Corporate Governance, Mergers & Acquisitions: Regulatory Framework, Intersection And Challenges In

Corporate Governance, Mergers & Acquisitions: Regulatory Framework, Intersection And Challenges In India

Dr. P. Bhuvaneswari & Jayant Kashyap

ABSTRACT

This research paper delves into the intersection of two pivotal domains: corporate governance and mergers & acquisitions (M&A). Both of these domains have stood as pillars of significance for over a quarter-century, if not longer, garnering attention and evolving with the evolving business ecosystem. However, the interplay between corporate governance and M&A, especially within the Indian context, remains relatively unexplored. This paper aims to shed light on the nuanced relationship that exists at the confluence of these two well- established phenomena. Corporate governance and M&A share a symbiotic bond, mutually influencing each other's dynamics. M&A transactions stimulate incentives for companies to enhance their governance practices, as poorly governed entities become attractive takeover targets. Conversely, robust governance mechanisms in M&A transactions add value for shareholders and stakeholders while mitigating the risks associated with value-reducing deals.

The paper examines various corporate governance mechanisms involved in M&A, emphasizing the pivotal role of boards of directors in assessing the strategic and monitoring aspects of these transactions. It also highlights the importance of risk management and the emerging role of independent directors in ensuring impartial decision-making. External advisors, such as accounting firms, investment banks, and lawyers, play a crucial gatekeeping role in mitigating cognitive biases during M&A transactions. The research paper further explores the involvement of shareholders and shareholder activism, addressing the challenge of limited participation in decision-making, particularly among retail shareholders. It discusses the emergence of independent proxy advisory firms in India and their role in influencing institutional shareholders' decisions regarding M&A transactions.

The research concludes by emphasizing the ongoing need for discourse at the intersection of corporate governance and M&A, calling attention to the significance of regulatory and legal developments in addressing evolving governance challenges. This paper contributes to the understanding of the intricate relationship between these two critical aspects of corporate India, ultimately advocating for more transparent and efficient corporate transactions in the country.