An Entrepreneur's Guide to the M&A Sale Transaction Process in India
- Saturday, November 18, 2017
This compilation attempts to provide entrepreneurs considering a potential M&A sale transaction in India for their privately-held companies with a birds-eye overview of the M&A sale transaction process in India and insights into some of the noteworthy deal points typically negotiated by the parties. While not a comprehensive review of all the aspects and issues involved in doing a M&A sale transaction, it attempts to provide entrepreneurs with a reasonable idea of what to expect from the process and such deal points. An attempt has been made to capture the Indian context in transactions and the regulatory nuances associated with the M&A sale transaction in India.
This compilation also lucidly explains the various jargons and commonly used deal terms with an aim to bring familiarity with the process and its terms.
M&A SALE TRANSACTION. Transactions in which a company is sold, in part or full, are referred to as "mergers and acquisitions" or "M&A" transactions because such transactions typically involve either the merger of the company being sold (the "Target") into the Buyer or the acquisition by the Buyer, in full or part, either of shares in the Target, or all or substantially all the assets of the Target. None of the major acts or regulations in India, define the term M&A. The closest definition is available under the Income Tax Act, 1961 which defines "amalgamation" in the context of being tax neutral from the direct tax perspective.
As generally understood, M&A transactions are different from equity "financing" transactions, in which a company raises money by selling new shares of its equity securities to investors, even though equity financing transactions also involve the sale of share in the company and can sometimes result in a change in control of the company. In this compilation, we focus on the M&A sale transaction and more so in the Indian context.