India’s fast-growing economy, diverse industries, and liberalised investment environment make it an increasingly attractive destination for cross-border Mergers and Acquisitions (M&A). Whether foreign investors are acquiring a stake in an Indian startup, entering into a strategic merger with a domestic firm, or purchasing assets from an Indian conglomerate, understanding the legal, financial, and regulatory landscape is crucial.
M&A in India offers a strategic route to access talent, technology, customers, and supply chains — but it also involves complex compliance under Indian corporate, tax, and foreign exchange laws. Here's what foreign investors need to know before diving in.
1. Entry Routes for Foreign Investors
Under India’s Foreign Direct Investment (FDI) policy, foreign investors can acquire Indian companies via:
Automatic Route – No prior government approval required for many sectors like manufacturing, ecommerce, and fintech
Government Route – Mandatory prior approval for sectors like defense, telecom, or where investment is from countries sharing land borders with India
Investors must also comply with the Foreign Exchange Management Act (FEMA) and SEBI regulations (in case of listed companies).
2. Key M&A Structures in India
Foreign companies typically pursue M&A through:
Share Purchase Agreements (buying equity in a private or public company)
Asset Purchases (acquiring specific business units, real estate, or IP)
Mergers or Demergers (under the Companies Act, 2013)
Joint Ventures (with Indian partners to combine local insight with global expertise)
Each route has implications for tax liability, stamp duty, and regulatory approvals.
3. Due Diligence Is Critical
Conducting thorough legal, tax, and financial due diligence is a non-negotiable step in M&A transactions. This helps uncover:
Pending litigations
Undisclosed liabilities
Regulatory non-compliance
Intellectual property ownership
Labour and environmental risks
Due diligence also impacts valuation and the negotiation of reps, warranties, and indemnities.
4. Regulatory Filings and Compliance
Foreign acquisitions in India involve various mandatory filings:
Form FC-GPR / FC-TRS with the Reserve Bank of India (RBI)
Competition Commission of India (CCI) clearance, for deals crossing specified asset or turnover thresholds
Stamp duty based on transaction value and state regulations
SEBI Takeover Code in case of listed companies
Tax implications — including capital gains tax, withholding tax, and indirect tax obligations — must also be reviewed early.
5. Cultural and Operational Integration
Post-acquisition integration often determines long-term success. India’s unique cultural, linguistic, and operational diversity calls for:
Strong change management
Transparent internal communication
Local leadership empowerment
Sensitivity to employee and vendor relationships