Mergers & Acquisitions

Decoding India’s Labour Codes: Strategic Insights for M&A Transactions

Summary: India’s consolidation of 29 central labour laws into four Labour Codes marks a landmark transformation of the country’s regulatory landscape, with far-reaching implications for M&A transactions. The introduction of Labour Codes is not just a compliance issue, but one that actively impacts deal making. While the Labour Codes promise a more streamlined compliance framework in the long term, the current transitional phase — where central rules remain unfinalised and most states are yet to implement the Labour Codes — introduces significant near-term complexity for dealmakers. In this blog, we aim to highlight some of these considerations, including on valuation impact, penalty enhancements and heightened due diligence requirements. This blog also serves as a summary of ongoing considerations for transactions in light of the new Labour Codes.Continue Reading Decoding India’s Labour Codes: Strategic Insights for M&A Transactions

From Restriction to Recalibration – The Path Forward for Press Note 3 and Cross-Border M&A

Background

Earlier this week, as a part of a broader set of key decisions, the Union Cabinet announced modification to India’s foreign investment regulatory framework on cross-border investments originating from countries sharing land borders with India (“LBC”). The changes announced are significant as they indicate a recalibration of the Government’s approach to certain categories of investments in India by LBC investors. The move is aimed at encouraging increased foreign capital flows in strategic industry sectors (with an emphasis on manufacturing capital goods, electronic capital goods, electronic components polysilicon and ingot-wafer (“Focus Sectors”)). They also clarify the applicability of the Government approval route to certain LBC investors, and the reducing regulatory approval timelines for such investments.Continue Reading From Restriction to Recalibration – The Path Forward for Press Note 3 and Cross-Border M&A

Impact of Business Transfers on Continuity of Prequalification Credentials

Summary: This article examines the impact of business transfers on pre-qualification credentials, including the interpretation by various courts on the position of their transfer in case of business transfers through a scheme of arrangement or through a slump sale of an undertaking, and discusses the important factors required to ensure successful transfer of pre-qualification credentials.Continue Reading Impact of Business Transfers on Continuity of Prequalification Credentials

CCPS: An important instrument for startups and M&A structuring

Summary: This blog examines compulsorily convertible preference shares (CCPS), a vital capital raising instrument for startups and M&A transactions in India. It explores the legal framework and key benefits, including balancing investor-founder interests, attracting foreign investment, avoiding tax implications, and providing strategic flexibility, despite limited legislative guidance.Continue Reading CCPS: An important instrument for startups and M&A structuring

The Four Pillars of Change: Unpacking India’s New Fast-Track Merger Regime

Summary: The MCA has unleashed a significant liberalisation of the fast-track merger framework, introducing four revolutionary changes by allowing unlisted companies, non-wholly owned subsidiaries and fellow subsidiary transactions to access the fast-track route, while also streamlining cross-border mergers. This change makes the fast-track route viable for a broader range of entities and seeks to reduce the NCLT’s burden, potentially allowing it to focus on contentious matters requiring judicial oversight.Continue Reading The Four Pillars of Change: Unpacking India’s New Fast-Track Merger Regime

The year 2023 saw 85 public takeovers implemented through the tender offer route under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Regulations). The number of takeovers were only slightly below the number of takeovers in CY22 (93 in all). The aggregate transaction size (i.e. the aggregate size of the negotiated deal and tender offer) of takeovers announced in CY23 was ₹274.27 billion, 77% lower than that of the takeovers announced in CY22, which was ₹1,180 billion. Primarily, the deal activity in CY23 was driven by domestic acquirers. Foreigners executed only three deals in this space (including only one deal by a PE player), which was substantially lower than CY22 (being 11 ).Continue Reading Public Takeovers in India: Flashback 2023

The ability to undertake corporate restructuring and M&A through private or statutory arrangements has served as a touchstone in deal making globally. Statutory arrangements, at times, offer several advantages over contractual/ private arrangements. There are, however, several commercial, legal and tax considerations that have to be considered before opting between a statutory and private arrangement. The speed and ease with which a business can undertake an arrangement also plays an important part in such decision-making. In India, private arrangement is more popular than statutory arrangement for undertaking M&A as the latter is contingent on receipt of regulatory authorisation. Statutory arrangements in India were initially permitted only by way of National Company Law Tribunal (“NCLT”) approval.Continue Reading Mergers on a Fast-Track

Mergers & Acquisitions

Introduction

While some Indian corporates have been bold acquirers in big-ticket overseas acquisitions, such transactions are rare, often complex, and risky. Indian acquirers have typically used internal accruals or resorted to overseas debt to finance offshore acquisitions due to regulatory restrictions preventing them from using their stock as consideration for the acquisition. Recent liberalisations in the overseas investment framework suggest that this constraint may be going away. While these regulatory changes may provide additional structuring options for cross-border M&A/ restructuring, decisions of certain tribunals on these (relatively recent) amendments may play spoilsport.Continue Reading Cross-Border Demergers: Navigating muddy waters

Mergers & Acquisitions

Context

Convergence of the Indian Accounting Standards (“Ind AS”) with the International Financial Reporting Standards (“IFRS”) can be regarded as the most significant milestone in the Indian accounting paradigm, which has fundamentally altered the rules for the preparation and interpretation of financial statements (“FS”) as also the ground rules for structuring M&A deals.Continue Reading How crucial is knowledge of Ind AS while negotiating an M&A deal?

SEBI

The concept of promoter and promoter group of a listed company finds a mention in the SEBI regulations, and assumes significance as it impacts a wide range of M&A transactions involving listed companies. After closing in a change in control deal, one needs to follow the conditions prescribed in Regulation 31A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations), to re-classify the outgoing promoter. The conditions in Regulation 31A are onerous, cumbersome, and not in consonance with the way the transacting parties and market participants think. We will also explain below how Regulation 31A is not in consonance with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Regulations), and does not reflect the realities of deal making and therefore, needs a change.Continue Reading Fresh Look Needed for Re-Classification of Promoters