Major Mergers - Zee-Sony and PVR-Inox, tracing the significance of M&A deals on business

Major Mergers - Zee-Sony and PVR-Inox, tracing the significance of M&A deals on business. This year began with progress in two major mergers in the entertainment industry - the Zee and Sony merger, and the merger of cinema giants PVR and Inox. In this article, Compliance Calendar aims to simplify the end goals of a merger while also casting light on the regulatory and other challenges of a merger in India.
Mergers in India - the why and how
The last few years have witnessed some big-ticket mergers between top players. This includes - Makemytrip and Goibibo (MMT-Go), Flipkart and E-bay, Tata Steels and ThyssenKrupp, Vodafone and Idea, Indiabulls Housing Finance and Laxmi Vilas Bank, among others.
Post-merger, PVR Inox would become the largest multiplex company in India with access to over 1500 screens across all tiers of cities. Similarly, Zee and Sony merger would boost the creative and infrastructural capacities of these two leading entertainment houses.
Mergers are becoming a preferred choice in an increasingly volatile and fragmented market, especially in cases of forward consumer-facing businesses like banking, media companies, telecom, construction, and technology industries.
Advantages, in a nutshell:

Better access to cash resources

Expansion of networks - suppliers, manufacturers, and distributors (especially in cases of upstream or downstream mergers with businesses in the supply chain)

Entry into newer geographies

Restructured debt and equity structure

More capital funding

Access to newer assets, technologies, and know-how

Protection of trademarks, patents, industrial designs, and trade secrets

Easier access to R&D information, licenses, auctions

Efficiency in prices due to cost optimization

Cuts out the intense competition, if competing players are merged

Delivering better shareholder value

Basic compliance framework of a typical merger:

Ensuring that the object clause in the Memorandum allows for the post-merger business to be carried on.

Sending notices to all stock exchanges, if the company is listed

Filing for merger approval with the NCLT and intimation to the ROC

Intimating shareholders and creditors of the NCLT approval, filing public advertisements in two newspapers and calling a public meeting.

Passing a special resolution, with the approval of three-fourths of all shareholders

If an enterprise has assets over INR 2000 crores or a turnover over INR 6000 crores, approval from CCI is also mandatory. These limits, reckoned for the group level are INR 8000 crores in assets and INR 24000 crores in turnover.

Antitrust perspectives of a merger:
Antitrust, in simple terms, refers to the possibility of fraud or abuse due to the large combined market power wielded as a result of the merger.
In India, this regulatory role is played by the Competition Commission of India, established by the Competition Act, of 2002. This Act replaced the antediluvian Monopolies and Restrictive Trade Practices Act.
For instance, when Lafarge and Holcim - two of the biggest cement manufacturing giants decided to merge, the Competition Commission of India mandated that they sell off some of their assets in certain states. This was done to curtail the merged cement conglomerate from asserting a large influence on the cement market and housing prices, and upsetting the natural balance of demand and supply.
Expansion of antitrust provisions to Big Tech companies:

The competition regulatory body CCI has not shied away from imposing large penalties on bigtech businesses, despite defensive claims by these companies of driving better consumer value.

For instance, CCI created history by imposing a fine worth INR 1337 crore on Google (its highest ever), for alleged abuse by Google due to its dominance in the android mobile app ecosystem.

MakeMyTrip and Goibibo, along with Oyo were fined for unfair pricing agreements with hotel partners and preferential treatment to Oyo’s hotel partners. The CCI deems these practices to be against the spirit of fair competition and ultimately distort the market.

Other issues that can potentially arise in a merger.

Conflict of values, goals, and interests

Fixing a fair valuation of post-merger shares

Leadership crisis, especially if top leaders of the two merging entities fail to cooperate

Failure of a merged entity causes greater market loss, bad debts, and demand erosion than just any one entity failing.

Failure to get appropriate regulatory approvals - especially from SEBI, NSE, BSE, RBI, CCI, and other agencies

Delay in filing for necessary approvals from the National Company Law Tribunal and Registrar of Companies

To ensure that your business faces none of these issues, connect with experts at Compliance Calendar who’d evaluate your financial and business metrics and deliver the best advice on mergers, tailored exclusively for your specific needs.

This year began with progress in two major mergers in the entertainment industry - the Zee and Sony merger, and the merger of cinema giants PVR and Inox. In this article, Compliance Calendar aims to simplify the end goals of a merger while also casting light on the regulatory and other challenges of a merger in India.

Mergers in India - the why and how

The last few years have witnessed some big-ticket mergers between top players. This includes - Makemytrip and Goibibo (MMT-Go), Flipkart and E-bay, Tata Steels and ThyssenKrupp, Vodafone and Idea, Indiabulls Housing Finance and Laxmi Vilas Bank, among others.

Post-merger, PVR Inox would become the largest multiplex company in India with access to over 1500 screens across all tiers of cities. Similarly, Zee and Sony merger would boost the creative and infrastructural capacities of these two leading entertainment houses.

Mergers are becoming a preferred choice in an increasingly volatile and fragmented market, especially in cases of forward consumer-facing businesses like banking, media companies, telecom, construction, and technology industries.

Advantages, in a nutshell:

Better access to cash resources
Expansion of networks - suppliers, manufacturers, and distributors (especially in cases of upstream or downstream mergers with businesses in the supply chain)
Entry into newer geographies
Restructured debt and equity structure
More capital funding
Access to newer assets, technologies, and know-how
Protection of trademarks, patents, industrial designs, and trade secrets
Easier access to R&D information, licenses, auctions
Efficiency in prices due to cost optimization
Cuts out the intense competition, if competing players are merged
Delivering better shareholder value

Basic compliance framework of a typical merger:

Ensuring that the object clause in the Memorandum allows for the post-merger business to be carried on.
Sending notices to all stock exchanges, if the company is listed
Filing for merger approval with the NCLT and intimation to the ROC
Intimating shareholders and creditors of the NCLT approval, filing public advertisements in two newspapers and calling a public meeting.
Passing a special resolution, with the approval of three-fourths of all shareholders
If an enterprise has assets over INR 2000 crores or a turnover over INR 6000 crores, approval from CCI is also mandatory. These limits, reckoned for the group level are INR 8000 crores in assets and INR 24000 crores in turnover.

Antitrust perspectives of a merger:

Antitrust, in simple terms, refers to the possibility of fraud or abuse due to the large combined market power wielded as a result of the merger.

In India, this regulatory role is played by the Competition Commission of India, established by the Competition Act, of 2002. This Act replaced the antediluvian Monopolies and Restrictive Trade Practices Act.

For instance, when Lafarge and Holcim - two of the biggest cement manufacturing giants decided to merge, the Competition Commission of India mandated that they sell off some of their assets in certain states. This was done to curtail the merged cement conglomerate from asserting a large influence on the cement market and housing prices, and upsetting the natural balance of demand and supply.

Expansion of antitrust provisions to Big Tech companies:

The competition regulatory body CCI has not shied away from imposing large penalties on bigtech businesses, despite defensive claims by these companies of driving better consumer value.
For instance, CCI created history by imposing a fine worth INR 1337 crore on Google (its highest ever), for alleged abuse by Google due to its dominance in the android mobile app ecosystem.
MakeMyTrip and Goibibo, along with Oyo were fined for unfair pricing agreements with hotel partners and preferential treatment to Oyo’s hotel partners. The CCI deems these practices to be against the spirit of fair competition and ultimately distort the market.

Other issues that can potentially arise in a merger.

Conflict of values, goals, and interests
Fixing a fair valuation of post-merger shares
Leadership crisis, especially if top leaders of the two merging entities fail to cooperate
Failure of a merged entity causes greater market loss, bad debts, and demand erosion than just any one entity failing.
Failure to get appropriate regulatory approvals - especially from SEBI, NSE, BSE, RBI, CCI, and other agencies
Delay in filing for necessary approvals from the National Company Law Tribunal and Registrar of Companies

To ensure that your business faces none of these issues, connect with experts at Compliance Calendar who’d evaluate your financial and business metrics and deliver the best advice on mergers, tailored exclusively for your specific needs.