The Indian corporate landscape recently witnessed a significant development with the Ministry of Corporate Affairs (MCA) announcing revised thresholds for mergers and acquisitions (M&A) requiring approval from the Competition Commission of India (CCI). This change aims to simplify the M&A process for smaller transactions.

Raising the Bar: Increased Thresholds for CCI Approval

The MCA's new notification raises the threshold limits for M&A deals that fall under the purview of the CCI. These thresholds are determined based on a combination of the target company's asset value and its annual turnover. Previously, deals exceeding a specific threshold required CCI approval to ensure fair competition. Here's a breakdown of the changes:

• Previous Threshold: The earlier thresholds were not explicitly mentioned in the article, but based on news reports, they were likely significantly lower than the current ones.
• New Threshold: Under the revised guidelines, M&A deals involving a target company with an asset value below Rs 450 crore (approximately $56 million) or a turnover less than Rs 1,250 crore (approximately $156 million) will be exempt from CCI approval.

This 150% increase in thresholds signifies the government's intent to streamline the M&A process for smaller companies. By reducing regulatory hurdles, the move is expected to:

• Boost Startup Activity: Startups and smaller businesses often face challenges navigating the complexities of M&A deals. The increased thresholds will ease the process for them, potentially encouraging more consolidation and growth within the startup ecosystem.
• Reduce Regulatory Burden: The previous thresholds might have captured a wider range of deals, leading to a higher workload for the CCI. Raising the bar allows them to focus on potentially anti-competitive mergers involving larger players.
• Enhance Ease of Doing Business: Faster and simpler M&A procedures can improve India's ranking in the World Bank's Ease of Doing Business Index.

A Two-Year Exemption

The exemption from CCI approval for transactions below the new thresholds is applicable for a period of two years from the date of publication in the official gazette. This time frame allows the government to assess the impact of this policy change and make necessary adjustments if needed.

Focus on Competition for Larger Deals

It's crucial to understand that the revised thresholds only apply to smaller M&A deals. Mergers and acquisitions involving companies exceeding the new thresholds (asset value above Rs 450 crore or turnover exceeding Rs 1,250 crore) will still require CCI approval. This ensures that the Competition Commission remains vigilant in preventing anti-competitive practices within the Indian market.

Determining Thresholds for Acquisitions of Business Segments

The article also clarifies how thresholds are calculated for acquisitions involving specific segments, divisions, or businesses within a larger company. In such cases, the relevant asset value and turnover for determining the threshold will be based solely on the value of the specific segment or business unit undergoing the M&A activity.

A Step Towards a More Dynamic M&A Landscape

The MCA's revised thresholds for M&A deals requiring CCI approval represent a positive step towards a more streamlined and efficient M&A landscape in India. This change is particularly beneficial for smaller businesses and startups, potentially fostering a more dynamic and competitive corporate environment. However, it's important to remember that the CCI will continue to play a vital role in safeguarding fair competition within the Indian market by scrutinizing larger M&A transactions.