6. Technology & Talent Acquisition – To gain new technology, skilled employees, patents.
7. Strategic Benefits – Entry into global markets, leveraging brand value.
8. Survival – Weak companies may merge/take over to avoid closure.
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2. Process of Merger in India
The merger process is regulated under the Companies Act, 2013, and supervised by the National Company Law Tribunal (NCLT).
Step-by-Step Process:
1. Board Approval
Board of Directors of both companies approve the draft scheme of merger.
2. Valuation & Due Diligence
Independent valuer decides the swap ratio (share exchange).
Financial, legal, and tax due diligence is carried out.
3. Application to NCLT
Companies jointly file a petition to NCLT seeking approval of the merger scheme.
4. Meetings of Stakeholders
NCLT orders meetings of shareholders and creditors to approve the scheme by special resolution (majority in number and 3/4th in value).
5. Sanction by NCLT
If satisfied, NCLT sanctions the merger.
6. Filing with Registrar of Companies (RoC)
Certified copy of NCLT order filed with RoC.
7. Issue of New Shares
Transferor company dissolves, assets and liabilities vest in transferee company, and new shares are issued as per swap ratio.
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3. Process of Acquisition in India
An acquisition is when one company acquires control (majority shares or management) over another.
Step-by-Step Process:
1. Identification of Target Company – Acquirer identifies a suitable company for takeover.
2. Due Diligence – Detailed financial, operational, and legal review of the target.
3. Negotiation & Valuation – Agreement on price (cash, shares, or a mix).
4. Board Approval – Approval by both acquiring and target companies’ boards.
5. Compliance with SEBI (Takeover Code, 2011) – If listed, acquirer must make a public offer when acquiring more than 25% shares.
6. Filing with Competition Commission of India (CCI) – If transaction crosses prescribed thresholds.
7. NCLT/Regulatory Approval – For schemes involving restructuring.
8. Payment & Transfer of Shares – Acquirer pays consideration and gains control.
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4. Indian Law on Mergers & Acquisitions
M&A in India is governed by multiple laws:
1. Companies Act, 2013
Sections 230-234 deal with mergers, compromises, and amalgamations.
NCLT approval is mandatory.
Cross-border mergers also allowed (with RBI approval).
2. SEBI (Securities & Exchange Board of India)
SEBI Takeover Code, 2011 regulates acquisitions of listed companies.
Open offer is required when acquisition exceeds 25% voting rights.
3. Competition Act, 2002
Large mergers/acquisitions need approval from Competition Commission of India (CCI) to prevent monopoly and ensure fair competition.
4. Income Tax Act, 1961
Provides tax benefits for mergers (e.g., carry forward of losses, exemption on capital gains for shareholders in approved schemes).
5. Foreign Exchange Management Act (FEMA), 1999
RBI approval needed for cross-border M&A involving foreign entities.
6. Insolvency & Bankruptcy Code (IBC), 2016
Distressed companies can be acquired through insolvency resolution process.
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5. Concepts under Indian Law
1. Merger (Amalgamation) – Two companies combine to form one; one may dissolve into another.
2. Acquisition (Takeover) – One company purchases controlling interest in another.
3. Demerger – A company transfers part of its business into a separate entity.
4. Reverse Merger – Smaller company merges into larger one, but management of smaller company takes control.
5. Cross-Border Merger – Indian company merges with foreign company (regulated by Companies Act + FEMA).
6. Friendly vs Hostile Takeover – Friendly with board approval, hostile without it.
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Example (Real-life Indian Context)
Merger: HDFC Ltd merged with HDFC Bank in 2023 – India’s biggest corporate merger. Objective: financial synergy, better capital access, and larger customer base.
Acquisition: Walmart acquired 77% stake in Flipkart (2018) for $16 billion – largest acquisition in Indian e-commerce. Objective: global expansion and entry into Indian retail market.
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✅ Summary:
The objective of M&A is to achieve growth, efficiency, and market dominance. In India, mergers are governed by the Companies Act & NCLT, while acquisitions (especially of listed companies) are regulated by SEBI Takeover Code. Other laws like FEMA, Competition Act, and IBC also play an important role.
