India Wants a Say in Global Mergers and Acquisitions
In what could be seen as an attempt to flex its economic muscles, India could be getting ready with a new law that would force global technology companies to seek approvals from an antitrust agency in the country before its mergers and acquisitions can be completed.
The government appears to have taken a leaf out of the books of the Chinese and some European governments that have existing laws applicable to technology companies operating out of their territories and seeking to acquire or merge with other enterprises. In the past, several big mergers have raised the hackles of law enforcement agencies in these countries.
What is this all about?
A report by Bloomberg News says deals where transaction value is over $250 million (roughly translates to Rs.2000 crore) would require the sign-off from an antitrust regulator but only in cases where the enterprises have substantial business operations in India. A draft legislation to this effect is in the works and may be presented to the lawmakers in Parliament soon.
The legislation would also bring forth specific rules that explains substantial business operations in terms of how it impacts the domestic market and such other variables. However, these would be at a later stage as the draft legislation first needs to be signed off by the lawmakers, who may first want to send it to one of their select committees for more study.
What’s the existing regulation?
Of course, there is no official word from the government on this, but in the past there have been instances where India has raised such concerns over global mergers and acquisitions but barring scrutiny from the Competition Commission of India, no further action was taken. And this has been true for not just global mergers but domestic ones as well.
The current regulations only allow the antitrust regulator to examine deals based on asset size and the turnover of the companies involved but once the new law comes into effect, it would give more teeth to the commission to scrutinize the transactions based on their total value.
Why is there a growing concern?
In the past, certain sections of the government had raised concerns over acquisitions like the one Facebook (now Meta) made of WhatsApp, given that the messaging app boasted the largest user base in India. Given that India’s internet user base is over 830 million and growing fast, the government is considering all options to keep anti-competition at bay.
How have other countries reacted?
Readers would know that China has always managed to wield power over mergers though in recent times it has become more so, as was evident when Qualcomm scrapped a $44 billion buyout of rival chipmaker NXP Semiconductors after Chinese regulators refused to approve the deal over antitrust issues.
While Germany had amended the law to prescribe a deal value threshold of 400 million euros ($400 roughly) for merger notifications, in Austria, this number is closer to what India is proposing in its legislation.
Value of transaction from an Indian standpoint includes every valuable consideration, both direct and indirect, or deferred by any acquisition, merger or amalgamation, says the report quoting the draft document, which also aims to reduce the time limit for approvals to about 150 days from the existing 210 days.