Cross Border Mergers In India And Ease Of Business

Author: LawSphereX

Category: Corporate & Insolvency

Published: 2026-08-23T19:05:40.318Z

Updated: 2026-08-30T07:12:18.676Z

CROSS BORDER MERGERS IN INDIA AND EASE OF

BUSINESS Bhavya Belwal, Jindal Global Law School Introduction The landscape of commerce being done worldwide has been changing slowly yet dramatically. With fire being fueled by the forces of digitalization and globalization, geographical obstacles are getting increasingly more porous. In the present day and age of globalization, companies, organizations around the globe are seeking to be able to create a marketplace which is international in true sense of the word. They no longer wish to remain limited to their home markets and are dynamically in search of possibilities for enlargement across borders. Crossborder mergers and acquisitions (M&A) represent one of the most potent ways to grow and explore strategies for corporations operating all over the world.

Businesses stand to gain admission to fresh markets, customer bases, and new technologies through such agreements, which enhances potential for profit and thereby brings in a new sense of competitiveness. 1 Within the area of activity of mergers and acquisitions happening across borders, cross-border M&A holds specific importance. For overseas corporations, cross-border M&A provides a compelling opportunity to tap into the giant capacity of emerging economies like India. Our country, with its mushrooming populace, swiftly growing financial system, and increasing income of disposable nature, has come to be recognized and advertised to be a magnet for foreign direct funding (FDI). 2 A cross-border merger explained in its simplest form is a merger of two companies which are positioned in different countries and ensuing to form a different third company.

A cross-border merger might contain an enterprise which is from India and merging with a foreign enterprise or vice versa. This means that the resultant entity would bring in foreign investment from the foreign enterprise. The said foreign investment would need to be through certain legal hurdles

1 HUMPHERY-JENNER, MARK, et al. “CROSS-BORDER MERGERS AND ACQUISITIONS.” Strategic

Management Journal, vol. 38, no. 8, 2017, pp. 1688–700. JSTOR. 2 Kour, Manjit, “Cross-Border Mergers and Acquisitions in India: Nature, Outreach and Structure”. Business Challenges and Strategies in Emerging Global Scenario, ISBN:978-93-80144-29-0, Page :275-278. in order to protect the home economy. 3 For India, there are mainly two types of cross border mergers which form part of the Companies Act, 2013, i. e. , the inbound merger like that of Daiichi acquired Ranbaxy and the outbound merger like that of the acquisition of Jaguar and Land Rover by Tata Motors. As cross-border M&A has remained one of the preferred ways of strategic transformation, it has remained robust in certain sectors like that of renewable energy and infrastructure (inbound M&A), IT services (outbound M&A).

In the present paper, we would be delving deep into the allure and challenges of cross-border mergers to understand the motivations behind such trend. The main question which arises, however, is that while India is being recognized as a magnet for FDI and seeing more and more cross-border mergers, whether our current regulatory environment ready and open for crossborder mergers to fit in our promise of “ease of doing business”. Given the various checks that foreign investment must go through and the new regulations with respect to overseas investment, we would be deliberating on the said research question. Our current hypothesis is that the current regulatory environment needs to undergo certain changes to achieve ease of business.

Understanding Cross-Border Mergers and Acquisitions In this section, we would be briefly introducing the reader to the concept of cross-border mergers and acquisitions to set the base for the coming sections. This section has been deliberately kept brief to maintain brevity. Cross-border M&A have turned out to be an important aspect for companies which are aiming to amplify their international footprint and gain certain competitive advantage over their peers. 4 Such approach involves the consolidation of companies headquartered in different nations, letting them gain access to new markets, leverage synergies, and ultimately to be able to diversify their operations.

5 As globalization keeps breaking down boundaries in conventional sense to trade and investment in international sense, cross-border M&A has emerged as a preferred technique for corporations to be able to rapidly scale and grow. Unlike increase in organic sense, which is usually found to be slow and full of loopholes, M&A provides them a 3 Neary, J. Peter. “Cross-Border Mergers as Instruments of Comparative Advantage. ” The Review of Economic Studies, vol. 74, no. 4, 2007, pp. 1229–57. JSTOR.

4 Id.

5 “The Vth NLSIR Symposium on ‘Corporate Mergers and Acquisitions in India’ – A Transcription. ” National Law School of India Review, vol. 24, no. 2, 2013, pp. 89–109. JSTOR. window to gain an improved direction to entry in the market, providing on the spot right to entry into customer bases and distribution networks which have been established years before their entry. Similar is found to be true for expertise on locals- whether it be the people or the authority. 6 Within the context of cross-border M&A, two primary styles of transactions are typically identified: inbound mergers and outbound mergers. Inbound mergers occur while an overseas company acquires a home organisation.

Such transactions are usually found to be influenced by the obtaining firm’s choice to enter the market of the home, leverage the current infrastructure and networks of the goal organisation, and gain advantage from the information about the local marketplace. An extremely good example of an inbound merger is the acquisition of the Indian e-commerce giant Flipkart by America’s Walmart whereby the latter bought 77 per cent stake in the former, which allowed Walmart to establish a break into and continue the sturdy presence Flipkart had made for itself in the Indian marketplace. 7 Outbound mergers, on the other hand, involve a domestic agency acquiring a foreign organisation.

Such form of transaction is frequently pushed by way of the home company’s strategic goal to extend its worldwide presence having already made a strong presence in the home country, to be able to offer its diverse product offerings worldwide and establish its worldwide competitiveness. An outstanding instance of an outbound merger is Reliance Brands acquisition of the British toy company Hamleys, a company which was previously not in the Indian marketplace. This acquisition in 2019 enabled Reliance Brands to be able to introduce a high-end toy brand in the country, having acquired a 100 per cent stake in Hamleys through a special purpose vehicle. 8 Each inbound and outbound mergers come with their own peculiar sets of possibilities and demanding situations.

Inbound mergers could offer the obtaining companies with instant entry to fresh set of markets, customers and networks, but additionally could also require for them to carefully navigate the local regulatory environment and also the cultural variations. 9 It is not necessary for them to be able to understand and turn around in a foreign culture or regulatory

6 Chaudhuri, Amrita Ray. “CROSS-BORDER MERGERS AND MARKET SEGMENTATION.” The Journal of

Industrial Economics, vol. 62, no. 2, 2014, pp. 229–57. JSTOR. 7 P. Bala Bhaskaran, “Walmart’s Acquisition of Flipkart: Emerging Paradigm of the Digital Era”, South Asian Journal of Business and Management Cases, 9(1), 24-39, 2020.

8 ET, “The man with all the toys

Why Mukesh Ambani bought Hamleys”, Economic Times Online, May 12, 2019.

9 Coeurdacier, Nicolas, et al. “Cross-Border Mergers and Acquisitions and European Integration [with

Discussion]. ” Economic Policy, vol. 24, no. 57, 2009, pp. 55–106. JSTOR. environment. Similarly, while outbound mergers do offer the capacity for extensive diversification and increase, they also demand robust integration strategies to be able to align their operation, culture, and strategic desires of the merging entities. A cross-border M&A which can be deemed to be successful requires planning in a meticulous manner, thorough due diligence, and powerful integration strategies to be implemented post-merger so as to be able to realise the predicted synergies and achieve the desired effects. In past few years, the landscape for cross-border M&A has been formed by different factors, including situation of the economy, adjustments by the regulators, and advancements in technology.

The upward push of the digital financial system, specially, has facilitated smoother cross-border transactions by presenting progressive equipment for statistics analysis, conversation, and automation of processes. 10 As countries go on to retain this strategy to reform their frameworks of regulations to attract overseas funding, the trend of cross-border M&A is predicted to develop, imparting organisations with fresh avenues for growth and value advent. Allure and Challenges of Cross-Border Mergers and Acquisitions While we have understood the ins and outs of cross-border M&A, in order to understand the problem statement at hand, it is imperative to form a base of why organisations are attracted by cross-border M&A and what are the challenges faced by them.

Cross-border mergers and acquisitions offer a myriad of pleasing advantages for companies looking for to beautify their presence worldwide and establish a competitive edge over their peers. Perhaps one of the most attractive allures is the opportunity for a fresh market access which is quick. By being able to obtain the present company in a market completely foreign to them, the companies can pass most of the time-ingesting and expensive steps related to establishing a brand-new presence in any market, let alone a new country altogether. Such instant access to already established patron bases, networks of distribution, and brand reputation holds the potential to substantially accelerate the profitability and growth of the said company. 11 Another big allure of cross-border M&A is the capability it offers to be able to diversify.

Organizations are able to mitigate risks which are associated with financial downturns or saturation of the marketplace of their home countries by being able to acquire firms in different 10 Stähler, Frank. “Partial Ownership and Cross-Border Mergers. ” Journal of Economics, vol. 111, no. 3, 2014, pp. 209–37. JSTOR. 11 Beena, P. L. “Trends and Perspectives on Corporate Mergers in Contemporary India. ” Economic and Political Weekly, vol. 43, no. 39, 2008, pp. 48–56. JSTOR. regions or industries- one wherein they are certain they can fulfil the need. 12 Such product and geographical diversification allow them to facilitate a stable stream for revenue and complements the overall ability of the company to remain standing in tough times.

Moreover, cross-border M&As permits organizations to be able to faucet into completely new technology, modern enterprise practices, and superior expertise of the mangers, fostering a lifestyle of nonstop improvement and aggressive advantage at their hand. Synergies are a key enchantment in cross-border M&As. Such synergies could appear in numerous ways, including savings in terms of being able to channelize economies of scale, stronger streams of revenue via cross-promoting opportunities, and progressed performance by being able to consolidate operations. 13 To give an example, the obtaining company would be able to enjoy the target company’s installed chains of supply, which would lead a reduction in the cost for manufacturing and thereby stand to increase their bargaining power with the suppliers or providers.

Similarly, a blended R&D efforts could brin new minds together, spur innovation and go on to expedite development of fresh levels of services or products. 14 In spite of the discussed advantages, the entire journey of cross-border M&A transactions is full of challenges. One of the most important challenges which companies realize is to be able to navigate the varied and complex regulatory environments of various international locations. Regulatory accordance includes expertise and adherence to the law of the land on varied aspects- ranging from antitrust to labor, standards to be maintained for environmental protection, and foreign funding, among others.

Failure to conform to any of them could turn out to be disastrous and can lead to felony penalties, breaks within the procedure of M&A, and even holds the capacity to harm the goodwill of either of the companies- something which neither want, specially at an international level. Corporations should therefore make investments in reputed resources for regulatory and criminal expertise so as to ensure their transactions are smooth. 15 Cultural variations pose another big assignment in cross-border M&As. Merging organizations from varied cultural backgrounds could lead to, miscommunications, clashes and misunderstandings in expected outcomes and in corporate practices and values. Such cultural

12 Supra note 10.

13 Supra note 3.

14 Stiebale, Joel, and Michaela Trax. “The Effects of Cross-Border M&As on the Acquirers’ Domestic

Performance: Firm-Level Evidence. ” The Canadian Journal of Economics / Revue Canadienne d’Economique, vol. 44, no. 3, 2011, pp. 957–90. JSTOR. 15 Anand G. Chandrawanshi, Amit Banerji, “Analysis of Cross Border Acquisitions By Indian Information Technology Sector Firms”, Academy of Strategic Management Journal, Vol 16, No. 1, 2017 boundaries could have a strong effect on morale of the workers, their productiveness, and achievement of integration at a higher level. Cultural integration which could be deemed to be effective calls for a thoughtful method which blends and respects the different cultures of each of the corporations, fostering a new, unified identity of the corporate. Such often involves comprehensive change management techniques, leadership to be active, and an ongoing effort at communication.

Moreover, the phase of integration after the merger is particularly difficult to deal with. An integration which could be deemed to be successful entails aligning disparate organizational structures, tactics, and systems, which could turn out to be complex by way of variations in the technology being used, practices of operations, and patterns followed by the management. Integrating financial structures, policies for human resources, and tech setup calls for planning which is meticulous and an execution which is able to keep away from any sort of disruption. Moreover, maintaining key expertise from each of the organization and keeping continuity of the enterprise all through the phase of integration is critical for attaining the desired synergies and future fulfillment of the said M&A.

16 This is to say that whilst cross-border mergers and acquisitions do provide significant opportunities for boom, expansion, and improved competitiveness, they also come with various complicated demanding situations. Navigating regulatory landscapes, linking divides between varying cultural, and executing seamless post- merger integration are critical to figuring out the entire capability of such dealing. Corporations which approach such challenges with cultural sensitivity, robust integration frameworks and strategic planning are much more likely to acquire successful consequences and harness the transformative energy of cross-border mergers and acquisitions. 17 Cross-Border M&A in India Cross-border mergers and acquisitions in India have become increasingly more significant as we continue to liberalize our financial system and entice overseas investment.

India’s sturdy monetary growth, massive client marketplace, and strategic geographic area make it an appealing spot to invest for foreign businesses who are seeking growth. 18 Conversely, Indian 16 Avin Tiwari, “Cross Border Mergers in India in the IBC Era: A Legal Inquiry”, Indian Journal of Law and Justice, Vol. 11 No. 2, ISSN 0976-3570. 17 Doytch, Nadia, and Merih Uctum. “Sectoral Growth Effects of Cross-Border Mergers and Acquisitions. ” Eastern Economic Journal, vol. 38, no. 3, 2012, pp. 319–30. JSTOR. 18 Beena Saraswathy, “Cross-Border Mergers and Acquisations in India: Extent, Nature and Structure”, Institute for Studies in Industrial Development, 2010. organisations have also been energetic in obtaining overseas corporations to benefit from the access to technology which could be said to be superior, new set of markets, and enhance their footprint globally.

Such cross-border transactions are reshaping varied sectors and contributing to integration of the country into the financial system at the global level. One instance of inbound cross-border M&A is the acquisition of Ranbaxy Laboratories by Japan's Daiichi Sankyo in 2008. This $4. 6 billion deal marked one among the biggest overseas investments in the pharmaceutical zone of the country. The purchase allowed Daiichi Sankyo to leverage tremendous distribution network of Ranbaxy and use their manufacturing talents to gain entry into our country. Thereby they stood to gain a robust foothold in the fast-developing pharmaceutical marketplace of the country. However, the deal also faced massive challenges, together with regulatory conformation issues with troubles in quality control, which allowed the complexities of cross-border M&A in India to be brought to light.

19 Within the automobile sector, Tata Motors’ acquisition of Jaguar Land Rover from Ford in 2008 is a distinguished instance of outbound cross-border M&A. This $2. 3 billion purchase by the Indian automotive giant enabled Tata motors to diversify their product portfolio and step foot into the posh automobile section, a market in which it previously had negligible presence. The purchase of Jaguar Land Rover not only provided them with the right of entry to advanced abilities of engineering segment but also premium brands and allowed them to position themselves as an international participant within the automobile enterprise. Regardless of the scepticism at the initial stages with respect to the economic viability of the said transaction, the coming success of the Jaguar Land Rover went on to announce to the world the very importance of strategy when looking at cross-border acquisition.

20 Within the information technology industry sector, the remarkable acquisition by Infosys of Panaya, an Israeli automation tech agency, in 2015, is an example of outbound cross-border M&A. 21 This two hundred- million- dollar transaction aimed at decorating the automation abilities of the Indian tech giant Infosys and providing them with much more efficient answers to its global consumer base. The said purchase allowed Infosys to be able to integrate the advanced automation technologies of Panaya into its service offering, thereby standing to enhance their operational performance and delivering better value to their clients. Such

19 Id.

20 Jain, Mrs & Jain, Naini, ”AN EMPIRICAL STUDY ON ACQUISTION OF JAGUAR AND LAND ROVER

BY TATA MOTORS”. International Journal of Multidisciplinary Research Review. 5, 2011. 21 ET, “Panaya: How one Infosys acquisition kicked off the big storm”, Economic Times Online, Aug 18, 2017. strategic acquisition tested how Indian IT groups are leveraging cross-border M&A to stay aggressive within the rapidly evolving landscape of technology industry. Such examples stand to illustrate the dynamic nature of cross-border M&A in India and the numerous motivations and challenges faced during such transactions. We, however, also need to understand the regulatory framework to solve the problem statement at hand. Regulatory Framework in India The regulatory framework for cross-border M&A in India is well-described, making sure that such transactions stand to be in compliance with the national framework of the law of the land.

One of the important crucial factors of such framework is the definition and regulation of inbound mergers, in which the ensuing enterprise is an entity of Indian origin. For an inbound merger to be valid in the eyes of law, the ensuing agency of Indian origin have to adhere to numerous key situations. First off, the switch or issuance of any security by means of the Indian organisation to the transferor of foreign origin should be in compliance with the defined “sectoral caps”, guidelines for pricing, routes established for entry, and requirements delineated for reporting as in line with foreign exchange management regulations of India.

22 Furthermore, while the overseas transferor organization is a joint undertaking (JV) or a wholly owned subsidiary (WOS) of the agency of Indian origin, or when the merger ends in the acquisition of a step- down subsidiary of such JV/ WOS, compliance with the provisions of the “Foreign Exchange Management (Overseas Investment) Regulations of 2022”, and the “the Foreign Exchange Management (Overseas Investment) Rules, 2022”, must be ensured. Such is to make sure that the cross-border M&A is such which is in alignment with the wider regulatory surroundings which govern foreign investments by entities of Indian origin. 23 Certain other crucial requirements for inbound mergers involve the control of overseas borrowings or guarantees of the overseas transferor organisation which could end up adding into the existing liabilities of the ensuing corporation of Indian origin.

24 The said liabilities must stand to be in compliance with the relevant Foreign Exchange Act (FEMA), read with the relevant rules and regulations within past two years. Appreciably, no remittance for compensation of such liabilities is allowed to be crafted from India within such period of two years. Moreover, conditions associated with the end- usage of such funding raised are not

22 Supra note 16.

23 Rajoria, Krati. “CROSS BORDER MERGERS AND ACQUISITIONS UNDER THE NEW REGIME

A REVIEW OF THE CURRENT POSITION”, International Journal of Multidisciplinary Research Review, 2020.

24 DLA Piper, India, “India

Cross-Border Merger Framework”, Lexology, Nov 28, 2022 applicable, presenting certain level of flexibility to the ensuing organisation of Indian origin to be able to handle their own obligations of financial nature. 25 The regulatory framework further permits the ensuing organisation of Indian origin to be able to accumulate, switch and hold belongings outside of the country India, furnished it adheres to the relevant guidelines of FEMA in place. Given that the ensuing company isn't accepted as per FEMA to be able to have any holding as any asset or securities out of the country, it ought to have to dispose of their property within two years from the date of the sanction of the scheme by means of the National Company Law Tribunal (NCLT). The proceeds from such should be repatriated to our country right away.

Further, any liability which is existing outside the border of the country which must not be allowed to be held via the consequent organization of Indian origin ought to be settled using such repatriated funds. 26 Moreover, the resulting organization of Indian origin is allowed to open an overseas bank account to be able to facilitate transactions which are associated with the said cross- border M&A activity. Such account can be maintained for up to two years from the date of the sanction of the scheme by means of the NCLT, enabling monetary operations which are smooth during the period of transition. Such provision guarantees that the resulting organization of Indian origin is able to control cross-border transactions is an effective manner without going through regulatory hurdles.

27 In the case of outbound mergers, where the ensuing agency is an entity of foreign origin, precise situations additionally follow. The overseas company have to be integrated in a jurisdiction specified as per the “Companies (Compromises, Arrangements and Amalgamations) Rules, 2016”. Residents of India who are having shares inside the transferor company of Indian origin are allowed to hold or acquire securities of the consequent overseas agency as per the regulations set forth in the “Foreign Exchange Management (Overseas Investment) Regulations, 2022”, and the related regulations. For individuals of Indian origin, such acquisitions must align with the “Liberalized Remittance Scheme”, so as to make sure that the outbound funding adheres to guidelines by the country on outflow of the capital.

The liabilities of the transferor organization of Indian origin, inclusive of guarantees and 25 R. Venkataraman and Thilak Venkatesan, “A study on the impact of FDI policy and the foreign exchange management in India” International Journal of Public Sector Performance Management, 2019. 26 Sumit K. Majumdar, “Foreign exchange legislation transformation and enterprise demography in India” Eur. Journal of Law and Economics, 2018.

27 Supra note 24.

incredible borrowings which become the duties of the resultant foreign business enterprise, need to be repaid as consistent with the sanctioned scheme according with the “Companies (Compromises, Arrangements and Amalgamations) Rules, 2016”. Importantly, the consequent company of foreign origin cannot expect any rupee- denominated liabilities which do not stand in compliance with the guidelines of FEMA. Such ensures that the outbound merger does not create any sort of risks financially or any conflict of regulatory nature for the consequent foreign entity. 28 Like that of the inbound mergers, the consequent overseas corporation can gather, preserve, and switch belongings in India as in line with FEMA guidelines.

If keeping any asset or protection in India is not permitted, the resultant foreign organisation has to sell such property within two years from the date of sanction of the said scheme of merger. Such proceeds from such sales need to be repatriated out of the country right away, and any liabilities in India may be extinguished using these proceeds within the identical two-year period. 29 Moreover, the resultant corporation of foreign origin is allowed to open a “Special Non- Resident Rupee Account” as per “Foreign Exchange Management (Deposit) Regulations, 2016”. Such account is allowed to be used to facilitate transactions associated with the crossborder merger for a maximum of two years from the sanction of the said scheme by NCLT.

Such provision ensures that the resultant overseas organization can handle their economic activities in India in an effective manner at certain stage in the initial post-merger period. 30 Judgement Day Having explored the regulatory framework, it is time we revisit our question on the ease of doing business in the case of cross-border M&A activities in India. It is undoubtedly true that regulatory framework of our country for cross-border mergers and acquisitions has seen reforms aimed toward attracting FDI, but loopholes and complexities persist, impacting the ease of doing business for traders from outside India. The lengthy approval method is one such challenge. Foreign buyers must seek certain levels of approval from multiple authorities.

Such approval system tends to be quite cumbersome and time-ingesting which leads to sizeable delays and extended transaction costs during already costly affair of cross-border M&A. Another issue is the lack of clarity and consistency in the application and interpretation of

28 Supra note 24.

29 Supra note 16,

30 Mondaq, “Inbound And Outbound Mergers in India”, Nov 21, 2022.

policies. Varied authorities might tend to interpret the law differently and thereby give rise to ambiguity which tends to hinder ability of overseas investors to able to successfully devise and execute M&A transactions in an effective manner. Such inconsistency results in ambiguity, which makes it tough for buyers to navigate the regulatory panorama optimistically. Furthermore, the complex tax framework for cross-border M&A can result in accidental tax liabilities for companies of foreign origin. Such complexity and shortage of clarity in tax policies could discourage some investors from pursuing M&A possibilities in our country. 31 The Foreign Exchange Management (Cross-Border Merger) Regulations, 2018, wherein Indian corporations acquire or merge with overseas entities. However, there are number of gaps regarding outbound M&A.

Such outbound mergers could face extra complexities in terms of approvals and tax implications, in addition to complicating an already complex regulatory landscape for cross-border transactions. Further, the regulatory framework in India for crossborder M&A is not absolutely harmonized with global requirements, creating an additional hurdle for overseas investors to understand the regulations within India. 32 Such loopholes and complexities can appreciably avert the ease of doing business for overseas investors who want to consider M&A in India. The lengthy approval method, loss of clarity, and ability tax liabilities create a surrounding of uncertainty, discouraging number of traders from pursuing such possibilities.

Additionally, the potential exploitation of loopholes, inclusive of over- valuation of property, structuring deals, and hidden liabilities to pass regulations, also tends to pose a risk for foreign buyers who would possibly unwittingly grow to be roped in transactions which are non-compliant. Such regulatory uncertainty and the potential for exploitation tends to undermine self- assurance of an investor and adversely effects India's splendor as a terminus for cross- border M&A. At the end, our hypothesis stands true. 31 Varottil, Umakanth. “Corporate Governance in M&A Transactions. ” National Law School of India Review, vol. 24, no. 2, 2013, pp. 50–61. JSTOR. 32 Moghadam, Alireza Tavakol, et al. “Mergers and Acquisitions and Greenfield Foreign Direct Investment in Selected ASEAN Countries. ” Journal of Economic Integration, vol. 34, no. 4, 2019, pp. 746–65. JSTOR.