Mergers & Acquisitions

A merger or acquisition is rarely just a legal transaction. It is a commercial decision with significant legal architecture behind it — and how that architecture is designed, documented, and executed has a direct bearing on what the parties actually end up with once the deal closes. Getting the legal side right is not a formality; it is the difference between a transaction that holds and one that unravels.

The M&A Landscape in India

Indian M&A operates across a layered regulatory framework. The Companies Act governs the corporate mechanics of mergers, demergers, and acquisitions of shares or businesses. SEBI's Takeover Code applies when listed company shares are involved. The Competition Act requires filings with the Competition Commission of India (CCI) when the transaction crosses prescribed thresholds. FEMA governs the cross-border dimension whenever a foreign entity is a buyer or seller. And the IBC has added a new route — the resolution plan — through which distressed assets are regularly acquired.

Navigating this framework requires counsel that can read across all these statutes simultaneously. A transaction that is clean from a Companies Act perspective may still run into FEMA approval requirements or CCI scrutiny. Missing any one of these layers can delay or derail a deal.

Transaction Structuring

Before documentation begins, the structure of the transaction needs to be decided. Share purchase, asset purchase, slump sale, merger by court scheme, demerger — each carries different implications for tax, stamp duty, regulatory approvals, liability transfer, and third-party consent requirements. The right structure for a transaction depends on what each party is trying to achieve and what they are trying to avoid.

Share Purchase vs Asset Purchase

In a share purchase, the buyer acquires the shares of the target company and inherits the entire entity — including its historic liabilities, pending litigation, and contractual obligations. The price is lower risk for the seller (who exits cleanly) but higher risk for the buyer (who takes on whatever the company has accumulated). In an asset purchase, the buyer selects specific assets and liabilities to acquire, leaving the rest with the seller. This gives buyers more control over what they take on, but requires individual transfers of each asset, which can be cumbersome and may trigger consent requirements under key contracts.

Slump Sale

A slump sale is the transfer of an entire business undertaking as a going concern for a lump sum consideration, without assigning individual values to each asset and liability. It is a commonly used structure for carve-outs — where a company transfers one of its business divisions to a buyer. The tax treatment of a slump sale is specific and has been the subject of significant litigation; getting the documentation right is essential.

NCLT-Sanctioned Mergers and Demergers

Mergers and demergers under Sections 230–232 of the Companies Act require sanction by the National Company Law Tribunal. The process involves shareholder and creditor meetings, regulatory notices, and ultimately a court order that sanctions the scheme and gives it binding effect on all parties — including creditors and employees. NCLT-sanctioned schemes are powerful tools for group reorganisations, but the process is time-consuming and requires careful preparation of the scheme document and supporting affidavits.

Legal Due Diligence

Legal due diligence is the process by which a buyer examines the legal health of the target before committing to a transaction. A well-conducted due diligence exercise surfaces issues that can affect the deal structure, the price, the representations and warranties the seller gives, or — in serious cases — whether the transaction should proceed at all.

The scope typically covers corporate records and constitution, material contracts, intellectual property ownership, employment and labour compliance, litigation and regulatory proceedings, real property title, and any sector-specific licences or approvals the business depends on. For businesses with a significant regulatory footprint — financial services, healthcare, telecom — the regulatory due diligence component can be as important as the corporate and commercial review.

Red Flags and Deal Killers

Not all due diligence findings are created equal. Some are cosmetic — minor compliance gaps that can be rectified before closing. Others are structural — undisclosed litigation, title defects in key assets, or regulatory non-compliance that the target has been carrying for years. Part of the value of experienced M&A counsel is the ability to distinguish between the two quickly, and to advise on which findings warrant a price adjustment, a specific indemnity, an escrow, or a walk-away.

Transaction Documentation

The transaction documents — term sheet, share purchase agreement (SPA) or business transfer agreement (BTA), shareholders' agreement, and ancillary documents — are the legal expression of the commercial deal. Every significant commercial point needs to find its way into the documents accurately, and every gap in the documents is a potential dispute waiting to happen.

Share Purchase Agreement

The SPA is the central transaction document for a share acquisition. It sets out the purchase price and the mechanism for its adjustment (locked-box or completion accounts), the conditions to closing, the representations and warranties given by the seller, the indemnity regime for warranty breaches, the restrictive covenants on the seller post-closing, and the dispute resolution mechanism. Negotiating the SPA requires an understanding of both the legal effect of each clause and its commercial significance — which clauses matter most in practice and which are largely theoretical.

Representations, Warranties and Indemnities

Representations and warranties are statements of fact given by the seller about the target at the time of signing. If a warranty turns out to be untrue, the buyer has a claim. The scope of the warranty package, the disclosure process, and the limits on claims (cap, basket, time limit) are heavily negotiated. Indemnities are stronger — they are dollar-for-dollar obligations to compensate for specific, identified risks, and are typically used for known issues discovered in due diligence. The interplay between the two is one of the most technically demanding aspects of M&A documentation.

PE/VC Transactions

Private equity and venture capital investments operate within their own sub-set of M&A practice. The primary documents are a term sheet, a share subscription agreement (SSA) or share purchase agreement, and a shareholders' agreement that governs the investor's rights post-investment. These are not standard documents — the terms are negotiated afresh on each deal, and the balance of founder and investor rights shifts significantly depending on the stage of the company and the leverage each party brings to the table.

Investor Protections

Institutional investors routinely negotiate a standard set of protections: anti-dilution rights (broad-based weighted average or full ratchet), liquidation preference (participating or non-participating), information rights, board representation, reserved matters requiring investor consent, and drag-along rights. Understanding what each of these means in economic terms — not just legal terms — is essential for founders entering their first institutional round.

Founder Protections

Founders negotiate their own set of protections: tag-along rights (so they can exit alongside investors in a secondary sale), ESOP pool size and vesting schedules, limits on the investor's ability to drag them into an exit they don't want, and the right to appoint or remove key management. The SHA is a negotiation between parties with different time horizons and different views of how the company should be run — and the document should reflect that honestly rather than paper over the disagreements.

Regulatory Approvals

Most significant M&A transactions in India require at least one regulatory filing or approval. The most commonly encountered are:

• CCI filing — mandatory when the transaction crosses the prescribed asset or turnover thresholds under the Competition Act. The CCI has a Phase I review period of 30 working days, extendable in complex cases. Gun-jumping — implementing a transaction before CCI clearance — attracts significant penalties.
• RBI/FEMA approvals — required when a non-resident acquires shares in an Indian company, or when an Indian company acquires shares overseas. Pricing guidelines, sectoral caps, and reporting requirements all apply.
• Sectoral approvals — in regulated sectors (banking, insurance, telecom, defence, media), the relevant sectoral regulator's approval is required in addition to or instead of the general corporate approvals.
• NCLT sanction — for mergers and demergers under the Companies Act scheme route.

How We Work on M&A Matters

Our M&A practice covers both buy-side and sell-side mandates across a range of transaction sizes and structures. We work with founders selling stakes or entire businesses, with acquirers buying into Indian targets, and with investors doing structured PE/VC rounds.

• Transaction structuring — share purchase, asset purchase, slump sale, scheme of arrangement
• Legal due diligence — buy-side and vendor due diligence reports
• Term sheet review and negotiation
• Drafting and negotiating SPAs, BTAs, SSAs, and shareholders' agreements
• Representation and warranty negotiation, disclosure letter review
• PE/VC transaction documentation — from seed rounds to Series B and beyond
• CCI filing strategy and merger control advice
• NCLT scheme preparation and filing for mergers and demergers
• Post-closing integration advisory — regulatory filings, share transfers, board reconstitution

Every M&A matter at Tejas Advisors is handled directly by the founder. Transactions are time-sensitive, and the cost of a missed issue or a poorly negotiated clause is real. We engage with the detail from day one — not at the eleventh hour when problems are harder to fix.