Competition watchdog CCI will need to be quick in clearing M&As and ensure secrecy of the deals under its new merger and acquisition norms that took effect from today, experts said.
As companies gear up for the new dimension in M&As, experts have cast doubts on various issues that could impact the deals.
Now, all M&As with combined turnover of Rs 4,500 crore or more will require approval of the Competition Commission of India (CCI), which has said that 95 per cent of the mergers would be cleared in as less as 30 days if there is no prima facie case against them.
“In India, it may be a tall claim to make because we have seen that all clearances take a lot longer. CCI currently does not have the expertise and staff enough to take a prima facie view on a M&A deal in 30 days,” said Pavan Vijay of Corporate Professionals.
“The practical staff is not market research oriented, so it is bound to take longer than the CCI claim,” he added.
As per the notified norms, CCI will take a maximum of 180 days to decide if M&A proposal is of any competition concern.
The time limit was pruned from 210 days due to concerns raised by the industry.
Another issue bothering industry is secrecy of merger conditions.
“Concerns regarding the risks apprehended due to low standards of confidentiality of transactions, which is an unfortunate feature of public institutions due to widespread corruption, are well-founded,” CUTS International Secretary General Pradeep Mehta said.
The new regime begins today with the implementation of sections 5 and 6 of the Competition Act, which was notified in March this year by the government.
The two sections will make it mandatory for companies engaged in high value M&A to seek the CCI approval to conclude the deal.
Meanwhile, Luthra & Luthra Partner and Head of Competition Law Practice G R Bhatia said, “The regulations do not provide for concept of deemed approval in case, at prima facie stage, the CCI forms an opinion that it does not notice any competition concern arising out of proposed transaction.
Business prefers certainty in this regard.”
Under the regulations, if the joint asset and turnover of the merging entities exceed Rs 1,500 crore and Rs 4,500 crore respectively, the companies will have to seek CCI approval.
In case the asset and turnover of the target company exceed Rs 250 crore and Rs 750 crore respectively, the merger would come under the purview of CCI