Corporate M&A 2025 Comparisons

A significant rise in deal value and volume has led to 2024 being viewed as another year of resurgence for M&A activity in India. Total deal value in the first nine months of 2024 stood at USD69.2 billion, which is a 13.8% increase when compared to the same period in 2023. In terms of deal volume, there were 2,301 transactions between January and September 2024, compared to 1,855 transactions in the first nine months of 2023. Consequently, India’s foreign investment inflow rose to USD88 billion in 2024 (a 10% increase from 2023), with the M&A market contributing significantly to the inflow. (Source: Business Standard)

Domestic deal making and outbound investment have contributed significantly to the growth of the market, when compared to previous years. 2024 saw sector-specific consolidation by Indian conglomerates and also the acquisition of overseas assets. Several “marquee” deals (see 1.2 Key Trends) also contributed to the continued resurgence of M&A activity.

“Second sourcing” and a general diversification of supply chains has bolstered India’s ambitions of being a preferred hub for manufacturing across sectors. Factors like government policies promoting domestic manufacturing, growing demand for auto components and EVs, and a positive investment climate have also contributed to a rise in deal-making. On the technology front, AI, blockchain and cryptocurrency are expected to contribute significantly to M&A activity in India.

Recognising the interest shown by foreign-domiciled but India-focused start-ups in “reverse” flipping their holding back to India, a regulation was introduced in late 2024 to simplify the process and remove regulatory roadblocks. 

Despite macroeconomic headwinds, regulatory foresight and investor optimism is likely to fuel another 12 months of growth in India.

Sector-Specific Consolidation

Several of the “marquee” deals of 2024 had a strong undercurrent of consolidation. While most deals in 2023 were led by mid-market buyers, 2024 saw India’s largest conglomerates (across sectors) taking the lead and contributing significantly to the increase in deal value. The most notable consolidation driven deals of 2024 were:

• the Reliance-Disney merger, valued at USD8.5 billion, creating the largest media and entertainment company in India;
• Ambuja Cement’s acquisition of Penna Cements for USD1.25 billion, which has further strengthened the Adani Group’s position in the sector; and
• Mankind Pharma’s acquisition of Bharat Serums and Vaccines Limited for USD1.642 billion, which expanded its product portfolio in critical care and reproductive health.

Sector-Focussed Investments by PE and VC Firms

In 2024, PE/VC activity was concentrated around five to six sectors, with infrastructure, financial services, real estate, e-commerce, technology and life sciences collectively accounting for 80% of total PE/VC investments by value and 66% by deal volume.

Infrastructure led with USD12.1 billion in investment, slightly down from USD13 billion in 2023, accounting for 22% of overall investments during the year. Financial services recorded USD9 billion, a 41% year-on-year growth. Real estate followed closely, with USD8.8 billion. Among other traditionally PE/VC friendly sectors, technology saw a remarkable 56% growth, reaching USD6 billion, while e-commerce galloped to 87%, totalling USD4.6 billion. However, the life sciences sector experienced a 31% decline, with investments falling from USD6.2 billion in 2023 to USD4.3 billion in 2024 (Source: EY)

Outbound M&A Activity

Driven by strong balance sheets and capital availability among legacy and new-age companies, outbound M&A activity made 2024 a milestone year for Indian corporate investments overseas. During the last quarter of 2024, outbound deals marked a ten-year high in terms of volume, with 35 M&A transactions worth USD5.3 billion, according to Grant Thornton’s Dealtracker report. By the end of 2024, Indian companies had completed more than 100 M&A transactions, with the USA and Europe seeing the bulk of the activity. Deal activity appears to be broad-based and led by mid-market firms. However, Bharti Airtel’s acquisition of a 24.5% stake in BT Group for USD4.08 billion and Oyo’s acquisition of the budget motel chain Motel 6 for USD525 million are indicative of the ambitions of both legacy and new-age business.

India’s IT and IT-enabled services sector leads the M&A landscape, accounting for 21.0% of all acquisitions. India’s rapid digital transformation and the increasing demand for technology driven solutions is a significant driver of growth.

Fintech and financial services represents 9.3% of M&A activity, with e-commerce a close third at 8.7%. Increased digital payments, mobile commerce and tech-enabled financial services are change-agents for these sectors. PE firms, in particular, are focusing on high-growth tech companies with strong expansion potential.

Energy and natural resources (8.6%) and healthcare/life sciences (7.8%) also saw substantial M&A activity. Both sectors are poised for long-term growth, aligning with global trends toward clean energy solutions and advancements in biopharma.

Foreign investment into Indian generative AI start-ups continues to gather steam. AI start-up Krutrim and fintech firm Perfios became India’s first AI start-ups to attain unicorn status in 2024. Investment in the sector was further bolstered by the government of India’s USD1.24 billion funding package to launch its IndiaAI Mission and USD10 billion semiconductor scheme.

Usually, acquisitions are consummated by purchase of existing shares or issuance of new shares to the acquirer. Consideration for such acquisitions may be cash or non-cash, with stock swap being one of the common modes for discharging non-cash consideration.

Alternatively, where an investor proposes to acquire only a division or business unit of the target, transfer of assets or undertaking (also known as a slump sale) of the business is also adopted. Lastly, in certain cases, the National Company Law Tribunal approved mergers which are implemented for acquisition, however, such tribunal mergers take much longer to complete than share acquisitions.

There is no single regulator that governs M&A activity in India. The jurisdiction of regulators depends on various factors, such as the structure of the transaction, the sector in which the target operates, whether the target is publicly traded and the identity of the acquirer.

Key laws and regulations governing M&A activity are:

• the Companies Act, 2013 (the “Act”), Limited Liability Partnership Act, 2008, and the Indian Partnership Act, 1932, which govern companies, limited liability partnerships and partnership firms, respectively;
• the Indian Contract Act, 1872, which governs aspects of contractual relationships in M&A deal activities;
• the Foreign Exchange Management Act, 1999, which governs aspects of foreign exchange control in Indian M&A;
• the Income Tax Act, 1961, which governs aspects of taxation in relation to Indian M&A deal activities;
• the Goods and Services Tax Act, 2017, which applies to the sale of assets; and
• the Competition Act, 2002 (as amended) (the “Competition Act”), which governs competition law aspects of M&A deals.

The principal regulators governing the Indian M&A landscape are:

• the Securities Exchange Board of India; (SEBI)
• the Reserve Bank of India;
• the Registrar of Companies under Ministry of Corporate Affairs;
• the National Company Law Tribunal (NCLT)
• the Competition Commission of India (CCI);
• the Central Board of Direct Taxes/Income tax department;
• the Central Board of Indirect Taxes and Customs/GST department;
• the Department for Promotion of Industry and Internal Trade under the Ministry of Commerce and Industry;
• stock exchanges, eg, the Bombay Stock Exchange or the National Stock Exchange; and
• specific regulators, eg, the Insurance Regulatory and Development Authority of India, Telecom Regulatory Authority of India, and the National Housing Board.

India is still not a fully capital convertible economy and, with respect to cross-border acquisitions, conditions exist that regulate pricing of equity shares, the nature of equity instruments, the percentage stake that can be acquired by foreign investors, the quantum of consideration that can be deferred, etc. A brief overview of India’s foreign investments regime is set out below.

Routes

Foreign investment in India is permitted through two main routes: the “automatic route” where no governmental approval is required, and the “approval route”, where prior approval of the government is required as a pre-condition to making the foreign investment. Typically, government approval is required where there are sensitive sectors such as media, defence and banking.

Sectoral Caps

Certain sectors have been restricted from any form of foreign investment such as lottery, gambling and cigarettes. In other sensitive sectors like defence or media, foreign investors are permitted to hold up to a certain percentage of the Indian entities’ equity capital.

Pricing Guidelines

Foreign investment in India is also subject to pricing guidelines which mandate that a foreign investor must pay a price that is higher than the fair value of the target.

Foreign Investment from Neighbouring Countries

Foreign investment from entities or beneficial owners of such foreign investment that are situated or citizens of a country that shares a land border with India would require prior approval of the government as a pre-condition to the investment. The said rule also restricts transfer of ownership of any existing investment in India to such entities or beneficial owners.

In India, business combinations are primarily governed by the Competition Act and the relevant regulations framed thereunder.

A “Combination” for the purposes of the Competition Act means the acquisition of control, shares, voting rights or assets, or merger or amalgamation exceeding the “financial thresholds”, based on the asset value and turnover of the parties/group (“Financial Thresholds”) or the deal value thresholds (DVT) (based on the value of the transaction).

If any of the tests prescribed under the Financial Thresholds or the DVT are met, the proposed transaction will qualify as a “Combination” and require the approval of the CCI, unless the notifying party can take advantage of any of the exemptions provided in the Competition Act or the rules framed thereunder (“Exemptions”).

DVT

A proposed transaction which is not notifiable to the CCI based on the Financial Thresholds would require notification to and approval from the CCI if: (i) the value of the proposed transaction exceeds INR2,000 crores (USD237.59 million); and (ii) the target has “substantial business operations in India” (SBOI). The CCI has also prescribed the methodology for assessing the value of the transaction and scope of SBOI.

De Minimis Exemption

A proposed transaction will not require notification to and approval from the CCI if the target has either a consolidated asset value not exceeding INR450 crores (USD53.46 million) in India or a turnover not exceeding INR1,250 crores (USD148.49 million) in India (referred to as the “De Minimis Exemption”). The De Minimis Exemption will not be applicable if the DVT is breached.

Exemption Under the Competition Act

The Competition Act and the rules framed thereunder also provide exemptions from notification to the CCI if the transaction is pursuant to any covenant of a loan/investment agreement by a public financial institution, SEBI-registered foreign portfolio investor, bank or SEBI-registered Category I alternative investment fund, or if the acquisition is of not more than 25% of shares or voting rights and qualifies as “solely as an investment”. Additionally, certain creeping acquisitions and acquisitions of assets, inter-alia relating to the acquisition of current assets which do not constitute the business of the target, are also exempted. Acquisitions pursuant to corporate actions which are applicable to all shareholders, such as rights issue, bonus issue, stock split, are also exempt provided that such acquisitions do not result in a change in control of the target. Lastly, intra-group transactions (not resulting in change of control of the target) and demergers where the resulting company issues shares to the demerged company (or its shareholders) in proportion to their existing shareholding in the demerged company are also exempt.

Depending on, inter alia, the acquisition structure and nature of the workforce, M&A transactions can trigger the applicability of several Indian labour laws. The key extant labour laws relevant for an acquirer would be:

• the laws governing conditions of service and employment including worker disputes, such as the Industrial Disputes Act, 1947 and state-specific shops and commercial establishments acts;
• the laws governing defined benefits and defined contributions for employee social security such as Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, Payment of Gratuity Act, 1972 and Employees’ State Insurance Act, 1948; and
• the laws governing pre- and post-maternity benefits for women, ie, the Maternity Benefit Act, 1961.

Based on the sector, industry and nature of the target, specific laws may also apply, such as the Factories Act, 1948, which is applicable to manufacturing facilities.

To ensure statutory and contractual wage-pay sufficiency as part of the acquisition transactions, acquirers must ensure that a thorough assessment of existing employee welfare measures and benefits under applicable labour laws is undertaken. Workforce-centric legal and financial diligences are recommended pre-acquisition to understand the general health of compliance, including correctness of compensation structures and potential shortfalls in social security contributions.

Transactions involving the acquisition of entire business undertakings, or cherry-picked assets including employees, need to be carefully structured, keeping in mind considerations such as employee consent, recognition of service continuity and payment of adequate compensation for employees refusing their transfer. Defects in payments in certain cases can result in liabilities being passed on to the acquirer. Transactions with labour union involvement may be contingent on discussions with labour union representatives and provisions under collective bargaining agreements, if any.

While the Indian Parliament has passed four new labour codes (ie, the Code on Social Security, 2020; the Occupational Safety, Health and Working Conditions Code, 2020; the Industrial Relations Code, 2020; and the Code on Wages, 2019), which consolidate 29 existing central Indian labour statutes, the same are yet to be brought into effect. The labour codes are anticipated to be harmonised and in effect by the third quarter of 2025. Acquirers should monitor these developments closely to ensure full compliance with the evolving labour regulatory landscape.

Acquisitions and investments in certain sensitive sectors above the prescribed thresholds (eg, defence and ground handling services under civil aviation) are subject to a national security review. Additionally, any investments from countries sharing land borders with India (more particularly set forth in 2.3 Restrictions on Foreign Investments) are also subject to a national security review. Additionally, directors from countries which share a land border with India are also required to obtain security clearance before they are appointed to the board of Indian companies.

Delisting Regulations

SEBI has introduced the fixed price method for delisting publicly traded companies. Multiple “take privates” have failed over the years due to arbitrageurs demanding a high premium over the ruling market price which was discovered through the reverse book build process. SEBI recognised that this was detrimental to overall dealmaking and has introduced the concept of offering a fixed price for delisting publicly traded companies.

Government Notifies Changes to Indian Merger Control Regime

In September 2024, the Indian merger control regime was revamped after amendments were introduced to the Competition Act and the underlying regulations.

The key amendments are:

• the introduction of DVT (as explained in 2.4 Antitrust Regulations);
• the codification of “material influence” as a standard for control in addition to de facto and de jure control;
• the implementation of open offers or on-market purchases pending CCI approval subject to certain conditions;
• the imposition of a penalty of up to 1% of the deal value of the combination on the notifying party for gun jumping; and 
• the imposition of a penalty for making false statements or omitting material facts in the notification form, increased to INR5 (approximately USD593,965) from INR1 crore (approximately USD118,793).

Company Laws Amended to Allow Fast-Track Cross-Border Mergers

Rules governing compromises, arrangements and amalgamations in India have been amended to permit fast-track cross-border mergers instead of going through the lengthy (pre-amendment) NCLT-approval process. This amendment facilitates “reverse flipping” by merging foreign holding companies with and into their Indian wholly-owned subsidiaries subject to certain conditions. Offshore entities can look to seamlessly relocate to India and consolidate value in the parent company in India with the goal of tapping into the booming IPO markets.

Special Rights Under the Listing Regulations

In an attempt to enforce governance and disclosure standards for listed entities, SEBI introduced an amendment in 2023 to disclose and approve any special rights granted to the shareholders of listed entities. In terms of the Listing Regulations, it is now mandatory to disclose any special rights (including but not limited to director nomination rights, drag, tag, right of first refusal) available to any person in a listed entity and also seek shareholder approval by way of a special resolution once every five years for such rights.

While there have not been any significant amendments to takeover law in 2024, SEBI acknowledged the issue with the corruption of open offer pricing due to the leak of unpublished price-sensitive information and, accordingly, has legislated that the price movement on account of any confirmation of the reported event or information will be disregarded in computing open offer prices.

Stakebuilding is relevant in the context of a listed entity in India. It is not customary, primarily for the following two reasons.

• Indian capital markets are open to only certain categories of investors. For example, registered foreign portfolio investors are permitted to acquire shares on the market (whereas FDI investors are not permitted unless they are already in control of the listed target). Additionally, the maximum holding of an FPI in a listed company is limited to 9.9%.
• Generally, promoters (controlling shareholders) hold a significant stake in Indian listed companies leading to a situation where investors may not be able to acquire a meaningful stake without entering bilateral discussions with the promoters. Accordingly, stakebuilding is typically facilitated by negotiations and discussions between an acquirer and the promoters.

As explained in more detail in Section 6. Structuring, a requirement to make a public offer is triggered upon an initial acquisition of shares or voting rights of 25% or more in a listed company. However, any acquisition by a prospective acquirer in the 52 weeks preceding the tender offer affects the offer price if consummated at a price higher than the offer price. Additionally, if any acquirer holds 25% or more voting rights in a listed company, any acquisition of more than 5% voting rights by such acquirer in a financial year triggers an obligation to make a tender offer – such acquisition is referred to as the creeping acquisition route and acquirers can acquire 4.9% every financial year (without triggering an open offer) as one of the stakebuilding strategies.

In accordance with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (the “Takeover Regulations”), any initial acquisition of a 5% or more stake in a listed company is required to be disclosed. Further, any change in shareholding from the previous disclosure is required to be disclosed to the public and stock exchanges if such change exceeds 2% of the shareholding. Additionally, any encumbrance created by the promoters on their shareholding is also required to be disclosed under the provisions of the Takeover Regulations. Further, in accordance with the SEBI (Prohibition of Insider Trading) Regulations, 2015 (the “Insider Trading Regulations”), trades beyond certain thresholds by an “insider” to a company are required to be disclosed within two trading days from the completion of the trade.

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the “Listing Regulations”), the quarterly shareholding pattern filed by the listed entity would disclose the details of all the persons holding 1% or more shares or voting rights in the entity and the shareholding of the promoters.

While a company can introduce a stricter threshold in its by-laws, the validity of such specific action remains to be tested by the Indian courts. Additional hurdles to stakebuilding include the requirement to make disclosures regarding any acquisition that exceeds the prescribed thresholds, sector-specific caps under Indian foreign investment policy and pricing conditions in relation to cross-border acquisitions.

Dealings in derivates are allowed in India. In fact, the National Stock Exchange of India is one of the largest stock exchanges in the world in terms of volume of equity derivative trading. There are various types of derivatives in the market such as, futures, forwards, options, swaps, foreign currency derivatives and credit derivatives.

Risk disclosures on derivatives are required to be displayed by intermediaries such as brokers who facilitate dealings in derivatives. Additionally, in terms of the Insider Trading Regulations, an “insider” is required to disclose its dealing in derivatives above the prescribed thresholds within two trading days from the completion of the trade.

The Competition Act governs acquisition of control, shares, voting rights or assets, or merger or amalgamation. If a proposed transaction falls outside the scope of the former, the Competition Act will not be applicable.

In so far as listed companies are concerned, the shareholders intending to acquire control must disclose the purpose and their intention in tender offer documents. Additionally, the acquirer will have to also disclose its intentions regarding the future business of the target together with its strategic plans for the target and their likely repercussions on employment and the locations of the target’s places of business.

In so far as unlisted entities are concerned, the acquirer is not required to make any such disclosure.

In the case of unlisted companies, there is no obligation to disclose the deal in the public domain. In the case of a tribunal approved merger, the deal may become public once the application is filed with the NCLT. Alternatively, once the deal has concluded, one can access the public records of a company on the database of the MCA to access the details of the directors appointed, the shareholding pattern (filed on an annual basis) and the details of the share issuance, if any.

In so far as listed entities are concerned, disclosure requirements are governed by the Listing Regulations. A listed company is required to mandatorily disclose events in relation to M&A, agreements entered into, inter-alia by the shareholders, promoters, promoter group entities, related parties of the listed entity, which impact the management or control of the listed entity or impose any restriction or create any liability upon the listed entity. Additionally, any fundraising to be undertaken by the listed entity is also required to be disclosed within the specified timelines.

Any disclosure regarding a deal is only required to be made when definitive agreements/binding term sheets are executed. However, it should be noted that as per the recent amendments to the Listing Regulations, companies exceeding a certain market capitalisation are required to confirm, deny or clarify, upon any material price movement, any reported event or information in the mainstream media which is not general and in the nature of a rumour of an impending event or information. Such clarifications are required to be made within 24 hours from the trigger of material price movement. 

In the case of: (i) an acquisition requiring CCI approval, the obligation is on the acquirer to file the notification form and disclose the transaction to the CCI; and (ii) mergers and amalgamations, the obligation is on the merging/amalgamating parties to file the notification form and disclose the transaction to the CCI. Such notification is usually made after the execution of the binding transaction documents. For mergers or amalgamations, board approval of the proposal relating to a merger/amalgamation is construed as a binding transaction document. In acquisitions, the execution of any agreement or “other document” is considered as a binding transaction document.

“Other document” means any document conveying an agreement or decision to acquire control, shares, voting rights or assets including (i) any document executed by the acquirer in a hostile acquisition; and (ii) a public announcement made in accordance with the Takeover Regulations.

The CCI has, through its decisional practice, widened the scope of the term “other documents” to include binding term sheets, resolution plans (limited to cases falling within the purview of Insolvency and Bankruptcy Code) and memorandum of understanding.

Market practice on timing of disclosure does not differ from legal requirements. As set out in 5.1 Requirement to Disclose a Deal, listed entities make the relevant disclosures when the binding agreements are executed.

Investors usually conduct detailed due diligence to identify any “red flags” for potential investors.

Vendor due diligence is common in bidding situations while buy-side diligence is common in bilateral deals. In bidding situations, where a vendor due diligence is already provided, the investors usually only have the chance to conduct “top up” due diligence and review the material agreements/licences. The scope of review will also depend on whether the investor proposes to procure a warranty and indemnity insurance, which is becoming increasingly common in India.

Investors conduct legal, financial and taxation diligence upon potential targets. Further, depending upon the industry or sector to which the target belongs, investors may undertake operational due diligence. In certain cases, environmental due diligence, or cybersecurity due diligence is also undertaken to ascertain industry specific risks.

It is common to see standstill and exclusivity clauses in transaction documents entered between parties to M&A deals.

Exclusivity clauses are usually seen in term sheets and set out actions that are restricted before the signing of definitive agreements. From a sellers’ perspective, shorter exclusivity periods and the right to terminate the term sheet in the case of unreasonable delays on the part of the buyers are demanded. It should be noted that in bidding situations, it is not uncommon for the sellers to not provide exclusivity and continue to liaise with multiple bidders till the execution of the definitive documents.

Standstill obligations come in at the definitive agreements stage. Definitive agreements commonly set out the restricted activities and obligations of a company/seller for the interim period between the signing date and the closing date in relation to a transaction such that the target continues to operate in the ordinary course. Such obligations usually include restrictions on the restructuring of capital, incurrence of indebtedness, termination of existing lines of business and other price protection measures.

It is permissible and common for tender offer terms and conditions to be documented in definitive agreements. A tender offer (usually in the form of a term sheet) includes key commercial terms such as pricing, transaction approvals and covenants relating to confidentiality. Such key commercial terms are also captured in the definitive documents in more detail.

The timing for any acquisition/sale is largely dependent on the listed status, the industry in which the target operates and the manner of acquisition.

All other aspects being equal, an acquisition of shares of a listed entity above the prescribed thresholds will require more time than an unlisted entity since the acquirer will be under an obligation to make an open offer to the public shareholders of the listed entity (which takes approximately three to four months to complete) and will only be able to complete the underlying transaction after the completion of the open offer unless the acquirer deposits 100% of the open offer consideration in escrow. Unlisted entities on the other hand have no such bar.

Entities which operate in regulated sectors such as banks and non-banking financial companies (NBFCs) would not be able to complete the underlying transaction until approvals from the specific regulators (in the present case, the RBI) are received. In contrast, entities operating in unregulated sectors such as IT/ITes do not require any regulatory approvals and accordingly such acquisitions can be completed quickly. Additionally, combinations which require the prior approval of the CCI (ie, transactions which breach the specified thresholds and are unable to claim the exemption set out above) would have to wait for such approvals.

Lastly, depending on the form of business combination, the timelines may differ. A combination in the form of a merger/amalgamation may take up to 8-12 months while a share transfer can be completed within a few days.

Under the Takeover Regulations, the requirement to make a mandatory open offer to public shareholders of a listed company occurs upon the initial acquisition of 25% of shares or voting rights, either directly or indirectly. Furthermore, if an acquirer already holds 25% or more of the shares or voting rights in a listed company, an open offer will be triggered upon an additional acquisition of more than 5% of shares or voting rights in such listed entity in a financial year. A mandatory open offer is required to be made for 26% of the expanded capital of the listed entity.

Cash is the most commonly used form of consideration in M&A transactions in India. Some of the common tools to bridge value gaps include deferred consideration and earnout structures, however, if any party is a non-resident, the restrictions under the exchange control laws will apply. Additionally, parties also use adjustment mechanisms, such as working capital adjustments and locked box adjustments, for bridging valuation gaps in an industry with high valuation uncertainty. Such adjustment mechanisms are more common in unlisted entities since the open offer pricing rules provide that the price payable to the shareholders under the open offer should be the highest of the pricing parameters set out in the Takeover Regulations, which includes the highest price payable under the transaction documents.

In terms of the consideration which is payable to the public shareholders in an open offer, while cash is the most common form of consideration, Takeover Regulations also permit the consideration to be paid by way of:

• (i) listed shares in the share capital of the acquirer or a person acting in concert with it;
• (ii) listed debt securities of the acquirer or a person acting in concert subject to rating thresholds;
• (iii) convertible debt securities which result in the shareholder acquiring the securities listed in (i); or
• (iv) a combination of any of the above.

However, it is uncommon for the acquirer to use any of the above (other than cash) to discharge consideration.

As a general practice, acquirers try and include the conditions to the transaction (regulatory and third-party approvals, lender consents and transaction specific conditions) as the conditions to the open offer so as to enable such acquirers to withdraw from the open offer and terminate the underlying transaction if the conditions are not satisfied. Other than for regulatory approvals, SEBI generally does not permit withdrawal of an open offer and any attempt to do so may result in litigation. Please also refer to 6.5 Minimum Acceptance Conditions for details on conditional open offers.

Conditional open offers are open offers which are conditional upon a minimum level of acceptance of the offer by public shareholders. In other words, if the desired level of acceptance of the offer is not reached, the base transaction which originally triggered the open offer requirement must be terminated and the open offer withdrawn. Conditional open offers are generally made by acquirers who desire to reach a majority shareholding in a target company, since such shareholding enables them to pass resolutions which only require a simple majority.

In the case of listed companies, a tender offer cannot be conditional on the bidder obtaining financing. As a precursor to making a public announcement for a tender offer, the acquirer is required to demonstrate firm financial arrangements for the open offer and the underlying transaction. Additionally, the acquirer is also required to fund an escrow account with a portion of the total open offer consideration through cash or bank guarantee within a period of three working days from the date of the public announcement. In so far as transactions with unlisted entities are concerned, such transactions may be contingent on the bidders obtaining financing but that would be driven by commercial considerations rather than legal requirements.

Break-up fees or non-solicitation provisions are some popular measures to ensure deal security. While break-up fees are not observed very often in transactions in India, provisions such as non-solicitation, exclusivity and confidentiality are typically used to derive comfort in Indian M&A transactions.

Additionally, in accordance with the Takeover Regulations, the target is required to conduct the business in the ordinary course during the offer period (ie, the period starting from the date on which the binding agreement is executed and ending on the day of completion of payments to the public shareholders under the open offer).

Apart from the ownership rights in terms of equity shareholding in a target, investors also seek to assert control of and to obtain governance rights with respect to a target. These could include the appointment of nominee directors on the board of a company, the right to appoint key managerial personnel (KMP), the right to a say in policy making, including through amendments in charter documents. Such rights help investors influence decision-making and governance in a company. However, any special rights acquired by an investor in a listed entity is subject to shareholder approval every five years. Lastly, it is pertinent to note that in listed companies, a minimum public shareholding of 25% is required as a continuous listing requirement and therefore an acquirer can only acquire up to 75%. Any increases in the shareholding above 75% will result in sell-down obligations. 

It is very common for shareholders to vote by proxy in India and this concept is also recognised in law. Proxies are entitled to vote at all shareholder meetings.

A squeeze-out in the Indian context entails the majority shareholders of a company enabling themselves to buy out the equity of minority shareholders of the company.

A commonly used squeeze-out mechanism in India is the reduction of share capital, which involves the acquisition of company shares by majority shareholders and the cancellation of those shares. Such a scheme of reduction requires approval from the NCLT and of the shareholders of the company. However, such schemes could result in disgruntled shareholders questioning the valuation before the NCLT.

The NCLT recently dismissed the application by Philips India Limited to undertake a selective capital reduction of the shares held by the minority shareholders after complaints from the minority shareholders were received in relation to the valuation and the NCLT held that the capital reduction was not in accordance with the requirements set out in the Act.

Generally, with respect to unlisted companies, principal shareholders can obtain commitments to tender shares or vote on resolutions of the company without any restrictions as such. However, with respect to listed entities, any voting arrangements may result in such persons being treated as persons acting in concert and accordingly could result in the shareholding of such persons being clubbed with the acquirer for the purpose of the calculation of thresholds under the Takeover Regulations. Once such persons are categorised as persons acting in concert with the acquirer, as prescribed by the Takeover Regulations, their obligations in terms of the Takeover Regulations are joint and several.

Negotiations for such commitments are usually undertaken during the definitive document stage and such restrictions form part of the definitive documents.

For listed companies, in accordance with the Takeover Regulations, a public announcement regarding the open offer is required to be made at the time when the acquirer agrees to acquire the shares of the target company beyond the specified thresholds. Such announcement is usually made at the time of execution of the binding documents. The public announcement contains brief details regarding the offer price, the offer size, the details of the acquirer and the underlying transaction. For unlisted companies, there is no requirement to make the bid public.

For the issuance of shares by an unlisted entity, while there are no disclosures required to be made in the public domain, the company is required to provide an offer letter to the prospective investors which, inter-alia, contains details of the company, risk factors pertaining to the company, any defaults/litigations regarding the company, offer size, offer price and interest of directors. While the offer letter may not be in the public domain, the details of the special resolution passed by the shareholders of the company and the list of allottees are available on the public register maintained by the MCA.

In so far as listed entities are concerned, at the time of seeking shareholder approval, the companies are required to inter-alia disclose the objects of the issue, the details of the investors and its ultimate beneficial owners (exempt in certain cases), and the intention of the promoters to participate in the offer. Such information is readily available to the public.

CCI Notification Form

The CCI notification form typically includes:

• the consolidated asset value and turnover of the parties;
• details of the proposed transaction (along with the underlying transaction documents);
• the rights acquired by the acquirer;
• timelines;
• the consideration;
• details of the respective groups of the acquirer and the target and their business activities;
• overlaps between the activities of the parties (including their affiliates);
• market shares of the parties;
• top five competitors in the relevant markets; and
• details of top five customers and suppliers.

While for unlisted companies, there is no legal requirement to produce financial statements, in the case of an acquisition of listed entities, letters of offer or detailed public statements are required to contain certain financial disclosures regarding the acquirer. Such disclosures include the total revenue, turnover, net profit, balance sheets and profit and loss accounts, and have to be audited in accordance with the laws of their home jurisdiction.

While regulators may seek transaction documents from the parties for their perusal, such documents are not required to be disclosed at large in full in so far as unlisted or privately-held companies are concerned. In so far as the acquisition of listed companies is concerned, the definitive documents are documents for inspection by the public shareholders in the case of an open offer or during the shareholder approval process in the case of issuance of shares. Additionally, public offer documents, such as detailed public statements and letters of offer, are required to include certain salient features of the transaction documents.

There are no specific duties that are imposed on the directors in India in a business combination. The directors have a statutory duty to act in good faith and to promote the objects of the company in the interest of all its stakeholders. The director is also required to exercise due and reasonable care and independent judgment. In an open offer or delisting offer, a committee of independent directors of the target is required to provide reasoned recommendations on the open offer/delisting offer.

Boards of directors of companies meeting certain specified thresholds and conditions are required to establish committees which accord specialised attention to matters such as audit, stakeholders’ relationship and nomination and remuneration of directors, KMPs and employees. Under the Takeover Regulations, a target company is required to set up a committee of independent directors to opine on the open offer received by its shareholders by way of “reasoned recommendations”. A similar obligation is also entrusted on the independent directors of the target in a take private. It is common market practice for companies to establish committees of directors for specialised functions such as investments and acquisitions. Such committees are used by companies in ordinary course and not specifically when some directors have a conflict of interest.

Generally, directors are bound to the company by their statutory and fiduciary duties to periodically disclose such interest and abstain from decision-making processes in its regard.

While the business judgement rule per se does not exist in India, in accordance with the Act, the board is entitled to exercise all such powers and do all such acts and things as the company is authorised to exercise and do. Courts in India have recognised that they would not generally interfere in the decision making of the board if the board acted reasonably while taking a commercial decision that was beneficial for the company.

It is common for directors to take outside advice during a business combination in India. Statutorily, directors are required to seek secretarial reports from external parties to ensure compliance with the certain SEBI laws during a take private or fairness opinions during a scheme of arrangement. Additionally, the committee of independent directors, while providing reasoned recommendations (as explained in 8.1 Principal Directors’ Duties), is entitled to seek external professional advice.

Statutorily, a director is required to act in good faith and in the best interest of the company. Furthermore, the director should not be involved in a situation in which they may have direct or indirect interest that conflicts or may conflict with the interest of the company. In cases where the director is interested in any business, the director is required to refrain from participating in any such meeting of the board. Such conflict of interest has also been subject to judicial review where the courts have reinforced the principle of an interested director abstaining from weighing in on matters where there is a conflict.

While hostile tender offers are not restricted in India, they are not very common. One of the reasons for the lack of hostile takeovers is the concentration of shareholding in the hands of the promoters and the hurdles to stake building which are discussed in section 3. Significant Court Decisions or Legal Developments. 

Recently, the most prominent hostile takeovers in India have been:

• the Burman’s proposed acquisition of Religare, which turned litigious;
• Adani’s takeover of NDTV in 2023, structured as an indirect acquisition; and
• Larsen & Toubro’s takeover of Mindtree in 2019, where the target’s promoters were unable to thwart the takeover.

When a tender offer is ongoing, the Takeover Regulations impose an obligation on the board of directors of the target company to conduct its business in the ordinary course and in accordance with past practice. Additionally, matters such as alienation of material assets or effecting any material borrowings, which could be construed as defensive measures, are required to be undertaken with the prior shareholder approval (by way of a special resolution). Accordingly, the directors are restricted from using certain defensive measures during the offer period.

Common defensive measures seen in India include enlisting assistance from third parties to acquire a non-controlling stake in the target so as to prevent a hostile bidder from acquiring a controlling stake in the target. As an example, iReliance Industries played the role of a “white knight” for an Oberoi group entity when it blocked ITC’s attempted takeover by acquiring a non-controlling stake in the Oberoi group entity. With family-owned businesses being common in India, consolidation of shareholding at the promoter level for safeguarding the company from hostile takeovers is an effective strategy deployed by many Indian companies (eg, Bharti Airtel and Tata Sons). Lastly, in the case of L&T – Mindtree, the board of directors of Mindtree declared a dividend to reduce the cash reserves of the company so as to render it unattractive.

Other than setting up a committee of independent directors for opining on the open offer and the delisting offer and conducting business in the ordinary course, under the Takeover Regulations, directors are not subject to any duties, other than their customary fiduciary/statutory duties, when enacting defensive measures. The statutory duties under the Indian company law includes acting in good faith, exercising duties with due and reasonable care, skill and diligence and without a conflict of interest, and their fiduciary duties to the company.

Business combinations which are merely inter-se shareholders, such as secondary acquisitions and open offers, do not provide the directors of the target company with the ability to “just say no” or reject the transactions. However, the independent directors of the target have the duty to provide their reasoned recommendations on the offer (as described in section 8. Duties of Directors) and thereby influence shareholder decisions to tender in such offers.

Litigation with respect to M&A deals is not very common in India. A few examples where such litigation has arisen are set out in 10.2 Stage of Deal. Arbitration is one of the preferred modes of dispute resolution in Indian M&A transactions, particularly in cross-border deals where international commercial arbitration is often chosen.

Deal-Making Stage

Term sheets are the most common instruments used at the deal-making stage. Such term sheets can be binding as well as non-binding. In the case of non-binding term sheets, the market practice has evolved to incorporate certain binding commitments within non-binding term sheets for provisions such as confidentiality, exclusivity, no-shopping and dispute resolution.

Court rulings in recent years have also tended to create/recognise legal consequences for non-binding term sheets, where the courts have ruled in favour of arbitrability in a non-binding term sheet in certain scenarios, eg, if the non-binding term sheet provides for a binding dispute resolution clause (source: Welspun One Logistics Park Fund v Mohit Verma); and in favour of right of specific performances of obligations of other parties under a non-binding term sheet if a party has taken steps towards complying with its obligations, as part of either the term sheet itself or as part of draft definitive documentation (source: Zostel Hospitality Private Limited v Oravel Stays Private Limited and others).

Documentation Stage

At the documentation stage, it is not common to see litigations as any disagreements at this stage usually result in the failure of the deal.

Post-Deal Stage

Most disputes generally arise at the post-deal stage by way of indemnity claims.

In recent years, the Indian M&A landscape has evolved through disputes, reflecting the growing complexity of deals, regulatory scrutiny, and stakeholder activism.

Zee-Sony Merger

In 2021, Zee Entertainment Enterprises Limited and Sony Pictures Television announced a merger of their businesses. However, the merger soon fell into dispute with Sony claiming Zee’s inability to fulfil closing obligations. Sony then instituted arbitration proceedings against Zee, seeking USD90 million as termination fees, with Zee counterclaiming and seeking a similar termination fee from Sony. In late 2024, Zee and Sony reached a settlement relinquishing all claims against each other and voiding all outstanding obligations or liabilities to each other.

While shareholder activism is not very common in India, the Act provides the right for the shareholders to initiate class action proceedings subject to meeting certain thresholds. The year 2024, in particular, has seen a number of cases of shareholder activism.

In the case of Jindal Polyfilms, minority shareholders filed class action proceedings against Jindal Polyfilms and its board, alleging financial mismanagement and the sale of undervalued assets to promoter-related entities.

Another development in shareholder activism is the rise of proxy advisory firms. Regulated by SEBI, these independent organisations provide research, analysis and recommendations to institutional shareholders on corporate governance matters, enabling them to make informed voting decisions.

Proxy advisory firms often hold companies to governance standards that exceed legal requirements, aligning them with global best practices. Over time, their influence has grown among institutional investors, encouraging greater transparency and improved corporate governance within companies.

Shareholder activism is not very common in India. However, institutional investors try their best to encourage companies to undertake transactions in the best interests of all stakeholders. The institutional investors do exercise their votes based on the recommendations of the proxy advisors, to prevent transactions which, in their view, are not in the best interests of the stakeholders.

It is not common for activists to seek to interfere with the completion of the announced transactions. Shareholders can however exercise their rights where the regulations themselves seek approval from minority shareholders. For instance, in the case of listed companies desirous of disposing off their undertaking is required to take prior approval of its shareholders by way of a special resolution wherein the votes cast by the public shareholders in favour of the transaction should exceed the votes cast against the transaction. A similar approval requirement is also applicable when a promoter is trying to take a company private under the Indian delisting regulations. All related-party transactions require an ordinary shareholder approval where the related parties are not permitted to vote. Accordingly, the shareholders can use their votes in such a manner, so as to ensure that the transactions undertaken by the listed company are not detrimental to the minority. However, shareholders and activists have little say in secondary share sale transactions.