M&A Transactions

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WOS Exemption

Context:

Ever since the stock market scam of 2001 (Ketan Parekh Scam) was brought to light, regulators have been vigilant about the use of complex corporate structures to circumvent statutory restrictions and divert company funds. After the magnitude of financial irregularities in the Ketan Parekh Scam came to light, the Joint Parliamentary Committee (“JPC”) and the erstwhile Department of Company Affairs (“DCA”) proposed steps to prevent  companies from using the ‘subsidiary route’ to siphon off funds, by providing inter-corporate loans.[1]Continue Reading The Layering Restrictions & WOS exemption – Need for Regulatory clarity

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

ESG and M&A

In recent years, investors and customers alike have been gung-ho about ESG, so much so that it has found its way into day-to-day commercial lingo. The term ESG stands for Environmental, Social and Governance and refers to three key factors when measuring sustainability and the ethical impact of an investment in a business or company.[1]Continue Reading Interplay between ESG and M&A transactions: Key factors to consider

Mergers are compared to marriages. As a union of companies, they require patience and understanding, but they also involve a large amount of paperwork. Mergers, like marriages, can flourish with the right synergies, but if there are differences between the entities, the arrangement can often collapse. The recent breakdown of the Snapdeal – Flipkart transaction, can provide a useful context to understand the reasons for the success/failure of M&A transactions.

The success of a deal depends on the companies, the individuals, the business climate, as well as the different regulators involved in the transaction. A few common reasons for deals breaking down are – valuation differences, different expectations between the parties involved, regulatory roadblocks or a lack of consensus regarding the exit horizons.

While these are reasons general to any corporate transaction, there are some requirements specific to M&A deals that must be met in order for the deal to survive.Continue Reading When the Engagement Ring Doesn’t Fit – Why M&A Deals Fall Apart