An entrepreneur may grow its business either by internal or external expansion. India in the recent years has showed tremendous growth in the M&A deal. It has been actively playing in all industrial sectors. It is widely spreading far across the stretches of all industrial verticals and on all business platforms. The increasing volume is witnessed in various sectors like that of Aviation, pharmaceuticals, telecom, FMCG, industrial development, automotive and metals.

Large Indian companies are going through a phase of growth as all are exploring growth potential in foreign markets and on the other end even international companies is targeting Indian companies for growth and expansion. Some of the major factors resulting in this sudden growth of merger and acquisition deal in India are favourable government policies, excess of capital flow, economic stability, corporate investments, and dynamic attitude of Indian companies. The functional importance of M&A’s is undergoing a sea change since liberalization in India. The MRTP Act and other legislations have been amended paving way for large business groups and foreign companies to resort to the M&A route for growth. Further The SEBI (Substantial Acquisition of Shares and Take over) Regulations, 1994 and 1997, have been notified. The decision of the Government to allow companies to buy back their shares through the promulgation of buy back ordinance, all these developments, have influenced the market for corporate control in India.

M&As as a strategy employed by several corporate groups like R.P. Goenka, Vijay Mallya and Manu Chhabria for growth and expansion of the empire in India in the eighties. Some of the companies taken over by RPG group included Dunlop, Ceat, Philips Carbon Black, Gramaphone India. Mallyas United Breweries (UB) group was straddled mostly by M&As. Further, in the post liberalization period, the giant Hindustan Lever Limited has employed M&A as an important growth strategy. The Ajay Piramal group has almost entirely been built up by M&As. The south based, Murugappa group built an empire by employing M&A as a strategy. Some of the companies acquired by Murugappa group includes, EID Parry, Coromondol Fertilizers, Bharat Pulverising Mills, Sterling Abrasives, Cut Fast Abrasives etc. Other companies and groups whose growth has been contributed by M&As include Ranbaxy Laboratories Limited and Sun Pharmaceuticals Industries particularly during the later half of the 1990s. During this decade, there has been plethora of M&As happening in every sector of Indian industry. Even, the known and big industrial houses of India, like Reliance Group, Tata Group and Birla group have engaged in several big deals.

Under the Monopolies and Restrictive Practices Act, takeover meant acquisition of not less than 25 percent of the voting power in a company. While in the Companies Act (Section 372), a company’s investment in the shares of another company in excess of 10 percent of the subscribed capital can result in takeovers. An acquisition or takeover does not necessarily entail full legal control. A company can also have effective control over another company by holding a minority ownership.

India is becoming a favorable destination for the investors day by day as the government has approved the investment through the FDI(Foreign Direct Investment).

Government has approved FDI to100 per cent from current 74 per cent, paving the way for consolidation in the telecom sector. Indian telecom sector has at present around 13 mobile phone service providers with some of them expected to go for consolidation once the final guidelines are in place.

Though the Telecom Ministry had announced broad guidelines for mergers and acquisition in February last year, but detailed guidelines are yet to be be unveiled. The guidelines that have been approved in principle include expeditious approval to merger proposals of telecom companies if their combined market share is up to 35 per cent. It will seek sector regulator Telecom Regulatory Authority of India’s (TRAI) recommendation in case the resultant entity has market share between 35 to 60 per cent.