SUMMARY
The MCA elevated the threshold value on the basis of wholesale price index and exchange rate of rupee by 150%
The earlier threshold beyond which M&As needed CCI nod stood at INR 350 Cr for value of assets and INR 1,000 Cr for turnover
The limits have now been increased to INR 450 Cr for asset value and INR 1,250 Cr for turnover in a move which is expected to ease startup M&A process
The Ministry of Corporate Affairs (MCA) has raised the threshold limits for mergers and amalgamation requiring approval from the Competition Commission of India (CCI).
In a notification, the MCA said that the threshold value on the basis of wholesale price index and exchange rate of rupee has been increased by 150%. The ministry called this a step towards increasing the ‘ease of doing business’.
In an additional notification, the MCA specified that if the acquisition target possesses an asset value below INR 450 Cr or turnover less than INR 1,250 Cr, then such a merger or acquisition would be exempt from approval by the CCI.
The earlier threshold stood at INR 350 Cr for value of assets and INR 1,000 Cr for turnover.
The exemption would be applicable for a duration of two years from the date of publication in the official gazette.
Section 5 of the Competition Act states that the acquisition of one or more enterprises or the merger or amalgamation of enterprises, surpassing the specified threshold, qualifies as a ‘Combination’ under the Act and requires nod from the antitrust regulator.
The move is expected to ease startups M&As, as many early stage startups have assets and turnover below the threshold limits.
It is pertinent to mention here that the number of M&As in the Indian startup ecosystem almost halved to 123 in 2023 from 240 deals in 2022.
Given the abysmal funding performance of 2023, Indian startups could witness another year of slow M&A activity this year. However, with the US Federal Reserve and several major central banks looking to cut interest rates in 2024, M&As are expected to start rising towards the end of 2024.
The latest development also comes at a time when the Centre has been working to revamp the competition laws in the country, especially with an eye on reining in Big Techs amid increasing digitalisiation. As part of these efforts, the CCI has also formed a new panel to suggest laws for the digital economy.
