From 10 September 2024, deals valued over INR 20 billion (~USD 240 million) would require a pre-merger approval from the Competition Commission of India (CCI), if the target company meets the criteria for ‘substantial business operations in India’ (SBOI). If the deal value threshold (DVT) and the SBOI criteria are met, the deal would trigger a CCI merger control filing even if the conventional turnover/ asset based thresholds are not met.

Earlier, many deals benefitted from the small target exemption as targets did not have the requisite turnover and assets in India. However, this small target exemption would not be available to deals triggering CCI filings based on DVT. Such deals will continue to benefit from other exemptions (such as, intra-group reorganisations and non-controlling minority investments).

A. How to calculate deal value?

Deal value would include every valuable consideration (including any indirect, deferred or non-cash consideration). If transaction documents do not record the deal value, it would be based on the estimated value (i.e., the maximum payable amount) as approved by the Board of Directors. If the deal value cannot be established with reasonable certainty, it may be considered to be above the DVT.

Inclusions: Deal value would include consideration for:

(i) covenants or obligations agreed separately;
(ii) inter-connected steps or transactions;
(iii) other transactions between the target and the acquirer group in the last two years before the signing date;
(iv) incidental arrangements (such as, tech licensing, marketing and raw material supplies) payable during two years post-closing;
(v) call options assuming full exercise of such options; and
(vi) future outcomes specified in the transaction document.

Exclusions: Deal value excludes transaction costs such as fees paid to lawyers, investment bankers and statutory authorities.

B. How to assess if target meets the SBOI criteria?

• For digital services: The target would be deemed to have SBOI if it has 10% or more of any of the following in India:
(i) total global number of users;
(ii) total global gross merchandise value (GMV); or
(iii) total global turnover.

• For non-digital services: The target would be deemed to have SBOI if:
(i) its GMV in India is over 10% of its total global GMV and is over INR 5 billion (~USD 60 million); or
(ii) its turnover in India is over 10% of its total global turnover and is over INR 5 billion (~USD 60 million).

C. What happens to deals which were signed, but not fully closed, before 10 September 2024?

If any such deal triggers a CCI filing based on the DVT, it needs to be notified to the CCI. Until the CCI approves, the deal must be put on a global standstill (as there is no provision to ring-fence India).

If you require any clarification or more details, please feel free to write to our competition law partner, Mr. Vivek Agarwal (vivek.agarwal@dmd.law).