The ministry of corporate affairs is reportedly going to mandate the Competition Commission of India (CCI) to clear M&A proposals in 180 days rather than 210 days it takes at present. This will help to finalise deals faster and avoid unnecessary bureaucratic logjam. Anecdotal evidence suggests that globally 80-85% of M&As do not raise any competitive concerns and are generally approved by concerned authorities within a single month?s time. Of course, some complex cross-border mergers do take more time, but a majority of cases can indeed be cleared much faster than even 180 days. In fact, the International Competition Network, an association of global competition authorities, had suggested that simple mergers should be cleared within six weeks and certain complex cases could take a maximum of six months? time. In order to boost shareholders? confidence, it is desirable to get clearance without much delay. In addition, the ministry of corporate affairs? decision to fix the turnover and assets threshold of the target enterprise at Rs 750 crore and Rs 250 crore, respectively, to get CCI clearance is welcome. This will ensure that only large M&As are placed before CCI for approval and smaller ones do not add to the regulator?s workload. While most M&As bring about efficiency, which are beneficial to the shareholders and consumers at large, some may have anti-competitive effects that the CCI must look into. Globally, vertical mergers, which are between different stages of production cycle, and conglomerate mergers, which are between firms operating in unrelated markets, are rarely challenged on competition grounds. Those that are challenged are mostly horizontal mergers between firms producing the same product where there is a higher probability of creation of a monopoly.
After the global downturn, Indian companies are once again looking at both domestic and cross-border acquisitions with a new zeal. During the first half of this year, Indian companies were involved in 300 M&A deals, which was up almost 70% as compared with the same period last year. About 33% of the deals in the same period were outbound acquisitions as against 23% during the same period last year and domestic deals continued to be the major contributor with 53% of the total share. Going by the current trend, this year is likely to surpass the record high M&A deals seen in 2007. Acquisitions have now become an important area of capital market activity and are a favoured route for growth and consolidation. The regulatory regime must not delay processes unnecessarily.
