The Ministry of Corporate Affairs (MCA) on Tuesday notified key provisions of its merger control regime, including on deal value thresholds for regulatory oversights and exemptions, which, experts said, would enable the antitrust regulator to better capture key transactions in the digital sector among others.
Deals above Rs 2,000 crore and where the target firm has “substantial business operations in India” will require mandatory clearance from the Competition Commission of India (CCI), according to one of the notifications.
The deal value threshold, introduced in the amended competition law of 2023, would help capture transactions that could otherwise escape the regulatory scrutiny based on the usual asset or turnover limits, experts said.
Since the MCA notification comes into effect from September 10, the CCI is expected to roll out required regulations this week to facilitate the actual implementations.
Another notification stipulates that any acquisition, merger or amalgamation of an enterprise with an asset size of less than Rs 450 crore and annual turnover of less than Rs 1,250 crore would be spared the CCI approval requirement.
As per a third notification, a company would be considered an affiliate of another if the latter has the right or ability to access commercially sensitive information or has a 10% or more stake or voting right or has the right to have a representation on the former’s board of directors.
This, some experts reckon, could lead to a number of unintended merger notifications, particularly for private equity players who need to access such information for corporate governance.
The introduction of the deal value threshold brings the CCI on a par with global regulators like those in the US, Germany and Austria, said Nisha Kaur Uberoi, partner and chair (Competition Law) at JSA.
“However, the devil will lie in the details – the enabling regulations and the need for CCI to enhance capacity to keep up their efficient track record of clearing M&A deals will be key to ensure ease of doing business remains unimpacted,” Uberoi added.
The details on what constitutes substantial business of the target entity is expected to be part of the CCI’s regulations, said Anshuman Sakle, partner at Khaitan & Co.
“Another significant change is that parties can now make open market purchases and then seek a post-facto approval from the CCI as well,” Sakle said.
“This would be hugely beneficial for on-market deals and allow for pricing to be factored in while making acquisitions in tranches,” he added.
Mayank Arora, director (Regulatory) at Nangia Andersen India, said the notified Competition (Minimum Value of Assets or Turnover) Rules would “ease M&A activity in entities that do not pose a systemic risk” of holding a dominant market position.
“The move should help investors in start-ups looking for an exit, or exploring synergies with other start-ups,” Arora said.
Unnati Agrawal, partner at INDUSLAW, said the deal value threshold will enable CCI to “review transactions which were previously not notifiable, such as in the digital markets, potentially making more deals notifiable and increasing the number of merger filings before the CCI”.
Agrawal added that an expedited timeline for review may also put pressure on the CCI, especially when an increase in merger filings is anticipated.
“Timelines and structure of ongoing deals, particularly those with a global footprint, will also have to be revisited to analyse notification requirements in light of the introduction of deal value threshold,” she added.
