M&A norms: Industry happy with concept, unhappy with construct

From the acquisition of erstwhile home-spun drug maker Ranbaxy by Japan's Daiichi Sankyo to Swiss cement-maker Holcim's buyout of Gujarat Ambuja or Vodafone's buyout of Essar's stake in their joint-venture — Corporate India is no stranger to mega-deals.

So while it is not averse to the concept of the Competition Commission of India keeping an eye on deals that could change ground rules, the 180-day time-frame for approvals and the rejection of informal consultations is proving to be a stick in the mud, say corporate lawyers and representatives of the corporate sector.

It is a “toned-down” version, but it removes ambiguity on deals that are in the process of closing, provided it is done before June 1, says Mr Rukshad Davar, Corporate Partner handling mergers and acquisition with international law firm Majmudar & Co.

A key provision that has been rejected is that on informal consultations, which was imperative, as the law is nascent and it would have aided clients, he said. Transactions have become complex and lawyers and accountants are grappling with the law to see if deals cross the asset or turnover thresholds, he said, adding, in such instances, informal consultations would have helped. The 180-day timeframe is also an impediment, he observed.

At a time of instant gratification and nano-seconds, to wait for 180 days for an approval is too long, says Mr Ranjit Shahani, head of the Organisation of Pharmaceutical Producers of India (OPPI), a platform for multinational drug-majors. The concept is acceptable, but it is the worst construct that the country has adopted, he points out, adding that approvals need to be given swiftly.

Overseas drug companies are said to be eyeing acquisition targets in India, and the sector has seen much activity – including the sale of Piramal Healthcare' domestic formulations business to Abbott, Dabur's sale or its pharmaceutical business to Fresenius Kabi and more recently Reckitt Benckiser's acquisition of Paras Pharmaceuticals, to name a few.

Echoing similar sentiments, Dr Ganesh Natarajan, Vice-Chairman and Chief Executive of RPG group company Zensar Technologies, points out: “Given that the endeavour is to guard against monopoly, the principal behind the move is right. However, the problem is that it should not get stuck in bureaucracy. The 180 day upper limit (set by the CCI to evaluate such M&A cases) is too long. In most countries, the entire process is completed within 90 days.”

At the domestic end of the pharma segment, Mr D.G.Shah of the Indian Pharmaceutical Alliance points out, it is good that the CCI keeps the discretionary element and not define the norms too narrowly.