India Mergers & Acquisitions

In the wake of economic reforms, Indian industries have started restructuring their operations around their core business activities through acquisition and takeovers because of their increasing exposure to competition both domestically and internationally.

Mergers or Amalgamations

Laws in India use the term ‘amalgamation’ for merger. The Income Tax Act,1961 [Section 2(1A)] defines amalgamation as the merger of one or more companies with another or the merger of two or more companies to form a new company, in such a way that all assets and liabilities of the amalgamating companies become assets and liabilities of the amalgamated company and shareholders not less than nine-tenths in value of the shares in the amalgamating company or companies become shareholders of the amalgamated company.

Thus, mergers or amalgamations may take two forms:-

- Merger through Absorption: An absorption is a combination of two or more companies into an ‘existing company’. All companies except one lose their identity in such a merger. For example, absorption of Tata Fertilisers Ltd (TFL) by Tata Chemicals Ltd. (TCL). TCL, an acquiring company (a buyer), survived after merger while TFL, an acquired company (a seller), ceased to exist. TFL transferred its assets, liabilities and shares to TCL.

- Merger through Consolidation: A consolidation is a combination of two or more companies into a ‘new company’. In this form of merger, all companies are legally dissolved and a new entity is created. Here, the acquired company transfers its assets, liabilities and shares to the acquiring company for cash or exchange of shares. For example, merger of Hindustan Computers Ltd, Hindustan Instruments Ltd, Indian Software Company Ltd and Indian Reprographics Ltd into an entirely new company called HCL Ltd.

Acquisitions and Takeovers

Under the Monopolies and Restrictive Practices Act, takeover meant acquisition of not less than 25 percent of the voting power in a company. While in the Companies Act (Section 372), a company’s investment in the shares of another company in excess of 10 percent of the subscribed capital can result in takeovers. An acquisition or takeover does not necessarily entail full legal control. A company can also have effective control over another company by holding a minority ownership.

Regulations for Mergers & Acquisitions

Mergers and acquisitions are regulated under various laws in India. The objective of the laws is to make these deals transparent and protect the interest of all shareholders. They are regulated through the provisions of :-

The Companies Act 1956

The Competition Act 2002

Our Services

Amritt has the expertise and resources to advise and support you through these transactions. In addition to strategic insight into values and options, we can help identify, negotiate, structure and close transactions.

In an Economist Intelligence Unit 2007 Survey, 63% of US and European respondents said they were interested in M&A targets from India.

Specifically we can

  • Assist in development of an acquisition strategy
  • Identify and vet target companies
  • Develop strategic rationale for transaction
  • Help with regulatory advice
  • Help with cross-cultural negotiations

By using our bi-culturally sensitive leadership, our clients benefit from:

  • Receive professional advice and qualified third party eyes during formulation and execution
  • Reduce risk of deal falling apart due to some miscommunication or cultural misstep
  • Benefit from access to on-the-ground resources in India

The vast majority of merger and acquisition transactions with Indian companies involve either private or “listed” companies. Most listed (public) companies are traded on the Bombay Stock Exchange or the National Stock Exchange.  Privately held companies may be family owned, employee-owned or investor owned. Some Indian companies are owned by a government (state or federal) and are often referred to as public sector undertakings or PSUs.

See our list of Companies in India for selected industries.

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