The Indian Mergers and Acquisitions (M&A) market has matured into a strategic anchor for global dealmaking, defined by a shift toward high transaction value rather than mere volume.The first half of 2025 recorded a substantial total deal value of US$50 billion, marked by a rise in strategic, large-scale transactions, including 10 deals exceeding a billion dollars.Domestic consolidation remains the primary market driver, accounting for 86% of total M&A deal volume.
For global acquirers, Indian assets frequently command high-valuation multiples, a factor stemming partly from India’s position as the world’s fourth-largest stock market since January 2024. While this high pricing presents a challenge, the global expectation of easing inflation and decreasing interest rates anticipated for 2025 suggests lower borrowing costs, which supports highly strategic, big-ticket deals. Sectorally, the Power industry leads M&A activity with US$8.5 billion in H1 2025, driven significantly by the renewable energy segment, alongside strong activity in the Consumer Products and Retail sectors.
Corporate Restructuring and the Companies Act, 2013
The formal execution of mergers and amalgamations is primarily governed by the Companies Act, 2013, under which Sections 230 to 232 regulate Schemes of Arrangement. This statutory framework mandates judicial oversight by the National Company Law Tribunal (NCLT), ensuring procedural rigor and the protection of stakeholder rights.
The procedural execution requires initial board approval of the draft scheme, pursuant to Section 173(3) of the Companies Act, 2013, and a mandatory valuation report from a registered valuer or Category I Merchant Banker to determine a fair share exchange ratio.Following shareholder and creditor approvals, the NCLT rigorously scrutinizes the scheme before issuing a final sanction, which must then be filed with the Registrar of Companies (ROC) via Form INC-28. To enhance efficiency for simpler transactions, the Ministry of Corporate Affairs has liberalized the fast-track merger framework, allowing a broader range of unlisted companies and subsidiary transactions to bypass the full NCLT judicial process.
Competition Clearance: The Competition Act, 2002
For transactions crossing predefined thresholds, mandatory clearance from the Competition Commission of India (CCI) is a pre-closing condition under the Competition Act, 2002, which aims to prevent combinations likely to cause an Appreciable Adverse Effect on Competition (AAEC) in India.
The most significant recent reform is the introduction of the Deal Value Threshold (DVT). Prior notification to the CCI is now mandatory if the transaction value exceeds INR 20 billion (approximately USD 240 million) and the target enterprise has “substantial business operations in India” (SBOI). The CCI has implemented differential criteria for SBOI: for digital services, the test is met if end users or turnover in India constitute 10% or more of global numbers; for non-digital services, the 10% threshold must be met and must exceed an absolute turnover value of INR 5 billion.
Despite these low thresholds, the De Minimis Exemption remains for small targets, exempting transactions if the acquired enterprise has assets not exceeding INR 450 crore or turnover of not more than INR 1250 crore in India. The CCI typically aims to form its prima facie opinion within 30 working days during the Phase I investigation.
Regulating Public Takeovers: SEBI (SAST) Regulations, 2011
Acquisitions of companies listed on Indian stock exchanges are governed by the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (the Takeover Regulations). The obligation for an acquirer to make a mandatory Public Announcement (PA) for an open offer is triggered when a party, alone or with Persons acting in concert (PACs), intends to acquire shares that would entitle them to exercise 25% or more of the voting rights.
An acquirer already holding 25% or more cannot acquire an additional 5% of shares in any financial year without triggering a fresh open offer. Crucially, the acquisition of “control” over the target company constitutes an open offer trigger, irrespective of the share percentage acquired.
The resulting mandatory open offer must be made to acquire a minimum of 26% of the total shares from public shareholders. The framework enforces equitable treatment, prohibiting the payment of non-compete fees to promoters above the price offered to the public.Furthermore, SEBI has relaxed the open offer trigger for entities listed on the Innovators Growth Platform (IGP), raising the direct acquisition threshold to 49% (instead of the general 25%) to provide greater control stability for high-growth companies.
Foreign Exchange Management Framework (FEMA)
Cross-border M&A and inbound foreign investments are regulated by the Foreign Exchange Management Act, 1999 (FEMA), the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (NDI Rules), and the government’s Foreign Direct Investment (FDI) Policy. Compliance is mandatory across entry routes (Automatic or Government approval), sectoral caps, and strict pricing guidelines.
A key regulatory focus is the operation of Foreign-Owned or Controlled Companies (FOCCs) and their ‘downstream investments’ into other Indian entities. Rule 23(4)(b) of the NDI Rules strictly prohibits FOCCs from utilizing funds borrowed from the domestic Indian markets for onward downstream investments. Such investments must be financed exclusively through the FOCC’s internal accruals or by requisite funds brought in from outside India. This restriction ensures that FDI-driven consolidation is backed by genuine external capital.
Tax Implications for Corporate Restructuring (Income Tax Act, 1961)
Tax efficiency is crucial, with the Income Tax Act, 1961 providing specific mechanisms. An acquisition structured as a Slump Sale, the transfer of an undertaking as a whole for a lump sum consideration is taxed as a capital gain under Section 50B. The net worth of the undertaking is treated as the cost of acquisition for computing capital gains, and a Chartered Accountant’s report in Form 3CEA is mandatory for certification. Notably, if the undertaking was held for more than 36 months, the resulting long-term capital gain does not benefit from indexation on the cost of acquisition under Section 50B.
Regarding amalgamations, the ability to carry forward accumulated losses and unabsorbed depreciation is governed by Section 72A. However, a significant change is anticipated with the proposed insertion of a new subsection (6B) to Section 72A, effective April 1, 2025, which will restrict the loss carry-forward period for the amalgamated company to the residual portion of the eight assessment years limit, preventing the indefinite carry-forward of inherited losses.
Corporate Governance: Related Party Transactions (RPTs)
Corporate governance standards require rigorous scrutiny of arrangements involving “Related Parties” (RPs), broadly defined under Section 2(76) of the Companies Act, 2013, to prevent the diversion of corporate funds. The Securities and Exchange Board of India (SEBI) has persistently strengthened oversight for listed entities. Effective April 1, 2023, the threshold for defining a ‘material RPT’ was lowered, requiring extensive review if a transaction involves any person or entity holding 10% or more of the equity shares in the listed entity.
Further regulatory institutionalization is expected with the implementation of formalized Industry Standards by the Industry Standards Forum (ISF), effective September 1, 2025, mandating specific minimum disclosures and documentation for Audit Committee and shareholder review, thereby enhancing transparency in consolidation deals.
Conclusion
Successful M&A execution in India requires an integrated legal strategy that anticipates key regulatory demands. Acquirers must navigate the procedural rigor of the Companies Act, 2013 alongside the new, lower Deal Value Thresholds under the Competition Act, 2002, which explicitly target high-value digital deals. Financial structures must strictly comply with FEMA, 1999, particularly concerning the prohibition on using domestic borrowed funds for downstream investments by Foreign-Owned or Controlled Companies.
Finally, the impending tax reforms under Section 72A of the Income Tax Act, 1961, capping loss utilization post-April 2025, necessitates meticulous financial due diligence focused on operational synergy rather than long-term tax benefits. Robust legal preparedness across these pillars is essential for compliant and timely global M&A closures.