New CCI Rules Reshape India’s Mergers and Acquisitions Landscape

In a significant move that’s set to transform the business landscape in India, the Competition Commission of India (CCI) has introduced new regulations for mergers and acquisitions (M&As). These rules, which came into effect on September 10, 2024, aim to enhance regulatory oversight, streamline processes, and adapt to the evolving digital economy12.

Key Changes in the M&A Regulatory Framework

1. Deal Value Threshold

One of the most notable changes is the introduction of a deal value threshold. Any M&A transaction valued at over ₹2,000 crore (approximately $237 million) now requires mandatory CCI approval3. This rule applies to deals where the target company has “substantial business operations” in India.

2. Defining Substantial Business Operations

The CCI has provided clear criteria for determining what constitutes “substantial business operations” in India:

• For digital companies: At least 10% of their global user base, gross merchandise value, or annual revenue comes from India1.
• For non-digital firms: Annual turnover exceeding ₹500 crore in India1.

3. Shortened Review Timeline

In a move to expedite the approval process, the CCI has reduced the overall review period for M&A transactions from 210 days to 150 days14. This change aims to facilitate faster deal closures while maintaining thorough scrutiny.

Implications for Businesses

These new regulations have far-reaching implications for both domestic and international businesses operating in India:

1. Increased Scrutiny of Digital Deals: The tech sector, in particular, will face more rigorous oversight. Transactions that might have previously escaped scrutiny due to low asset or turnover values will now be under the CCI’s radar2.
2. Compliance Challenges: Companies involved in ongoing or planned transactions must reassess their deals in light of these new rules. This may lead to increased compliance costs and potential delays in deal closures3.
3. Global Alignment: By adopting a deal value threshold, India aligns its M&A regulations with countries like the United States, Germany, and South Korea2. This move reflects India’s growing stature in the global business arena.

Looking Ahead

While these changes present new challenges, they also signify India’s commitment to creating a more transparent and competitive business environment. As the country continues to attract foreign investment and nurture its domestic industries, these regulations will play a crucial role in shaping fair market practices.For businesses, adapting to these new rules will be crucial. Legal and financial advisors will need to work closely with companies to navigate this new regulatory landscape effectively.As we move forward, it will be interesting to see how these regulations impact India’s M&A activity and whether they achieve the intended balance between fostering business growth and ensuring fair competition. Footnotes:1 CCI tightens oversight on digital mergers, mandates clearance for big deals. Business Standard. (2024, September 11).2 CCI in action: India’s M&A regime gets a regulatory shakeup. The Policy Circle. (2024, September 13).3 India enforces mandatory CCI approval for M&As over ₹2,000 crore under new regulations. The Hindu BusinessLine. (2024, September 10).4 CCI’s M&A overhaul: Stricter scrutiny, faster approvals under new rules. Business Standard. (2024, September 19).