SECTION 1: Market overview
1.1 What have been the key trends in the M&A market in
your jurisdiction over the past 12 months and what have been
the most active sectors?
India continues to see reasonably high volumes of M&A
activity, both domestic and cross-border, driven by a
relatively stable economy, the liberalisation of government
policies and a continued interest from both strategic and
financial investors. The telecom industry has seen the largest
deals, accounting for 37.30% of all deal activity, followed by
the technology sector (17.55%), financial services (12.61%) and
energy, mining and utilities (9.7%).
The main themes which were drivers for M&A activity in
2017 were: substantial domestic M&A activity; the
prominence of strategic acquirers over financial investors;
trend towards "control deals" by financial investors; and deals
prompted by the distress of the seller or the target.
1.2 What M&A deal flow has your market experienced and
how does this compare to previous years?
2017 saw a higher volume of deals (614 deals worth $77.6
billion), compared to 2016 (421 deals valued at $59.7
1.3 Is your market driven by private or public M&A
transactions, or both? What are the dynamics between the
Private deals represent the majority of M&A activity in
India. Historically, public M&A has seen higher levels as
compared to 2017. That said, the public markets did see some
large stock deals in 2017, whereas in the past, cash deals
predominated. 2018 is likely to see more public M&A than
2017 and the trend of bulge-bracket private equity sponsors to
focus on buyouts is likely to gather momentum.
1.4 Describe the relative influence of strategic and
financial investors on the M&A environment in your
Recently, strategic acquirers have had the upper hand in
acquiring control of large assets, primarily because of their
willingness to ascribe higher valuations, justified by
synergies and their ability to tolerate longer gestation
periods. However, some of these acquirers are themselves backed
by private equity, and private equity players have been active
sellers in exits over the course of recent years, including
2017. Private equity acquirers predominate in non-control
deals, and in certain industries like real-estate or
SECTION 2: M&A structures
2.1 Please review some recent notable M&A transactions
in your market and outline any interesting aspects in their
structures and what they mean for the market.
The merger of Idea Cellular and Vodafone (expected to close
mid-2018), valued at $23 billion, is set to create India's
largest mobile telecom operator.
2.2 What have been the most significant trends or factors
impacting deal structures?
The most significant factors have been a revamped insolvency
law and new loan restructuring guidelines forcing sales by
distressed groups; consolidation in the telecom industry; and a
shakeout in the e-commerce and online payments industries.
SECTION 3: Legislation and policy changes
3.1 Describe the key legislation and regulatory bodies that
govern M&A activity in your jurisdiction.
Key legislation and regulatory bodies can be classified as
(i) Companies Act, 2013
Administered by the Ministry of Corporate
Affairs, the Companies Act is the primary legislation governing
both private and public companies in India. All corporate
mergers are implemented under the provisions of the Companies
(ii) Securities Regulations
The Securities and Exchange Board of India
(Sebi) is the securities markets regulator. Sebi (Substantial
Acquisition of Shares and Takeovers) Regulations, 2011, govern
M&A transactions that involve the acquisition of a
substantial stake of a publicly listed company. In parallel,
Sebi (Delisting of Equity Shares) Regulations, 2009, govern
take-private transactions and Sebi (Listing Obligations and
Disclosure Requirements) Regulations, 2015, regulate Pipes
(private investment in public equity) and stock-for-stock
(iii) Foreign Exchange
Management Act, 1999 (Fema) Administered by the
Reserve Bank of India (RBI), Fema and the regulations issued by
the RBI thereunder regulate all capital inflows and
(iv) FDI Policy
India's FDI (foreign direct
investment) Policy issued by the Central Government contains
the framework for regulating foreign investment into India,
including sector-specific restrictions/prohibitions.
(v) Competition Act, 2002
Transactions above prescribed thresholds
require approval of the anti-trust regulator, the Competition
Commission of India (CCI).
(vi) Income Tax Act, 1961
Administered by the Income Tax Department, the
Income Tax Act along with double tax avoidance treaties entered
into by the Government of India (if applicable in a given case)
govern the tax treatment of M&A transactions.
(vii) Insolvency and
Bankruptcy Code, 2016 Administered by the
National Company Law Tribunals with respect to auction sales
under a scheme of restructuring.
|NB: Values may exclude
certain transactions, for example asset
3.2 Have there been any recent changes to regulations or
regulators that may impact M&A transactions or activity and
what impact do you expect them to have?
Recent legislative changes include the
(i) Companies (Amendment) Act, 2017
The Companies Act, 2013 was a significant piece
of legislation as it overhauled the erstwhile Companies Act,
1956. The 2013 Act has since undergone amendments in 2015 and
2017. The 2017 amendment has introduced several changes to the
framework of the Act – the amendments are being
brought into force in a phased manner.
(ii) Fema The principal
regulations governing foreign investment are the Foreign
Exchange Management (Transfer or Issue of Security by a Person
Resident Outside India) Regulations, 2017, which have replaced
an earlier set of regulations. There have been a number of
amendments to these regulations in 2017, which have simplified
and liberalised the regime for foreign investment in India.
(iii) Insolvency and Bankruptcy Code, 2016
(IBC) and Restructuring Guidelines of the Reserve Bank of India
Implementation of the recently enacted
bankruptcy code has become a significant driver for M&A in
India, primarily through auction sale of businesses in
bankruptcy, but also, by forcing owners of distressed
businesses to aggressively pursue a sale. Simultaneously, loan
restructuring guidelines of the RBI have been overhauled to
encourage lenders of distressed companies to force a change of
(iv) Competition Act, 2002
The Central Government has exempted
acquisitions involving targets with assets of less than $53
million or revenues of less than $153 million from merger
control requirements, effectively raising the de
minimis threshold. This has made smaller acquisitions, as
well as acquisitions of growth-stage technology companies,
easier and quicker to complete.
(v) Sebi (Substantial Acquisition of Shares
and Takeovers) Regulations, 2011 (Takeover Code)
A number of amendments to the Takeover Code
were made in 2015, 2016 and 2017, with the aim of making it
easier and quicker to implement transactions involving the
acquisition of a substantial stake in a publicly listed
company, especially in cases of distress.
3.3 Are there any rules, legislation or policy frameworks
under discussion that may impact M&A in your jurisdiction
in the near future?
(i) Imposition of long term
capital gains tax: Recent
amendments to tax laws have imposed income tax on long-term
capital gains on the sale of listed equity shares (previously
most transfers of listed shares were exempted from capital
gains tax). However, notional gains earned on such shares till
January 31 2018 are exempt irrespective of when they are
(ii) The Union Budget for
2017-18 also proposes to tax all M&A transactions in which
a company with higher accumulated profits merges with a company
with lower profits to avoid paying dividend distribution tax.
In such cases, dividend calculation would now include the
accumulated profits of the amalgamating company on the date of
(iii) Amendments to the stamp
duty regime Varying rates of
stamp duty across Indian states have historically made certain
states unattractive for M&A activity, particularly asset
sales and mergers. The Ministry of Finance is proposing to
bring uniformity in stamp duty in all Indian states, which
could boost M&A activity.
SECTION 4: Market idiosyncrasies
4.1 Please describe any common mistakes or misconceptions
that exist about the M&A market in your jurisdiction.
There is a common belief that sale of an overseas holding
company is the better way to effect sale of an Indian company.
This may not hold good in cases where the Indian company
represents the primary asset that is sought to be sold, and
particularly if there are there are third party investors at
the India level. There is also a strong rationale, pursuant to
recent changes to the Mauritius and Singapore tax treaties, for
private equity investors to exit their investments in portfolio
companies directly at the India level.
Similarly, there is a belief that the use of Indian law
governed transaction documents increases the risk of exposure
to delays in the Indian legal system. The Indian government has
made improvements to the Indian court system and is actively
encouraging arbitration (including through recent amendments to
Indian arbitration law) to address this concern. This belief
does not hold true in cross border transactions, which provide
for international arbitration seated in litigation friendly
jurisdiction such as London or Singapore.
4.3 Are there frequently asked questions or often
overlooked areas from parties involved in an M&A
India has exchange control laws, which regulate how shares
of an Indian company may be transferred – this
represents the biggest area of Indian law which gives rise to
such questions. Indian antitrust, tax and securities laws also
provide for long-arm jurisdiction with respect to certain
overseas deals, which involve indirect sale of an Indian
Specifically with respect to publicly listed companies, the
Takeover Code provides for a mandatory public tender in
connection with any direct or indirect acquisition of a
substantial stake (25%) or control of a publicly listed
company. Delisting regulations pose additional challenges in
taking a company private.
4.2 What measures should be taken to best prepare for your
Legal and tax advice should be sought early on in the
process, before any heads of terms are agreed.
SECTION 5(a): Public M&A
5.1 What are the key factors involved in obtaining control
of a public company in your jurisdiction?
Under the Takeover Code, a person who enters into an
agreement to acquire substantial stake (25%) or control of a
publicly listed company is required to make a public tender
offer to acquire at least an additional 26% of the target
company's shares (from public / institutional shareholders). At
the same time, the acquirer must maintain a public float of at
least 25%, unless the company is delisted as part of the
transaction. Delisting a public company is particularly
challenging in India as the acquirer must do so through a
delisting offer, which involves a minimum acceptance level of
90% and a reverse book-building process to determine the offer
price, which often results in a significant premium.
5.2 What conditions are usually attached to a public
Mandatory regulatory approval, such as merger control
approval from the Competition Commission.
Except for such regulatory approvals, there is limited scope
to impose additional conditions in a public tender offer. If
the underlying transaction is terminated because an essential
condition, over which the acquirer has no control, is not
satisfied, the acquirer is permitted to withdraw the tender
5.3 What are the current trends/market standards for break
fees in public M&A in your jurisdiction?
Break fees are not common, nor are go-shop provisions.
SECTION 5(b): Private M&A
5.4 What are the current trends with regard to
consideration mechanisms including the use of locked box
mechanisms, completion accounts, earn-outs and escrow?
Completion accounts are more common than locked box
arrangements. However, locked box mechanisms are gaining
Earn-outs are quite common (in the range of 10% to 30%),
though it is worth keeping in mind that there are some
regulatory limitations, which apply to earnouts in cross border
Over the last few years, escrows have become quite standard,
in transactions involving both – business owners and
private equity sellers. However, the escrow amount tends to be
modest (5% to 10%).
5.5 What conditions are usually attached to a private
There is no practice of private takeover offers in India,
except in transactions involving the exercise of tag-along or
drag-along rights with respect to sale by a majority
shareholder; or the sale of pledged shares by lenders. The main
reason for this is that the board of directors of a private
company must approve a sale of shares.
5.6 Is it common practice to provide for a foreign
governing law and/or jurisdiction in private M&A share
It is not common for M&A transactions to be governed by
foreign law. However, agreements for cross-border transactions
often provide for international arbitration seated in Singapore
5.7 How common is warranty and indemnity insurance on
private M&A transactions?
Warranty and indemnity insurance is not common in India,
although it is a growing trend, especially in private equity
5.8 Discuss the exit environment in your jurisdiction,
including the market for IPOs, trade sales and sales to
2017 was a record-year for IPOs, driven by a buoyant market
and rich valuations compared to trade sales. To an extent, this
reduced the volume of trade sales by financial sponsors in 2017
(although it was a relatively healthy year from that
perspective as well). 2017 saw further development of the trend
for larger financial sponsors to focus on buy-outs as against
acquiring minority positions.
SECTION 6: Outlook 2018
6.1 What are your predictions for the next 12 months in the
M&A market and how do you expect legal practice to
M&A volumes are likely to grow in the next 12 months,
especially transactions involving public companies,
infrastructure assets and the sale of distressed or insolvent
companies as part of a restructuring.
Mumbai and New Delhi, India
T + 91 22 4079 1062, + 91 11 4259 9290
Harsh Pais is a partner in Trilegal with a focus on
M&A. In the course of his practice, Pais advises
corporations and institutions extensively on
cross-border acquisitions (involving public and private
targets) and joint-ventures. He also advises on
transactions in regulated sectors such as telecom and
In addition, Pais provides strategic counsel to
clients on matters involving change of control
transactions, corporate governance, securities laws,
troubled joint ventures and crisis management.
Pais has been ranked as a leading lawyer for M&A
and private equity in India by Chambers and Partners,
IFLR1000 and RSG. He has past experience at a major
international law firm in New York and is additionally
qualified in the UK and New York.
New Delhi, India
T: + 91 11 4163 9393
Clarence Anthony is counsel, Trilegal with a focus
on private equity, mergers and acquisitions and funds.
He has extensive experience on transactions in
regulated sectors, such as insurance, financial
services and real estate.
His clients include some of the largest private
equity funds and multinational corporations in
Anthony is an alumnus of Government Law College,
Mumbai and is a solicitor registered with the Bombay
Incorporated Law Society. Anthony is also qualified to
practice in England and Wales.