Legal Risk Management In M&A: The Effect Of Regulatory Frameworks

Aarthi D. Asrani, LL.M (Corporate and Financial Law), O.P Jindal Global University.

ABSTRACT

Mergers and acquisitions (M&A) are strategic instruments that firms use to expand into new markets, diversify their holdings, and realize economies of scale. A merger occurs when two or more businesses combine to form a single entity, whereas an acquisition occurs when one business buys another. Due to the complexity of these operations, it is necessary to carefully examine all operational, financial, and legal factors to properly manage the risks involved.

M&A deals are divided into two categories: horizontal mergers, which increase market share and lessen rivalry within the same industry, and vertical mergers, which improve supply chain efficiency by combining businesses at different stages of production. Through the combination of businesses in various geographic markets within the same industry, market- extension mergers increase market reach. Conglomerate mergers, which combine enterprises in unrelated industries, provide advantages for diversification. Product-extension mergers combine businesses that produce related items to broaden product offerings.

In India, M&A activities are conducted with fairness, openness, and stakeholder protection guaranteed by a strong legal and regulatory framework. The Companies Act of 2013 includes fast-track merger measures to streamline the process for small businesses or mergers involving a holding company and its wholly owned subsidiary. It also lays out key corporate governance principles, including M&A procedures. To stop anti-competitive practices, mergers that meet certain requirements must be approved by the Competition Commission of India (CCI) under the Competition Act of 2002. By enforcing disclosure laws and takeover regulations, the Securities and Exchange Board of India (SEBI) protects investor interests and controls the conduct of listed firms. The 2016 Insolvency and Bankruptcy Code makes distressed asset acquisitions through mergers and acquisitions easier.