Articles Part - I

Mergers and Acquisitions – Strategies and

ARTICLE

Execution
Corporate Restructuring is concerned with arranging the business activities of the Corporate as a
whole so as to achieve certain pre-determined objectives at corporate level, such as enhancement of
shareholders value, deployment of surplus cash from one business to finance profitable growth in
another, exploiting inter-dependence among present or prospective businesses, risk reduction,
development of core-competencies, to obtain tax advantages by merging a loss-making company
with a profit-making company etc. One of the most popular way of Corporate Restructuring is
Mergers/Acquisition and Amalgamation.

Corporate Restructuring is concerned with arranging

the business activities of the Corporate as a whole
so as to achieve certain pre-determined objectives at
corporate level, such as enhancement of shareholders
value, deployment of surplus cash from one business to
finance profitable growth in another, exploiting inter-
dependence among present or prospective businesses, risk
reduction, development of core-competencies, to obtain
tax advantages by merging a loss-making company with
a profit-making company etc. One of the most popular
CS Maitri Thakkar, ACS way of Corporate Restructuring is Mergers/Acquisition
Manager- Investment Banking, and Amalgamation. Different types of Strategic Corporate
GYR Capital Advisors Pvt Ltd, SEBI Regd. Restructuring are as follows:
Category I Merchant Banker, Ahmedabad
[email protected]

CS Pratima Singh, ACS

Assistant Manager- Investment Banking
GYR Capital Advisors Pvt. Ltd.,SEBI Regd.
Category I Merchant Banker, Ahmedabad
[email protected]

A
INTRODUCTION
business may grow over time as the
utility of its products and services is
recognized, but it is a long-drawn process.
It may also grow through an inorganic
process, symbolized by an instantaneous MERGERS/ACQUISITIONS AND
expansion in work force, customers,
infrastructure resources and thereby an overall increase AMALGAMATION:
in the revenues and profits of the entity. Corporate Mergers and Acquisitions (M&A) is a critical strategy
Restructuring is such tool, it’s a comprehensive process by for growth in the new economy. M&A are transactions
which a company can consolidate its business operations in which the ownership of companies, other business
and strengthen its position for achieving its short-term and organizations or operating units are transferred or
long-term corporate objectives. combined. As an aspect of strategic management, M&A

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 Mergers and Acquisitions – Strategies and Execution

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allow enterprises to grow, shrink and change the nature Geographic Trends:
of the business or competitive position. It refers to the
North America continues to dominate global M&A
consolidation of two companies. The reasoning behind
activity, accounting for 40% of the total deal value, driven
M&A is that two separate companies together create more
by the US’s robust economic recovery. However, the Asia-
value compared to being on an individual stand. With
Pacific region has also shown significant growth, with
the objective of wealth maximization, companies keep
China and India leading the charge, accounting for 30% of
evaluating different opportunities through the route of
the global deal value, a 5% increase from the previous year.
merger or acquisition. Section 232 of the Companies Act,
2013 (‘the Act’) deals with the mergers and amalgamation M&A Structure Trends:
of companies and Section 234 of the Act which deals
The year 2023 saw a rise in stock-for-stock transactions,
merger or amalgamation of a company with a foreign
given the elevated equity valuations. There has been a 25%
company.
increase in such deals compared to 2022, indicating that
DIFFERENCE BETWEEN MERGER AND businesses are using their appreciated stock as a currency
for acquisitions.
ACQUISITION
Private Equity (PE) buyouts continued their upward
In a merger, two companies form a single entity together, trajectory, accounting for 27% of the total M&A deal value,
and this single company replaces the two previous ones, a 7% increase from 2022. This was largely driven by the
whereas, In an acquisition, one company buys another, and significant amount of dry powder available with PE firms
the buyer company retains its identity. and their eagerness to invest in high-growth sectors like
technology and healthcare.
M&As: THE GLOBAL TRENDS
The first half of 2023 saw a robust M&A market with total
CASE STUDY ANALYSIS OF RECENT
deal value reaching an astounding $2.3 trillion globally, MERGERS
a 15% increase from the same period in 2022. A total of The Most Popular and Major Mergers and Acquisitions of
8,934 deals were announced globally during this period, 2022-2023 have been:
representing a 12% increase over 2022.
1. Merger between Tata Group and Air India: Tata
Group acquired Air India for a value of $2.4 billion or
Indian Rupees 18,000 crore, wherein INR 2,700 crore
was paid upfront and INR 15,300 of debt was taken up by
Tata Sons. Further, Tata Group also announced a merger
between Air India and Vistara, whereby Singapore
Airlines (the owner of 49% of Vistara equity) will get
ownership of 25.1% of the combined merged entity.

Sector Specific Trends:

 In 2023, technology, healthcare, and financial services
have continued to be the leading sectors in M&A
activities.
 The technology sector maintained its dominance,
accounting for approximately 28% of the total deal
volume, reflecting the ongoing digital transformation
and increased technology adoption across various
2. HDFC Limited – HDFC BANK Merger – HDFC
industries. There has been a 20% increase in tech M&A
Bank and HDFC Ltd merged to create a financial
deals compared to 2022, with Artificial Intelligence
services conglomerate. The merger became effective
and Cybersecurity companies leading the charge.
by July 01, 2023. The merger ratio is 25 HDFC shares
 The healthcare sector, accounting for 22% of the for 42 HDFC Bank shares. The merger created a
total deals, continued to see growth. The drive for banking behemoth with a market capitalisation of Rs
consolidation, advancements in biotechnology and 14 lakh crore.
the increased demand for telehealth services post- 3. Zomato – Blinkit merger – Zomato and Blinkit have
pandemic were the key drivers for this uptick. reached an agreement for a merger. The all-stock deal
 Meanwhile, financial services accounted for 18% values Blinkit between $700 million and $750 million.
of the total deal volume. Fintech continues to be a Blinkit, formerly known as Grofers, has recently
hotbed of activity, reflecting the sector’s rapid digital revamped itself to focus on an instant grocery delivery
transformation. portal.

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ARTICLE Mergers and Acquisitions – Strategies and Execution

SWOT ANALYSIS: THE PROS AND CONS  Acquiring new technology:

OF JOINING HANDS AND RESOURCES To stay competitive, companies need to stay on top
of technological developments and their business
Advantages/ Pros for Mergers & Acquisitions:
applications. By buying a smaller company with
unique technologies, a large company can maintain
or develop a competitive edge.
 Improved market reach and industry visibility:
Companies buy other companies to reach new markets
and grow revenues and earnings. A merger may
expand two companies’ marketing and distribution,
giving them new sales opportunities. A merger can
also improve a company’s standing in the investment
community: bigger firms often have an easier time
Regardless of their category or structure, all mergers raising capital than smaller ones.
and acquisitions have one common goal: they are all
meant to create synergy that makes the value of the  Ultimate obtainment of Synergies:
combined companies greater than the sum of the two Consolidation of business operations thus resulting in
parts. The success of a merger or acquisition depends significant impetus to growth.
on whether this synergy is achieved. Synergy takes
the form of revenue enhancement and cost savings. Disadvantages/ Cons for Mergers & Acquisitions
By merging, the companies hope to benefit from the
following:  M&A can very easily be conducted for the wrong
reasons:
 M&A is the fastest way to achieve growth: Because of all the pros that have just been outlined, it
can be simple to think of M&A as a quick win. That’s
There is no other form of corporate activity that can one thing that it almost certainly never is. A merger
grow your company’s top line as fast as a merger or or acquisition is the largest project that any company
acquisition. will take on, so it’s not to be taken lightly.
 Becoming bigger:  M&A can distract from the daily management of a
business:
Many companies use M&A to grow in size and leapfrog
their rivals. While it can take years or decades to As much as M&A can add value for a business, the
double the size of a company through organic growth, main value creation that goes on in any business
this can be achieved much more rapidly through should be its day-to-day operations. Thus, pulling
mergers or acquisitions. managers away from the operations of the company
can be a major distraction from their performing their
 Pre-empted competition: day-to-day tasks.
This is a very powerful motivation for mergers and This defeats the purpose of what M&A is for, so a good
acquisitions, and is the primary reason why M&A plan has to be put in place before any deal to ensure
activity occurs in distinct cycles. It eliminates that the correct time is allocated for each manager’s
competition. participation in the process.
 Domination:  M&A can destroy value as well as create it:
Companies also engage in M&A to dominate More than one company has had value destroyed
their sector. However, since a combination of two because of mismanagement at some part of the
behemoths would result in a potential monopoly, M&A process. Unfortunately, if managers don’t keep
such a transaction would have to face regulatory their eye on the ball, this can even happen when two
authorities. companies appear to be a near-perfect match.

 Tax benefits: Without the proper care at every stage of the deal
- be that origination, negotiations, due diligence,
Companies also use M&A for tax purposes, although deal closing, or integration - value can be destroyed
this may be an implicit rather than an explicit motive. without good planning and implementation.
 Economies of scale:  M&A valuations are an inexact science:
Mergers also translate into improved economies More than one book on M&A has called it’s a
of scale which refers to reduced costs per unit combination of ‘science and art’. Another way of
that arise from increased total output of a saying this is, even the most analytical of us can get
product. M&A horribly wrong.

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Amazon’s acquisition of Whole Foods, to take one
example, was seen in many quarters as a deal that
would generate significant value for both companies,
giving Amazon a high-end distribution chain for its
grocery fulfilment efforts, and giving Whole Foods
access to the world’s most potent e-commerce engine.
But the deal hasn’t been a roaring success, proving
that even if everything is in place for a deal to be a
success, it doesn’t mean for sure that it will be.
 M&A due diligence is a complex and time-
consuming task:
There is a correlation between thorough due diligence
and deal success. The most successful deals were
almost always those in which the M&A lifecycle
management platform was used more, by more
participants, for a longer period of time.
structures of two companies can be challenging.
M&A: THE STRATEGIC BENEFITS: Discrepancies or differences in financial reporting
may emerge, requiring adjustments and careful
 In order to reduce competition. scrutiny.
 For the purpose of gaining a larger market share. 5) Technology Integration: Integrating different IT
 For the purpose of creating a strong brand name. systems and technologies is often a daunting task.
Incompatible systems may lead to disruptions in
 For the purpose of reducing tax liabilities. operations and data migration problems.
 For Risk diversification.
6) Customer Concerns: Customers of both merging
 For balancing the losses of one organisation against companies may feel uncertain about the changes,
the profit of another. leading to questions about service quality, pricing, or
product availability.
M&A: THE INITIAL HICCUPS AND THEIR
RECOURSES 7) Supplier and Vendor Management: Managing
relationships with suppliers and vendors may become
Merger and amalgamation are complex business complicated due to changes in contracts, payment
transactions that involve combining two or more terms, or preferred suppliers.
companies into a single entity. While these processes
can have several benefits, they often come with various 8) Synergy Realization: The expected synergies, such
challenges and initial hiccups. Some of the common as cost savings or increased market share, may not
initial hiccups that may arise in case of a merger and materialize as quickly or as significantly as anticipated.
amalgamation include:
9) Branding and Identity: Deciding on the branding
1) Cultural Integration: Different companies often have and identity of the newly merged entity can be
distinct organizational cultures, work practices, and challenging, as it needs to reflect the combined values
values. Merging these cultures can lead to conflicts and strengths of both companies.
and resistance among employees, affecting overall
productivity and morale. 10) Communication Challenges: Inadequate or
unclear communication to employees, customers,
2) Workforce Redundancy: Mergers and amalgamations and other stakeholders about the merger and its
may result in duplicate job roles or overlapping implications can lead to misunderstandings and
functions, leading to potential job redundancies. resistance.
Deciding which employees to retain and how to
manage workforce reductions can be a difficult and 11) Management and Leadership Changes: Leadership
sensitive process. roles may be restructured or merged, causing
uncertainty and resistance among executives and
3) Legal and Regulatory Challenges: Mergers and managers.
amalgamations must comply with various legal
and regulatory requirements at the local, national, To address these initial hiccups effectively, companies
and international levels. Navigating through these need meticulous planning, open communication, and a
complexities can be time-consuming and expensive. clear vision for the future of the merged entity. Engaging
experienced consultants and professionals can also
4) Financial and Accounting Issues: Combining help streamline the process and ensure a smoother
financial statements, accounting practices, and tax transition.

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ARTICLE Mergers and Acquisitions – Strategies and Execution

RECOURSES FOR INITIAL HICCUPS IN M&A  Address customer feedback and concerns
promptly to build confidence and trust.
Initial hiccups in mergers and amalgamations can be
challenging to handle, but there are various resources and 7) Supplier and Vendor Management:
strategies that companies can employ to address them
effectively. Let’s look at some common hiccups and their  Engage in open communication with suppliers
possible remedies: and vendors to discuss contract modifications
and any potential changes in the business
1) Cultural Integration: relationship.

 HR and organizational development experts  Explore opportunities for renegotiation to align

can help facilitate workshops and activities terms with the new entity’s requirements.
to promote cross-cultural understanding and
8) Synergy Realization:
integration.
 Set clear goals and expectations for synergy
 Encourage open communication and feedback realization and monitor progress regularly.
channels to address concerns and conflicts
promptly.  Allocate resources strategically to prioritize and
achieve synergy targets.
2) Workforce Redundancy:
9) Branding and Identity:
 HR teams can conduct a thorough assessment of
the workforce to identify overlapping roles and  Work with marketing and branding experts to
develop a fair and transparent redundancy plan. develop a cohesive brand strategy that reflects the
combined entity’s values and vision.
 Offer retraining and reassignment options for
affected employees where possible.  Involve key stakeholders in the decision-making
process to build buy-in for the new brand identity.
3) Legal and Regulatory Challenges:
10) Communication Challenges:
 Legal advisors and experts can assist in navigating  Establish a dedicated communication team to
complex legal and regulatory requirements, handle internal and external communications
ensuring compliance and minimizing potential related to the merger.
risks.
 Use multiple communication channels, such as
 Seek pre-approval from relevant regulatory town hall meetings, emails, and intranet updates,
authorities to avoid delays and uncertainty. to keep stakeholders informed.
4) Financial and Accounting Issues: 11) Management and Leadership Changes:
 Financial consultants and auditors can assist  Provide leadership training and support to
in reconciling financial statements, identifying help leaders adapt to their new roles and
discrepancies, and ensuring accurate reporting. responsibilities.
 Develop a comprehensive financial integration  Foster a culture of collaboration and inclusivity
plan and allocate sufficient time and resources to encourage smooth leadership transitions.
for its execution.
Overall, successful merger and amalgamation require a
5) Technology Integration: combination of effective planning, open communication,
and the use of specialized expertise. By leveraging
 IT specialists can conduct a thorough assessment appropriate resources, companies can navigate through
of existing IT systems and devise a plan for the initial hiccups and set a strong foundation for the
integrating and upgrading technology. merged entity’s future success.

 Implement temporary workarounds or parallel M&A: THE LEGAL ANGLE:

systems during the integration process to
minimize disruptions. The legal framework applicable to Mergers and
Amalgamation is primarily governed by the Companies
6) Customer Concerns: Act, 2013, along with rules made thereunder. Other acts
applicable are SEBI (LODR) Regulations, 2015 in case of
 Implement a proactive communication strategy listed entity, Competition Act, 2002, Income Tax Act,
to keep customers informed about the merger, its 1961, Indian Stamp Act, 1899, FEMA (in case of merger
benefits, and any changes in services or products. of companies having foreign capital), Prior approval of

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RBI in case of cross-border merger and any other sectoral-  The board must clearly communicate its expectations
regulatory approval as maybe applicable. about management’s obligations to inform and involve
the board in the M&A process.
What is succession planning?

A solid succession planning definition would be that it’s

the set of measures that you put in place ahead of selling
your business to ensure the continuity of the company’s
success in the future.

“There is nothing obliging a board to buy or sell if a proposed

transaction is not in the best interests of the company
and its owners. To that end, the board must carefully
weigh an M&A opportunity as part of its corporate
oversight.”

After your exit, the success of your business will have to

endure without your leadership – otherwise, how can it be
expected to command a good price on the M&A market?
THE IMPACT ON BOARDS AND Buyers won’t spend top-dollar on a business that is overly
SUCCESSION PLANNING reliant on your position as CEO. The business needs to
have a strategy in place that will maintain its performance
“There is nothing obliging a board to buy or sell if a after your departure – that’s the purpose of succession
proposed transaction is not in the best interests of the planning.
company and its owners. To that end, the board must
carefully weigh an M&A opportunity as part of its Why is succession planning important?
corporate oversight.”
The purpose of succession planning is to hand over
 The board has an important role to play in setting control of your business in a way that not only ensures its
strategy, monitoring corporate performance continued commercial success, but provides assurances
and management, overseeing risk management, over the continuity of your business to potential
counselling the CEO on the most difficult challenges buyers, helping your company command a higher price
facing the business, championing good governance at exit.
and offering constructive criticism on the company’s
operations. Many of these tasks are applicable to Areas to be approached for developing an effective
M&A where the board must offer oversight and succession plan:
governance. Though deals are typically proposed by
1. Defining the role – what are the responsibilities of
the senior executive team, the boards of both the
acquirer and target must decide whether a potential your current role, and what qualities will a person
transaction can proceed beyond an initial exploratory need to be able to take on the role?
phase.
2. Gauging interest – is there a genuine appetite
 The board’s involvement in any deal should begin well among your middle management team to take a
before it appears imminent and last until well after step up?
completion. For this beginning-to-end cycle to be
successful, the board must adopt a holistic approach, 3. Assessing talent and identifying potential – if there
undertaking a strategy review, risk assessment, due is interest, do the candidates at your disposal have the
diligence of all varieties, deal approval and post-deal skills, experience and drive to take on your business?
integration. Or will you have to look beyond the walls of your
company?
 The board should also ask management a series
of questions as part of its oversight of corporate 4. Alternative successors – even if you have suitable
strategy, to ensure that the directors agree with how candidates within your family or your middle
management believe M&A fits into the company’s management team, are there other viable fits outside
overall strategy. of your business?
 Board members must be clear on the drivers and logic
5. Developing your business through your
of the deal, within the framework of the company’s
succession plan – once you have a vision for
business plans and growth strategy and they must
also be comfortable that the due diligence process will your succession in mind, is your business model
highlight and properly mitigate any issues that might tailored to make the transition as smooth as
arise. possible?

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ARTICLE Mergers and Acquisitions – Strategies and Execution

M&A: THE PROCEDURAL SIDE consideration by the Boards of both the transferor and
transferee companies.
Some of steps involved in merger are mentioned in
detail below: v. Preparation of scheme of amalgamation or merger
i. Due Diligence All the companies, which are desirous of effecting
amalgamation or merger, must interact through their
company’s auditors, legal advisors and Practicing
Company Secretary who should report the result of
their interaction to the respective Board of Directors.
The Boards of the involved companies should discuss
and determine details of the proposed scheme of
amalgamation or merger and prepare a draft of the
scheme of amalgamation or merger. The drafts of the
scheme finally prepared by the Boards of both the
companies should be exchanged and discussed in
their respective Board Meetings. After such meetings
A due diligence is an investigation or audit of a a final draft scheme will emerge. The scheme must
potential investment. It seeks to confirm all material define the “effective date” from which it shall take
facts in regard to a sale. It is a way of preventing effect subject to the approval of the Tribunal.
unnecessary harm/hassles to either party involved in
a transaction. It first came into use as a result of the vi. Application to Tribunal seeking direction to hold
US Securities Act, 1933. meetings

ii. Obtain NOC from Stock Exchange Pursuant to Rule 3 of the Companies (Compromises,
Arrangements and Amalgamations) Rules, 2016,
The procedure commences with an application to stock Application made to NCLT for an order directing
exchange for NOC and then an application for seeking convening of Meeting of creditors or member or any
directions of the Tribunal for convening, holding and class of them.
conducting meetings of creditors or class of creditors,
members or class of members, as the case may be, vii. Obtaining order of the Tribunal for holding class
to the stage of the Tribunal’s order sanctioning the meeting
scheme of compromise or arrangement is contained On receiving application, NCLT the Tribunal may
in Sections 230 to 240 of the Companies Act, 2013 order meeting(s) of the members/creditors to be
and rules 3-29 of the Companies (Compromises, called, held and conducted in such manner as the
Arrangements and Amalgamations) Rules, 2016. court directs. Once the ordered meetings are duly
iii. Memorandum to authorise amalgamation convened, held and conducted and the scheme is
approved by the prescribed majority in value of the
a. MoA under object clause of company should members/creditors, the Tribunal is bound to sanction
authorise power of amalgamation. the scheme.
b. If not, then company should hold General Note: The Tribunal looks into the fairness of the
Meeting to alter object clause by passing SR. scheme before ordering a meeting because it would
be no use putting before the meeting, a scheme
c. The above same process for transferor company,
containing illegal proposals which are not capable of
apart from that some other part such as increase
being implemented. At that stage, the Tribunal may
authorised share capital of company, power to
refuse to pass order for the convening of the meeting.
issue shares.
iv. Convening a Board Meeting of the Board of viii. Draft Notice:
Directors of the company. a. Explanatory statement under Section 230 of the
i. Board Meeting is to be convened and held to Companies Act, 2013 and form of proxy are required
consider and approve in principle, amalgamation to be filed and settled by the concerned Tribunal
and appoint the registered valuer for valuation of before they can be printed and dispatched to the
shares to determine the share exchange ratio. shareholders.

ii. After finalisation of scheme, another Board i. Generally, this meeting is called by company
Meeting is to be held to approve the scheme. under section 230 but creditor or a member or a
class of creditors or a class of members may make
iii. Notice to CCI, IRDA if applicable application to tribunal to hold meeting under
section 230(1).
Preparation of Valuation Report
Simultaneously, Registered Valuers are requested to b. After obtaining the Tribunal’s order containing
prepare a Valuation Report and the swap ratio for directions to hold meeting(s) of members/creditors,

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the company should make arrangement for the issue ii. The number of creditors or class of creditors or
of notice(s) under form CAA-2 of the meeting(s). the number of members or class of members, as
the case may be, who voted at the meeting either
i. The notice should be in Form No. CAA- 2 of in person or by proxy;
the said Rules and must be sent by the person
authorised by the Tribunal in this behalf. iii. Their individual values; and
ii. Generally, the Tribunal directs that the notice iv. The way they voted.
of meeting of the creditors and members or xi. Petition to Tribunal for confirmation of scheme
any class of them be given through newspaper
advertisements also. In such case, such notices a. A petition must be made to the Tribunal for
are required to be given in the prescribed Form confirmation of the scheme of compromise or
and published once in an English newspaper arrangement. The petition must be made by the
and once in the regional language of the State company.
in which the registered office of the company is
i. The petition is required to be made in Form No.
situated
CAA-5.
iii. Tribunal also appoints Scrutinizer for holding ii. On hearing the petition the Tribunal shall fix
voting through postal ballot and e-voting. the date of hearing and shall direct that a notice
ix. Convening of General Meeting of the hearing shall be published in the same
newspapers in which the notice of the meeting
a. At the General Meeting convened by the Tribunal, was advertised.
resolution will be passed approving the scheme of
amalgamation with such modification as may be xii. Obtaining order of the Tribunal sanctioning the
proposed and agreed to at the meeting. scheme

i. The Extraordinary General Meeting of the a. An order of the Tribunal on summons for directions
Company for the purpose of amendment of should be obtained which will be in Form No. CAA. 6.
Object Clause, consequent change in Articles and xiii. Filing of copy of NCLT order with ROC
issue of shares can be convened on the same day
either before or after conclusion of the meeting a. Certified copy of the order passed by the Tribunal
convened by the Tribunal for the purpose of required to be filed with INC-28 as prescribed in the
approving the amalgamation. Companies Act, 2013 within a period of 30 days of the
receipt of the order.
ii. Following points of difference relating to the
holding and conducting of the meeting convened xiv. Other Important points:
by the Tribunal may be noted: a. Section 2393 provides that the books and papers of a
company which has been amalgamated with, or whose
1. Proxies are counted for the purpose of
shares have been acquired by, another company shall
quorum;
not be disposed of without the prior permission of
2. Proxies are allowed to speak; the Central Government and before granting such
permission, that Government may appoint a person
3. The vote must be put on poll or by voting to examine the books and papers or any of them for
through electronic means. the purpose of ascertaining whether they contain
any evidence of the commission of an offence in
iii. The minutes of the meeting should be finalized in
connection with the promotion or formation, or the
consultation with the Chairman of the meeting
management of the affairs, of the transferor company
and should be signed by him once it is finalised
or its amalgamation or the acquisition of its shares.
and approved. Copies of such minutes are
required to be furnished to the Stock Exchange b. In case of Banking company different procedure will
in terms of the listing requirements. be applicable as prescribed by RBI.
x. Reporting of the Results M&A: THE TRIGGER POINTS FOR
a. The chairman of the meeting will submit a report of COMPETITION LAW
the meeting indicating the results to the concerned
Tribunal in Form No.CAA-4 of the said Rules within Following statutory provisions apply
the time fixed by the Tribunal, or where no time has to mergers, amalgamations and
been fixed, within three days after the conclusion of acquisitions from competition law
the meeting. perspective:

i. The number of creditors or class of creditors or  The Competition Act, 2002

the number of members or class of members, as  The Competition Commission
the case may be, who were present at the meeting; of India (Procedure in regard to the

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ARTICLE Mergers and Acquisitions – Strategies and Execution

transaction of business relating to combinations) more than Rs.350 crore in India or turnover of not more
Regulations, 2011 than Rs.1,000 crore in India, are exempt from Section 5 of
the Act for a period of 5 years.
 The Competition Commission of India (General)
Regulations, 2009 Under section 6:
 Notifications issued by Competition Commission of Section 6 of the Competition Act, 2002 prohibits any
India from time to time. person or enterprise from entering into a combination
which causes or is likely to cause an appreciable adverse
CCI Approval:
effect on competition within the relevant market in India
Section 5 provides the financial thresholds and all and if such a combination is formed, it shall be void.
combinations exceeding these financial thresholds are Section 6 read as under:
required to be mandatorily approved by the Commission.
Regulation of combinations
Combination means…
 No person or enterprise shall enter into a combination
Combinations as envisaged under section 5(a), 5(b) and which causes or is likely to cause an appreciable
5(c) were explained by the Supreme Court in Competition adverse effect on competition within the relevant
Commission of India v. Thomas Cook (India) Ltd. & Anr. market in India and such a combination shall be void.
(Civil Appeal No.13578 of 2015) in the following manner:
 Subject to the provisions contained in sub-section
 Under section 5(a), a combination is formed if the (1), any person or enterprise, who or which proposes
acquisition by one person or enterprise of control, to enter into a combination, shall give notice to the
shares, voting rights or assets of another person or Commission, in the form as may be specified, and
enterprise subject to certain threshold requirement the fee which may be determined, by regulations,
that is minimum asset valuation or turn over within disclosing the details of the proposed combination,
or outside India. within thirty days of—
 Under Section 5(b) of the Act the combination is  approval of the proposal relating to merger or
formed if the acquisition of control by a person over amalgamation, referred to in clause (c) of section
enterprise when such person has already acquired 5, by the board of directors of the enterprises
direct or indirect control over another enterprise concerned with such merger or amalgamation, as
engaged in the production, distribution or payment of the case may be;
a similar or identical or substitutable good provided
that the exigencies provided in section 5(b) in terms  execution of any agreement or other document
of asset or turnover are met. for acquisition referred to in clause (a) of section
5 or acquiring of control referred to in clause (b)
 Under section 5(c) merger and amalgamation are of that section.
also within the ambit of combination. The enterprise
remaining after merger or amalgamation subject to a  The provisions of this section shall not apply to share
minimum threshold requirement in terms of assets or subscription or financing facility or any acquisition,
turnover is covered within the purview of section 5(c). by a public financial institution, foreign institutional
investor, bank or venture capital fund, pursuant to
Threshold: any covenant of a loan agreement or investment
Under section 5: agreement.

Section 5 is applicable when the combined assets of the Section 54(a) of the Act provides Exemption to
parties or the group to which the target entity would Banking Sector and Oil and Gas Sector.
belong after the acquisition.
M&A: ROLE OF GOVERNANCE
PROFESSIONALS
We can understand that how different regulators
and professionals ensure the governance and their
responsibilities in case of M&A Transactions. With the
growing economy, the corporates would grow at much
larger pace and would also take the benefits of corporate
restructuring techniques permitted in law. With all this,
De Minimis Exemption: law makers and regulators will ensure to have a better
governed economy and governance level will keep on
rising. In future many new sectors will get evolved and
more sectoral regulators would get involved in M&A
According to Notification No.S.O.988(E) dated March Transactions approvals, as each sectoral regulator will
27, 2017, all forms of combinations involving assets of not need to ensure the interest of its stakeholders, hence,

56 | AUGUST 2023 CHARTERED SECRETARY

 Mergers and Acquisitions – Strategies and Execution

ARTICLE
4) Structuring Business Deal: After finalizing the
merger and the exit plans, the new entity or the take-
over company or target company has to take initiatives
Governance is no longer the luxury of for marketing and creating innovative strategies to
Compliance, it's an expectation of the regulator enhance business and its credibility. The entire phase
and the stakeholders of the Company. emphasize on structuring of the business deal.
5) Stage of Integration: This stage includes both the
company coming together with their own parameters.
It includes the entire process of preparing the
governance level in M&A Transactions will keep on rising document, signing the agreement, and negotiating
in coming future. Although governance is important in the deal. It also defines the parameters of the future
M&A Transactions, but timing of completion of M&A relationship between the two.
Transactions is also very important. Members would
have approved the scheme based on valuation derived as CONCLUSION
on a particular date. In today’s dynamic world, there are
innumerable factors which can affect the valuation within As we navigate through 2023, it’s evident that M&A
a short span of time. If the entire process of M&A takes 7-8 activity continues to play a critical role in shaping the
months or even a year or more, then the whole rationale global business landscape. The dynamic and resilient
of undertaking the M&A Transaction may get defeated nature of M&A activity is highlighted by the trends
and the valuation, which would have been the basis of the we’ve seen this year. With the continual advancement in
scheme, may not remain relevant at all. As due diligence technology, ongoing economic recovery, and abundance
is wholesome exercise that require specialized knowledge, of capital available for investments, it seems likely that
expertise & experience to complete the task in time bound M&A activity will continue to flourish in the foreseeable
& effective manner. The role of governance professionals future. Corporations and investors should stay agile and
is much crucial in the following pre-requisite arenas for attentive to the changing trends and opportunities within
Merger and Amalgamation. the M&A landscape. Rapid strategic change is a necessity
for most companies in these days of globalization, hyper
Prerequisites of Merger and Acquisition: competition, and accelerated technological change.

1) Due Diligence: It refers to the investigating effort REFERENCES:

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