides that “[t]he transfer of capital instruments
of companies engaged in [the above mentioned sectors]
from residents to non-residents by way of sale or otherwise
requires Government approval followed by permissionfrom RBI.”110 Thus, Indian corporations subject to these
regulatory hurdles and that are interested in overseas
acquisitions must either obtain regulatory approval to use
their shares as consideration for such transactions, limit
the use of their shares in these transactions so as not to
run afoul of the FDI caps, establish overseas subsidiaries
to facilitate such acquisitions, or resort to cash deals.
Certainly, these considerations have a deep impact on
the transaction structures that Indian corporations may
employ in foreign acquisitions.
Cmpn A f 2002 The Competition Act of 2002also mandates merger regulation. Section 32 of the
Competition Act expressly provides for extra-territorial
reach of the statute. Any anticompetitive activity taking
place outside India but having an appreciable adverse
effect on competition within India will be subject to its
application.
In March 2011 the MCA issued notice that sections 5, 6, 20,
29, 30, and 31 of the Competition Act, dealing with merger
control, will be enforced beginning June 1, 2011.111 These
sections regulate combinations, statutorily defined in
section 5 as an acquisition if:112
• h p h h $500 ll
h v h $1500 ll;
• h wl hv vl v $2 ll
v v $6 ll;
• p k p l h
l p p,
, ll h
h p h p h v
$500 ll v h $1500 ll,
h wl vl v $2 ll
v v $6 ll.
Following complaints that these numbers are too low, the
MCA responded by enhancing the thresholds by 50 percent.113
The MCA has further modif ied the scope of the Competition
Act of 2002 in regulating combinations. Any acquisition of
a target company with approximately $55 million or less in
assets, or $165 million or less in turnover, is exempt from being
classified as a combination for a period of five years.114 Groups
with less than 50 percent of voting rights in an enterprise arealso exempt from triggering the regulations for five years.115
Under the Competition Act, regulators have committed
to resolving reviews of applications within an outside
date of 210 days. The timing provisions have come under
criticism from deal-makers concerned about the delay
these regulations would cause, especially for time-sensitive
deals.116 The draft regulations combat time sensitivity issues
in three ways: 1) companies can informally consult with the
Competition Commission 2) mergers that are not likely to
distort the market can use a shorter process to get approval
within 30 days and 3) the Competition Commission willendeavor to come to a decision within 180 days instead of
the 210 day limit.117
Conclusion
The transformation of Indian law following the
liberalization period has substantially contributed to the
growth of Indian multinationals. Legal reforms since
economic liberalization have not only set the stage for
outbound acquisitions, they have also shaped outbound
acquisitions in terms of transaction structure and size.
While the internationalization of Indian firms is expectedto grow, Indian law may need further reform to allow
Indian firms to achieve their M&A goals. Some of the
current legal constraints on M&A activity by Indian f irms,
such as roadblocks in their ability to carry out cross-border
stock swap transactions, impose substantial restrictions
not only on the methods used by Indian multinationals
in pursuing outbound acquisitions but also on the future
potential of Indian multinationals.
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Endn
S D. N, “T Iz F I: Iv,M A,” Oxford Dev . Stud . , - (); NK, “I U,” Bus. Strategy Rev . 8, 13 (2009) [ K,“I U”].
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pp_.p. S, e.g., R G, “I I. G Spp,” E W Mk:
I, F , , v ..//GTC//I/Pv%/GT_TD_EI_F.p ( M&A v I); A G,“C Tkv: I Ep v E P,” Int’l Herald Trib.,F. , ( j v T Gp’ A-D, C); A O’C, “I’ F — O Bk O Sp W, Times (L), J , , 4 ( xp I p UK W k); D W,“T Ep Sk Bk; T T D,” Times (L), M , ( T Gp’ T).
4 S , e.g., J.P. P, “I M W E:Ip Dvp” (). T v M&A I p p - M&A v, p vp . S O-KHp, W B. T, & Dk V, “T C P: W DF Dvp C B H?” (J. , ) (pp), v ./=.
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Bus. Line, J. , , ../////.) ; “K T M&A ,”Hindu Bus. Line, D. , , ..////
/4.; “R C D S MPv E D: E&Y,” Hindu Bus. Line, M , , ../////..
N K, “H E G A R R M&A,”Harvard Business Review , M , , .
S, .., G, p , .
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S N K Pp K. Mp & Sj Ck,“I’ G P: H T A Tk W” , -4() [ G P].; Rv R & J V. S,“I M: G Iz S,” EM E Mk 110, 115 (Rv R & J V.S ., ); Jø D P, “P F B R I M Ep: A E P E,” T R O
I M , - (K P. Sv . ., ., ).4 J A & P L, “L, F, P: T C I,” 4
Law & Soc’y Rev . 4, ().
S S & A I, “A F I,” Global
Securitisation And Structured Finance , (), v ../_GBP/GBP_GSSF___I.p.
F pv p p v v, SGp, Dp Gv, Rv Bk I, “Ov Iv I Cp: Ev P T,” K A I C I C-B P/A (J., ), v ../v/.p.
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N Dp, “I Cp Iv U S: AI R P T,” J Pk P & K P.Sv, “I: T R I M Ep: RvK I,” “T R I M” (K P. Sv . ., .,) [, T R I M], , 4.
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S S Tk D, “F P R: A A F.E.M.A. ,” Chemical Bus., M. , ; S K. Mj,“I T: Pp R R C S F F I,” India Rev . , ().
K. R, Op-E, “FEMA: F ‘R’ ‘F’ Exp,” Hindu
Bus. Line, M , , ../////..; “B Sp F ,” Bus. Asia, Sp. ,, , .
S Pk R, “C B M A I Sp R FEMA” (p p), v .x./x/--_..
4 T F Ex M A, , N. 4, A P, (I) v ../_/p__/p_k_v/FEMA__.p.
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Ex E’ F C ADR/GDR. S .
S M N J, P K & A., “C B M A: T L Lp” (), .pk.//CROSS%BORDER%MERGERS%&%ACQUISITIONS.pp.
S E. I U, C C I 56-57 (T E .., ).
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S, .., A K, “D V I A E E F: T C I F” -4 (Uv. M.,Wk Pp N. 4, ), v ./=( I p k p); “H I Cp F T O v A,”India Knowledge@Wharton. (D. 4, ), k..p./
/.?=4 (“Uk M& A p k p , I v p p , p .”)
S E & Y Pv. L. & F’ O I C O C &I., “I C T Ep, Cp G A Tx Rv IT US” () [ E & Y L. & FICCI], v ./EY-FICCI-Rp--v-US-I.p .
4 S N K, “H E G A R R M&A,”Harv. Bus. Rev ., M , .
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Endn (continued)
S D Rjp & S Pk, I Lk O: C-B M&A I Cp — C C, North American Free Trade
& Investment Report 3-5 (); K, p , .
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S . -. “‘Dp Rp’ (DR)
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“W G App F, M P P Mk E,” Econ. Times,J 4, , ..//44..
S & I, p .
4 N Ck, “C F Ex Lv B I Ev G B” , (Ap. , ) (pp), v 4.../k//Ck.p.
4 I. .
4 I. .
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Today , J./F. , , -. T I p LBO S C p A, p p pv .H, I p pv p LBO , k LBO p I.
4 S “C B: T M G Lv B,” Econ. Times, O., , ..//4.; “EG Tk Lv B R A B,” Econ. Times, Ap., , . ./N/N-B-Cp/E-Cp/E-Gp/E-G--k-v----A-//.?p=; “I I’ L LvB C,” Hindu Bus. Line, J , , ..
/////.; “H I Cp FT Ov A,” India Knowledge@Wharton. (D. 4, )
4 S “D A F F H,” Fin. Express, J. ,, .xp.//----/4/.
4 T xp pv v I k . S .
4 T Cp A, N. , I C (). F vv p vv Cp A, A S. J, “M A I: A P,” Mich. Bus. L.J.,S , 4, 4-.
4 T Cp A. I, Cp A . T Cp A, § -. F pp pp, .
Sp M ., “M A T I,”M, O’Mv & M LLP, F , v ..//p/MA%T%%A.p
A “” z p p , v , . TCp A, § . T v p p p .
S N D A., “M A I” (F. )(p p), v ../R_Pp/MA%Pp%.p.
S Av S, Cp L ( . ).
4 T Cp A, § - (pv k p pv p).
J, p 4, 4.
S S D & A., “J V M A I— L Tx Ap” ().
I. -.
J, p 4, 44-4.
S G L Gp., “T I Cpv L G : M A” 2009, (), v ...k/x.pp?=4&_=&k_p_=&p_=4.p.
S J. M, “H Tkv I: N Pp, C, R Opp,” Colum. Bus. L. Rev . 800, 806 . (2007).
S Rv S & Rjv V, “L R C B MU Cp A ,” 1956, SEBI Corp. L. (), v pp..//pp.?_=; Av S, CpL - ( . ); “M A T I”M Sp M ., 4 ( “[] p p p,” p v ).
S S & V , p , -.
I. -.
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N D A., p , ; Moschip Semiconductor
Technology , (4) C.L.A. 4 (A P H.C.) (I). I Mp, vv I p C p, A P H C, , CCp C pv I , vvp p p. T , v, “ z, v xp k p p v , v, .”
S S D & A., p , .
C I I, P R, “N R F Ov A” (F , ) v ../PD.px?=pZ/vGARMZHHA==.
J J. I ., Exp C. C. L, Rp Exp
C Av Gv N Cp L ()[ I Rp], v .p./p/JJ%I%Rp-MCA.p. I vxp, p v p, p pz, v. I. -4, .
Aj, p 4, .
S I Rp, p , . X, p. -.
Uk V, “Cp B R P,” I Cp. L.B ,A. 4, , :44 PM, p.p.///p---. [ Cp B R].
“B I Mz S Cp R T C,”P R, M Cp A (I), O. , , v .p..//.p?=444.
S Cp B (), v ..v./M/_.; “Cp B I Lk S,” P R,
M Cp A, Gv I, A. , , v .p..//.p?=
4 S Ck R & Av C, Lv B: T Cp B,, PRS Lv R, A. , , v .p./p//Cp/Lv%B--p%%.p.
S S C F (-), F Lk S, TCp B, , T-F Rp A ; Uk V,“P S C Cp B, ,” ICp. L. B Sp. , , : PM, p.p.///p---..
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.. Director Notes outbound mergers and acquisitions by indian firms
Endn (continued)
Uk V, “C B M,” I Cp. L. B, Sp. , ,:4 AM, p.p.///--..
Cj Bj, “Cp B M Hp S,” Econ. Times, F.4, v .../--4//__-p---p.
S N K Pp K. Mp & Sj Ck,“I’ G P: H T A Tk W” , 4- ()
[ G P]. S . .
S C Pp, J Bj , “T Mk Cp C:Tkv R I,” Ox’ Q Ez H C (J4–, ), ..x..k//-pp/j.p( v kv p), 4-.
T C C Tkv M . . ( . ); M,p , .
S M, supra , ; Bj, p , -.
S J A & Dv A. Sk, J., “W W R HTkv, W? — T P Dv US U.K. TkvR,” 95 Geo. L.J. 1727, 1729 (2007).
4 S Bj, p , -; M K T, I TkvC: I S Ex (A C S App) (Ap. ,) (p p), v ...4/p//pp/4/4.p p.
J A, Jk B. J & C J. Mp, “T Ev HTkv R Dvp E Mk: A AFk,” Harv. Int’l L.J. , ().
S Ex B I (S A S Tkv) R, , Gz I, III() (F. , )[ Tkv C], v ..v.//..
I § .
S G P, p , .
S .
S A C, “I I. R H Tkv”, Fin. Express, J , , .xp.//-----kv/4/; “R M&A G : H Tkv P P,” T F, J , , ../_.pp?=4.
A k p p , p , . I , I v p j . S Rv Bk I , “FAQ Ov D Iv,”.../p/FAQV.px?I= ( ) /k p .
S E & Y L. & FICCI, p , .
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A, R, P N, P R, C, .C FDI P, p , .
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Express, J , , .xp.//---p--&--/4/.
S E & Y L. & FICCI, p , .
T Cp A, N. , I C ().
S N D A., p , -; Uk V,“Dp Rp Tkv R,” I Cp. L. B ( J, , : PM), p.p.///p-p--kv..
S S Gp, N, “F A: Tk I G”,India L.J., Ap.–J , .j./v/_/__ .. T v SEBIDIP G, . S “HHp M&A,” Int’l Fin. L. Rev., M , , ../A/4/H-p--M-A. ; G, p .
S S D & A., p -. U R FEMA, v ppv , Cp A, -I p j p p x ppv RBI p FDI p FEMA . I v x , ppv FIPB RBI . S Aj, p 4, .
Aj, p 4, .
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I.
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v k k pz p. S RBI M C, p , -.
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Cp A (I), M , v ..v./M//p/N_4%%.p
Cp A, v ..v./M//p/T_p_A_.p
S R. G & R R, “T Up, W T L: MS U Cp A,” Econ. Times, M. , v ../p/-p-------p-//4.; NM Cp A (I), M , v ..v./M//p/N_4%4%.p.
4 S p ; N, M Cp A (I),M , v ..v./M//p/N_4.p.
S p ; N, M Cp A (I),M , v ..v./M//p/N_4%%.p.
I.
I.
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About the AuthorAfra Afsharipour is Assistant Professor of Law at University of
California, Davis School of Law. Professor Afsharipour conducts
research on comparative corporate law, corporate governance,
corporate social responsibility, mergers and acquisitions, and transac-
tional law. Prior to joining the Davis faculty, Professor Afsharipour wasan associate in the corporate department of Davis Polk & Wardwell,
where she advised clients on domestic and cross-border mergers and
acquisitions, public and private securities offerings, and corporate gov-
ernance and compliance matters. She also served as a law clerk to the
Honorable Rosemary Barkett of the Eleventh Circuit Court of Appeals.
She received a J.D. from Columbia Law School and a B.A. from Cornell
University. Professor Afsharipour’s scholarship has appeared in a num-
ber of law reviews, including the Columbia Law Review, the Vanderbilt
Law Review , the UC Davis Law Review , and the Northwestern Journal of
International Law and Business. In addition, Professor Afsharipour is a
contributing editor at the M&A Law Prof Blog.
Editor’s Note: Portions of this Director Notes have been adapted fromAfsharipour’s prior article, “Rising Multinationals: Law and the Evolution
of Outbound Acquisitions by Indian Companies,” 44 U.C. Davis Law
Review 1029 (2011).
AcknowledgmentsThe author is grateful to Khalil Mohseni for invaluable research
assistance.
About Director NotesDirector Notes is a series of online publications in which The
Conference Board engages experts from several disciplines of busi-
ness leadership, including corporate governance, risk oversight, and
sustainability, in an open dialogue about topical issues of concern to
member companies. The opinions expressed in this report are thoseof the author(s) only and do not necessarily reflect the views of The
Conference Board. The Conference Board makes no representation
as to the accuracy and completeness of the content. This report is not
intended to provide legal advice with respect to any particular situation
and no legal or business decision should be based solely on its content
About the Series DirectorMatteo Tonello is the research director of corporate leadership at The
Conference Board in New York. In his role, Tonello advises members of
The Conference Board on matters of corporate governance, regulatory
compliance, and risk management. He regularly conducts analyses
and research in these areas in collaboration with leading corporations,
institutional investors, and professional firms. Also, he participates as
a speaker and moderator in educational programs on governance best
practices. Recently, Tonello served as the co-chair of The Conference
Board’s Expert Committee on Shareholder Activism and as a member
of the Technical Advisory Group to The Conference Board Task Force
on Executive Compensation. Before joining The Conference Board, he
practiced corporate law at Davis Polk & Wardwell. Tonello is a graduate
of Harvard Law School and the University of Bologna.
About The Conference Board
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