A TRENCHANT ANALYSIS OF THE CROSS-BORDER M&A REGIME IN A

PANDEMIC-STRUCK INDIAN ECONOMY.

8.4/.5- (BL.2) Mergers, Acquisitions and Antitrust Laws

Submitted by:-

Uditanshu Misra

UID:- SM0117057

4th year & 8th semester

Submitted to- Prof. Ankur Madhia

National Law University and Judicial Academy, Assam

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 TABLE OF CONTENTS
ABSTRACT.....................................................................................................................................................3
INTRODUCTION............................................................................................................................................4
KEY STATUTORY PROVISIONS.....................................................................................................................8
JET-ETIHAD MERGER.................................................................................................................................11
IMPACT OF COVID-19 PANDEMIC ON CROSS-BORDER M&A.....................................................................16
CONCLUSION..............................................................................................................................................21
BIBLIOGRAPHY...........................................................................................................................................23

2
ABSTRACT
In today's time, with the technology being at its apex, a global shift is seen for every business in
India. Indian companies have been in and towards aggressive investment changes and
optimizing of profit making patterns. With the government policies getting liberal and Indian
companies' want for expansion and restructuring increasing, cross-border mergers (inbound and
outbound) have become the prevalent source of corporate restructuring. With the 2013
Companies Act streamlining the 1956 Act several significant changes have been made to make
the provisions functional.

Cross-border mergers and acquisition are a key method in rejuvenating a business model. The
pandemic has given a tough challenge to companies, sectors like tourism, aviation and
hospitality have suffered the crunch even more. Furthermore, the cross-border M&A regime has
gone through a shift as outbound mergers have now been allowed, regulatory timelines and
monetary considerations have been precisely laid down, objections of frivolous nature from
shareholders/creditors have been kept in check. In addition, multiple approvals (RBI for eg.)
have caused the process to become pretty tiring and time consuming.  Lastly the additional
changes in several taxation and security laws are also anticipated.

On the lines of the aforementioned, this paper goes through the intricacies of Cross-border
mergers and acquisition in India, it states the statutory law and regulations to be followed to opt
for a cross-border transaction. It also analyses the famous Jet Etihad merger case decision by
the Competition Commission of India. The paper goes into depth scrutinizing the present
scenario in the market because of the Covid-19 crisis. It suggests a way forward in dealing with
cross-border mergers and acquisition, the paper also analyses how this pandemic will make a
difference in the long term for the companies if they act wisely and make use of the time.

Keywords: Covid-19, Cross-border mergers and acquisitions, Pandemic, Companies

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CHAPTER 1

INTRODUCTION

Mergers and acquisition is a means in formulating business strategy, it involves fusion or taking
over of one enterprise by another. It is beneficial as synergies of both the companies are brought
together as one and each of them get what they lacked earlier. It also helps the businesses
seeking opportunity to enter a new market segment by providing them with the capacity,
capability and resources.

With the advent of globalization and the economies in the world coming closer, the ease of doing
business has become an important aspect. India attains a fair position in the Ease of Doing
Business Index. Cross-border mergers are an essential factor, which influences the Index.

Generally, a cross border merger is a fusion of two different enterprises located in distinct
countries into a third, wholly new enterprise. It is essential that both the businesses are situated in
different countries to constitute a cross border merger. Cross border mergers involve complex
compliances to be taken care of as laws of two countries are concerned. Cross-border mergers
take place with the view to expand their business territory, as the particular company has
achieved maximum in its domestic market.

As per the international law, when the acquirer company acquires the target company, that
company (target company) becomes a national of the acquirer company. With the change in
nationality, there also happens a change in the corporate governance of the company; the
company is then governed by the law of that country. Cross-border mergers and acquisitions help
in generating Foreign Direct Investment (FDI) in the country and also help in the advancement
of technology.1

Prior to the notification of Section 234 of the Companies Act, 2013, the cross border merger of a
foreign company with an Indian company was only permitted but post the notification, both
outbound and inbound mergers are permitted under the Companies Act, 2013.

1
Gupta, Sayantan, “Cross-Border Mergers and Acquisitions in India”, Corporate law advisors, (SSRN, 2009).

4
When it comes to cross border mergers, inbound mergers are quite popular in India as the foreign
investors believe that it is much more economical to acquire a setup rather than set-up one itself.
This is majorly popular in the information technology and telecom sector. Outbound mergers are
also picking pace in India as it can be seen that the Indian manufacturing giants are interested in
going global and acquiring business outside India.

The mergers and acquisition activity in India, has now become much predictable especially the
cross-border mergers and acquisitions but due to the recent Covid-19 crisis everything, every
deal is shattered and companies are thinking of new ways to keep the business activities on track.
There have been many issues which the parties to a cross-border mergers and acquisitions deals
will have to take into consideration to minimize the jerk of pandemic.

1.2 Review of Literature

Godbole (2017) in his book2has laid down several aspects related to Corporate Restructuring and
M&A in India. The book complies with the provisions of the Companies Act, 2013 (TCA 2013).
The book gives a research scholar; a definitive line of research as well as the various concepts
has been written in the simplest way possible. The various Cross Border M&A terms and ways
that have been mentioned above have been discussed in depth by this particular book. The book
is helpful for any academician or research scholar as it has given a plethora of dimensions related
to the field of corporate commercial laws. The book has helped the researcher in finding a
definitive line of research and has helped the same in analyzing various corporate restructuring
terms in the light of the Indian Retail Industry.

This particular research article by Team NDA3 is both descriptive and analytical as it covers
major M&A concepts in great detail. The article covers several key corporate and security laws
considerations pertaining to Cross-Border M&A. Moreover, the article covers the role of
Competition Law in this particular field of study. Lastly, the research article is wholesome as it
highlights the relevance of TCA, 2013, several exchange control mechanisms and necessary
taxes and duties. In short, wherever the aforementioned book lacks, this particular article has
2
PRASHANT G. GODBOLE, MERGERS, ACQUISITIONS AND CORPORATE RESTRUCTURING, (Vikas Publishing House
2017).
3
Team of NDA, Mergers and Acquisitions, NISHITH DESAI AND ASSOCIATES (April 2nd 2021, 10:10 PM),
https://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/
Mergers___Acquisitions_in_India.pdf.

5
 come down as an answer to the same as it encourages extensive research with an analytical
mindset.

1.3 Aim of the Project

The main aim of the project is to understand corporate restructuring and M&A laws in the light
of TCA, 2013, and other relevant legislations. Moreover the research article focuses on the area
of corporate restructuring and M&A laws in the light of the retail industry in India in the current
scenario.

1.4 Research Objectives

 To understand the meaning of the concept of Cross Border M&A laws and research about
its prevalence in today’s times;

 To understand the significant Cross Border M&A transactions and terminologies

 To understand the opportunities and setbacks in the Cross Border M&As.

 To understand the impact of COVID-19 on the Cross Border M&A market with reference
to the several industries.

1.5 Research Questions

 What is the relevance of specific Indian legislations and what are the key statutory provisions
pertinent in the current Cross Border M&A regime?

 How has the Jet-Etihad Merger revamped the Cross Border M&A industry?

 How has a global pandemic impacted the Cross Border M&A regime with reference to several
sectors?

1.6 Research Hypothesis

 That hypothesis for this particular project is that with changing times, both global and domestic
players have tried to establish themselves in the current M&A industry in India.

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 That with this the never ending race of corporate restructuring and M&A has been on a rise in
several industries.

 Those specific legislations have ensured that this process is properly facilitated. However, a
global pandemic has done nothing but depreciate what had been a rising scenario.

 That several necessary steps are required in a stringent manner in order to make the current
market to where it had been.

1.7 Research Methodology

This particular paper primarily focuses upon the corporate restructuring and M&A laws
pertaining to the retail industry and how the current industry scenario in India will be the driving
force for the growth of the M&A industry and how a global pandemic has been a setback in
regards to the same. The overview mainly consists of legislations such as TCA, 2013, FEMA,
1999, SEBI regulations, Income Tax Act, etc. Doctrinal method was opted in order to conduct
the research for the topic. Moreover, several reports, relevant statements and schemes have also
been resorted to for the better research outcome. Several books and online sources were referred
while making this paper which is further stated in the References. Doctrinal method is mostly
library based research and is mostly related to books, texts and documents. The researcher has
resorted to descriptive as well as analytical mode of Doctrinal research. Moreover, ILI method of
citation has been used for the purpose of this paper.

CHAPTER 2

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KEY STATUTORY PROVISIONS

A significant amount of cross border mergers have occurred in a country like India and the same
is bound to continue as short-term lowered evaluation can be fruitful for the buyers to gain
control over companies that are significantly important while the same aggravates with a global
pandemic in the picture.4 Earlier under the Indian law, only those cross border M&As were
permitted where the company that was the transferor, was of a foreign country while the
company that was the transferee was an Indian company. This meant that a foreign company
trying to merge with an Indian company was allowed while the vice versa was prohibited. 5

Both inbound and outbound mergers have been permitted after the notification to s. 234 of the
Companies Act, 2013(hereinafter referred to as ICA, 2013). Inbound mergers are those where a
foreign company merges into an Indian company6 while where the contrary to the same happens,
it is known as an outbound merger.7

Since a cross border merger is different from a domestic one, several other conditions have to be
complied with apart from S. 232-234 of the ICA, 2013. These conditions are discussed below:

RBI has to give deemed approval: Regulations 4-9 of Foreign Exchange Management (Cross
Border Mergers) Regulations, 2018 have to be complied with for the cross border merger to
happen. S. 234 of ICA r/w Rule 25A of Companies (Compromises, Arrangement and
Amalgamation) Rules, 2016, stated for prior approval to be obtained from RBI. However, in a
process of ensuring that the cross border mergers are more time efficient, Regulation 9 of the
aforementioned Regulations stated for 'deemed approval' to be obtained from RBI if such merger
is in consonance with the FEMA regulations. Self-certification of the same has to be done by the
Managing Director and the company secretary in regards to compliance with the aforementioned
Regulations while applying to the NCLT for a merger (in consonance with the ICA, 2013).
4
RamagovindKurrupath, “COVID-19 and M&A in India: Navigating Risks and Understanding Opportunities, India
Corporate Law: A Cyril AmarchandMangaldas Blog”, Cyril Amarchand and Mangaldas, April 16, 2020, available
at https://corporate.cyrilamarchandblogs.com/2020/04/covid-19-and-ma-in-india-navigating-risks-and-
understanding-opportunities/, (last visited on March 1, 2021, 3:45 PM).
5
 Companies Act 1956, (Act 1 of 1956), s. 394 (4)(b).
6
Companies Act, 2013, (Act 18 of 2013), Explanation to s. 234; Foreign Exchange Management (Cross Bound
Merger) Regulations, 2018, (Regulation 389 of 2018), s. 2(v).
7
Foreign Exchange Management (Cross Bound Merger) Regulations, 2018,(Regulation 389 of 2018), s. 2 (iv),
2(vii).

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 CONDITIONS PRESCRIBED FOR INBOUND MERGERS

1. The Resultant Indian Company issues shares: The resultant Indian company when issues security
to a foreign person/company, the same in regards to the cross border merger, has to be in
consonance with guidelines of pricing, routes of entry, sectoral caps, attendant conditions and
requirements of reporting for foreign investment as prescribed under FEMR (Transfer or Issue of
Security by a Person Residing Outside India) (TISPRO Regulations).
2. Off-shore Branches: As per the Foreign Exchange Management (Foreign Currency Account by a
Person Resident in India) Regulations, 2015, offices of the foreign company that is merged
outside India, will be considered as the offices of the Indian company which is the resultant
company.
3. Merged Foreign Company’s Outstanding Borrowings and Guarantees: Foreign Company's
outstanding borrowings will be deemed to be that of the Indian company and the same has to be
in consonance with guidelines of FEMR on lending in foreign exchange or Indian rupee or
Guarantee, ECB (External Commercial Borrowings) and trade credit norms. However, such strict
compliances may not be feasible to be followed in case of inbound mergers' retrospective debt.
The RBI has laid down certain relaxations in regards to the same stated as: a) end restrictions
have been scrapped and b) the Indian company which is the resultant company is granted a
period of grace for 2 years from the date of merger so that the same can comply with the
Regulations of borrowings. Moreover, in regards to the same, remittances for repayment cannot
be granted for such liability from India.
4. Merged Foreign Company’s offshore assets: As per the FEMA Regulations, the resultant Indian
Company has a right to acquire the offshore assets of the merged foreign company and if the
same is not permitted under the Regulations, then two years period is given by the RBI to part
with the assets and use the sale proceeds and further if the same does not occur, it should be
repatriated to India immediately, through several banking channels.8

CONDITIONS PRESCRIBED FOR OUTBOUND MERGERS

8
NamrataBhagwatula, “Cross Border Merger Regulations- A step in the right direction or Unbolting of floodgates?”,
Game Changer Law Advisors, January 4, 2019, available at https://gamechangerlaw.com/2018-in-review-cross-
border-merger-regulations-a-step-in-the-right-direction-or-unbolting-of-floodgates/, (last visited on March 3, 2021,
4:40 PM).

9
1. Granting of Permission for acquiring security of the resultant foreign company: The guidelines
laid down by FEMR (Transfer or Issue of any Foreign Security), 2004The Indian Company's
shareholders who have the authority of getting the resultant foreign company's issued shares after
an outbound merger, have the authority of acquiring and holding the same. Moreover, the share's
valuation in regards to the same has to be in consonance with the RBI's Liberalized Remittance
Scheme.
2. Merged Indian Company’s Onshore Offices: The merged Indian company's Indian offices shall
be considered as the resultant foreign company's branch offices and the same has to be in
consonance with the guidelines of FEMR, 2016 ( Establishment in India of a Branch office or a
Liaison office or a Project office or any other Place of Business).
3. Merged Indian Company’s guarantees or outstanding borrowings: The merged Indian company's
guarantees and borrowings shall be deemed as the resultant foreign company's outstanding debt
and shall be further repaid as per the guidelines of merger laid down by the NCLT. Furthermore,
the acquisition of any Indian Rupee liability that is payable to an Indian lender is prohibited for
the foreign company if the same does not draw consonance with FEMA guidelines and for the
same, the Indian lender will have to give an NOC.
4. Merged Indian Company’s onshore assets: The foreign company has the authority to hold and
transfer assets that are there in India and the same has to be in consonance with the FEMA
regulations, and if the same is not prescribed under FEMA, a two year period is given by RBI
from the date where the merger has taken place so that it can part with the onshore liability and if
such is not the case, banking channels should come into use for them to immediately repatriate
outside India.9

IMPLICATIONS REGARDING TAXATION FOR CROSS BORDER M&A

Compliances related to two international customs and treaties of two or more countries are
required for a successful cross border M&A. In regards to cross border M&A, generally taxation
compliances are pretty complex.The entire taxation regime has undergone significant changes
and has continued to do so due to the necessary regulatory measures taken by the OECD. The
guidelines laid down by the same have significantly aimed at attacking the problems related to
tax evasion and avoidance. Moreover, Multilateral Convention to Implement Tax Treaty Related

9
Id.

10
Measures is signed in order to ensure that Profit Shifting occurs and Base Erosion is prevented
(MLI) and the same has been signed by 94 countries to ensure that the aforementioned problems
are solved. MLI was signed by India on 7th June 2017 and came into force on 1st October,
2019.10Every cross border transaction has seen the altering tax landscape based on the action
plans laid down by OECD and MLI. In regards to M&A, these measures had come across as a
tool to increase transparency and introduce a hybrid tax system, but the same has led to increased
cost compliances and lack of implementation that is uniform in nature. This has posed a serious
threat towards several corporations and regulatory authorities.11

CHAPTER 3

JET-ETIHAD MERGER12

The Indian aviation industry marked a historic day on November 20th, 2013 where the much
awaited Jet and Etihad merger finally took place at an investment of about 379 mn. USD dollars
as Etihad acquired 24% stakes in the Jet airways.13 Pursuant to the equity investment, Etihad
agreed upon infusing a 150 mn. into the frequent flyer programme of Jet privilege as the same
has to be managed by its subsidiary Jet Privilege Pvt. Ltd. Etihad has also agreed upon giving a
loan to Jet of a 150 mn.14

As the foreign investment by foreign Airlines came into prevalence pursuant to the liberalization
of the aviation sector, the saga of the Jet-Etihad merger was rumored. The first step in this
direction was executed when the chairman of Jet Airways, Mr.NareshGoyal conceived the idea

10
OECD, “Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS”, OECD, February
28, 2020, available at https://www.oecd.org/tax/treaties/multilateral-convention-to-implement-tax-treaty-related-
measures-to-prevent-beps.htm, (last visited on March 4, 2021, 6:55 PM).
11
SnehalKanzarkar, “Cross Border Mergers and Acquisitions: An Overview”, M&A Critique,available at
https://mnacritique.mergersindia.com/cross-border-mergers-acquisitions-an-overview/,  (last visited on March 4,
2021 3:40 AM).
12
Competition Commission of India, Combination Registration No. C-2013/05/122, available at
http://www.cci.gov.in/sites/default/files/C-2013-05-122%20Order%20121113.pdf, (last visited on March, 4, 2021
4:11 PM).

13
Jet airways, Outcome of Board Meeting, Bombay stock exchange, available at http://www.bseindia.com/xml-
data/corpfiling/AttachHis/Jet_Airways_(India)_Ltd2_201113.pdf., (last visited on March, 4, 2021 5:11 PM).

14
Nishit Desai Associates,Jet-Etihad: Jet Gets a Co-Pilot, available at
http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Ma%20Lab/Jet-Etihad_Deal_Dissected.pdf , (last visited
on March, 4, 2021 6:26 PM).

11
along with the CEO of Etihad Airways, Mr. James Hogan. Mr.Goyal was of the opinion that FDI
in the Indian aviation sector will increase the economies of scale as well as the airport traffic at
the airports in India and would lead to employment opportunities. He stated that the stakeholders
would have easy access to a global network which was expandable and the same would expand
the tourist connectivity in regards to the Indian and global families. 15With the fruitfulness of the
deal being placed at the hands of the future, several allegations have been put towards the change
of government policies for facilitating liberalization of the aviation sector and several questions
have been asked in regards to the control Jet post the deal.

A 49% cap had been put for the foreign investment in the Civil Aviation industry in India as the
government liberalized its FDI policy. Etihad, a UAE based aviation company, decided to
acquire 24% stakes of Jet, a company that was listed in India. The Government of Abu Dhabi
had entire control over Etihad and it was primarily involved in aviation services for international
air passengers. 29.21% of the integrity of Air Berlin is held by Etihad, 40% of the same is in Air
Sychelles, 10% in Virgin Australia and 2.9% of the equity in Aer Lingus. Jet is primarily
prevalent for giving low-cost services for its passengers in transportation along with overhaul
services, maintenance as well as repair.16

SEBI, Foreign Investment Promotion Board and CCEA were the bodies that approved the
proposal. Post this, a Shareholder Agreement, Investment Agreement and a Commercial Co-
operation Agreement submitted to the Competition Commission of India (CCI) by both Jet and
Etihad for the approval of the same. It is a landmark judgment in the aviation sector as the CCI
examined the entire impact of the same on the aviation practices and India's competition
regime.17The only thing that had to be examined by the commission was whether this merger had
impacted India on the grounds of Appreciable Adverse Effect on Competition (AAEC). The
relevant market in the instant case was properly examined.

RELEVANT MARKET

15
 Id.
16
 Case Study of Jet Airways (India) Limited and Etihad Airways PJSC (Combination Regulation),available at
http://circ.in/pdf/Case_Study_18.pdf, (last visited on March, 4, 2021 6:26 PM).
17
Competition Commission of India,Order under Section 31(1) of the Competition Act, 2002, available at
http://www.cci.gov.in/sites/default/files/SCBIndia28Dec2011_0.pdf, (last visited on March, 4, 2021 6:26 PM).

12
A relevant market in the instant case was considered to be the market pursuant to international
passengers transport of air on the basis of point of origin or point of destination (O&D).
Therefore in regards to O&D, distinct routes were deemed to have different relevant markets.
Following points were to be considered for ascertaining the relevant market:

1) Substitution of Direct and Indirect flights through O&D.

2) Competitor's indirect flights being substitutable between O&D.
3) Distinct classes of travellers and services inside the flight that are rendered to different
classes having a valid substitution.
4) Passengers according to price and time.
5) Indian policy on open skies in regards to international air cargo transportation as Etihad
was inoperative in the Indian sector.

Therefore, CCI concluded to this by stating that the relevant market in the case at hand would be
in regards to:

1) O&D ending or from 9 cities in India from/to UAE.

2) O&D from or ending in India to/from destinations internationally on the routes that are
overlapping the parties to the combination.

APPRECIABLE ADVERSE EFFECT ON COMPETITION (AAEC)

As the relevant market had been defined in regards to such routes, the CCI went on to ascertain
as to whether there will be any AAEC. As the routes were international, CCI stressed upon trans
boundary competition in order to assess the proposed combination and ascertain the AAEC. 38
routes were assessed where Jet and Etihad had at least one competitor on the route to/from India.
Apart from 7 routes, Jet and Etihad had less than 50% of the combined share. Moreover, on the 7
routes stated above, the combined share had huge discrepancies. For eg.on the Bombay-Brussels
route, Jet had a market share of 72.9 % while Etihad had a market share of 3.3 %. While on the
Ahmedabad - Brussels route, the discrepancy was an 83.1 and 2.6 percent. Therefore, the market
share observed a post transaction change as the same did not alter the dynamics of competition.18
18
Supra Note 9.

13
In regards to the market in UAE, the CCI considered the substituting aspect of the airport
between the proposed O&Ds as well as the possibility for them to be in the same market. The
combined market share of Jet and Etihad decreases significantly when the airports are considered
to be substitutable as the airports of six Indian cities out of the 7 aforementioned routes are
overlapping. For the one remaining route between Chennai and Toronto, there is a significant
alternative that the customers can choose from. It was concluded that on every significant route
there is a major carrier to choose by the passengers apart from Jet and Etihad which has
constraining effects on the price behavior of the same and significant combinations are available
for the passengers to choose.19

The CCI however, observed that when one considers the effects of network, one must go beyond
the pairs of O&D and consideration must be given to potential effects of network in regards to
the combination that is being proposed. It was noteworthy that since the routes of Jet and Etihad
work complementary in nature, they made the effects of the network stronger. Rather than just
the point to point O&D pairs, competition was increasing seemingly among the systems. Jet
(India) and Etihad (Abu Dhabi) having high market shares in their respective hubs, does not
imply that there is a lack of competition.

THE EXCLUSIVE HUB BEING ABU DHABI

According to the CCA clauses, for the scheduled services to and from UAE, Africa, North
America and South America, Abu Dhabi was considered to be the exclusive hub and their work
to be certain O&Ds where there will be no sharing of codes of Jet with the other airlines. It was
considered that if there is lack of strong competitors, such constraints over sharing of code, can
lead to the foreclosure of the market and abuse of dominance can be further incited. But due to
eminent and effective competition by the aviation competitors constraining the power of Jet-
Etihad in the market, concern pertaining to competition from the share of market concentration
was eliminated.

THE MAJORITY DECISION

19
Id.

14
 CCI opined that the alliance of airlines would lead to improvement and expansion in services and
further would induce competition in that sector. It was also laid down that the proposed
combination would be leading to two similar combinations by other stakeholders in a sector
where competition is on a constant rise. The proposed equity infusion and its importance was
also analyzed by the CCI as Jet had been facing a crisis in the financial sector, it would have
helped Jet in staying and competing in the relevant market in India and on a global level.
Moreover, it was concluded by the CCI that the aforementioned combination is not going to have
AAEC and therefore such combination was approved on the basis of the details and information
provided by the parties. In case of any modifications or alterations at a later stage, fresh approval
was to be taken from the appropriate authorities. Moreover, it was implied that the parties had to
ensure that no ex-post violation takes place in regards to the provisions of the Act due to the ex-
ante approval.

THE MINORITY DECISION

The decision of the minority in the instant case signifying that there would be AAEC in the air
passenger transportation market was on the basis of the observation that:

1) Consumers will be tied down by the Frequent Flyer Participation (FFP) being incorporated, and
thereby entry/expansion barriers may arise making it pretty difficult for the new entrants as well
as competitors to shift the network of the parties' customers.
2) The approach of substitution in regards to the airports as observed by the CCI and asserted by the
parties, is formed on principles that are wrong and vague. This was because the minority ruling
opined that the route of India-UAE sector is not deemed to be substitutable by both, the airlines
themselves as well as the consumers.
3) Competitors can be present on all routes; however, the only remaining competitors in the direct
route of Delhi and Abu Dhabi are the Jet-Etihad. Since Jet and Etihad are going to operate as one
airline after the proposed combination, the entire competition shall be eliminated.
4) Furthermore, airlines with services of one stop can only be remote competitors and the same will
not exert any competitive constraint on the parties.

15
In totality it was opined that an appreciable adverse effect will be caused on the competition by
the proposed combination both in India and on a global level and significant investigation was
necessary to be called upon.

ANALYSING THE ORDER OF CCI

As stated, this case was first of the sort to have an examination over the arrangement between
two airlines. The decision of the CCI is that there is plenty of competition in the relevant market
and therefore AAEC in those markets is not is not likely to occur. The present approach of the
CCI is said to have been inspired from the British Airways-Iberia merger, wherein, the
Commission of Europe stated that there will be no effect on the competition by the said merger
till the time there are competitors who are credible to compete in the relevant market.

As already put forth, approvals from SEBI, FIPB and CCEA were already sought and several
approvals were sought as per the guidelines of FEMA. The CCI carefully analyzed several
significant aspects of this deal. Moreover, this case was one of a kind where the CCI relied upon
no further investigations and only information presented by the parties were taken into account
for deciding the role of AAEC. The CCI re-emphasized on the idea that there was significant
material available to form an opinion and further investigation was not necessary. However, the
dissent was also formed on significant grounds prescribing for further investigation. It is a
noteworthy fact that if there are any alterations or modifications, fresh approvals need to be
sought from appropriate authorities.

CHAPTER 4

IMPACT OF COVID-19 PANDEMIC ON CROSS-BORDER M&A

The Covid-19 pandemic of 2020 has shaken the very shackles of the world; it is disruptive not
only in terms of global economy on a whole but also loss of human lives. This was a situation
nobody could have anticipated and prepared for. It also had a significant impact on mergers and
acquisition, though M&A activity was not totally refrained as business activities in some sectors
like medical research and consumer goods were on full swing owing to the lockdown all over the
world and getting a solution from the virus respectively. But corporations from other sectors like

16
aviation, tourism and hospitality suffered a great crunch because of the lockdown. 20 The
corporations were in a muddle, whether to continue the ongoing transactions or to pull it off.
Buyers will have to decide whether to utilize liquidity for acquisitions or to stabilize the existing
business.21 With the pandemic and everything being shut down, uncertainty was the weather
throughout the year 2020. Cross-border mergers and acquisition dropped by 15% in 2020
compared to 2019.22

GETTING BACK TO NORMAL

Going back to the normal course of business will be a difficult task for the corporations. M&A
deals will not take place until the situation gets a little better as the corporations will have to
work towards the risk mitigating factors in a whole new fashion after the cloud of severe
uncertainty in this pandemic. Mergers & Acquisitions have often been known as the “seller’s
market” as the seller always had an upper hand in the M&A transactions but, unfortunately, after
the pandemic, it will be a “buyer’s market”. 23 Due to the uncertainty, sellers are hesitating to
provide any warranty or indemnity to the buyers regarding the deal, which makes the situation
grievously risk taking for the buyers. The sellers also have to ensure that the buyer does not plug
off the deal due to paucity of funds in this unprecedented time.

TRANSACTION OBLIGATIONS

In these unpredictable times, there can be seen a clear difference between the M&A agreements
which are in their ‘pre-signing phase’ and agreements which are in their ‘post-signing phase and
the deal was about to close’ when the pandemic was declared.

20
SS Rana&  Co., “ M&A in Times of COVID-19:Considerations, Navigating Risks and Understanding the Change
in Dynamics”, ICLG, June 11, 2020, available at  https://iclg.com/briefing/13319-m-and-a-in-times-of-covid-19-
considerations-navigating-risks-and-understanding-the-change-in-dynamics, (last visited on March 5, 2021, 6:47
PM).
21
Delloite, COVID-19– a global M&A legal perspective, available at
https://www2.deloitte.com/ch/en/pages/legal/articles/m-and-a-legal-during-covid-19.html, (last visited on March 5,
2021, 5:22 PM).
22
UNCTAD, Impact of the Covid-19 on Trade and Development, available at
https://unctad.org/system/files/official-document/osg2020d1_en.pdf, (last visited on March 5, 2021 5:55 PM).
23
 DordaRechtsanwalte, “ Covid-19 poses major challenges for (cross-border) M&A transactions as well as for
capital market deals”, ICLG, June 11, 2020, available at  https://iclg.com/briefing/11272-covid-19-poses-major-
challenges-for-cross-border-m-and-a-transactions-as-well-as-for-capital-market-deals, (last visited on March 5,
2021, 6:47 PM).

17
A deal in its pre-signing phase, is in sole control of the seller, it is on the seller to decide whether
he wants to work towards the welfare of the company or just sell it anyhow without any
considerations. The buyers will be struck in a loop, whether to call off the whole deal as to why
he will merge or acquire with a loss making unit or to reconsider some aspects of the cross-
border transaction. In this phase revaluation of the deal is possible as anything is not in
conformity yet. The buyers will also be adamant to include a Material Adverse Effect (MAE)
Clause after all the Covid losses businesses around the world have suffered. MAE clause
becomes all the more essential in acquisition agreements where the buyers refuses to the deal
agreed on, if the target company suffers any material or significant change between the signing
of the deal and closing the deal, which results in downturn of the company, therefore making the
target weak and of less potential.24 Force Majeure is also an important clause that should be
included in the M&A agreement, amid all the confusion that is happening because of the
pandemic. Force Majeure is described as “event or effect that can be neither anticipated nor
controlled . . . [and] includes both acts of nature (e.g., floods and hurricanes) and acts of people
(e.g., riots, strikes, and wars)”.25 This clause will be instrumental in handling all the confusion
that is happening because of the Covid crisis. If this clause is explicitly mentioned in the
agreement then the parties are absolved from breach of contract if it happens in uncontrollable
circumstances. It is also important as the Board of Directors is answerable to the shareholders of
the company and they would never be liked to be accused of making wrong decision-making, by
acquiring an overvalued company.

Buyers would have to survey the risks exuding from the target company in the pandemic and
look for warranties. The sellers will have to consider all the uncertainty while executing
warranties in the agreement, negotiation will play a great part in this arrangement. 

With negotiations back on the table, the parties involved in the merger or acquisition deal should
also consider uncertainty as a major factor, given the current times. The agreement should
consist of clauses stating what will be the outcome of the deal if future performance of the
company is not upto the mark or it should also take into consideration eminent risks owing to the
present pandemic situation.

24
Id.
25
 Bryan A. Garner, Black Law Dictionary 1 (Thomson Reuters, 11th edn., 2019).

18
Before sealing the deal there are various steps taken by the parties to ensure that they are sailing
in the right boat. One of them being due diligence. It is almost impossible to conduct due
diligence in person due to the constraints put on the tourism and hospitality sector by the
government which makes cross-border M&A all the more difficult to execute. Therefore, buyers
and sellers should both be ready to conduct this step in the new normal way. The buyers should
be well-equipped with people and technology to conduct due diligence remotely and the buyers
should also provide a proper virtual set-up, so as to avoid any hindrances in the process. But not
all of it can be done virtually, matters involving confidential information should be done in
person. Each and every information has to be verified with complete satisfaction, every
obligation; every covenant has to be understood. It has to be seen how the customers and
suppliers of the target company are reacting to its pandemic problem. What is the rate at which
the company has taken a loan, are the lending institutions considerate enough regarding the
Covid issue. Once every detail has been satisfied with and all the laws and conditions regarding
the merger and acquisition have been complied with, then only the parties should move forward
with the deal unless it will be an issue of “gun jumping”26 and will make the deal null and void.

As we get acclimatized to the ‘new normal’ phase, Board Meetings, Extra-Ordinary General
Meetings are all conducted online and all the decisions relating to the merger or acquisition is
made there. Due to restrictions by the governments of respective countries on tourism and
hospitality industries, companies have adopted e-execution and e-signing of the cross border
mergers and acquisition.27

Even the Reserve Bank of India and Securities Exchange Board of India has made their
applications online.28 The Competition Commission of India has also allowed for online
application of merger combinations through the Green channel via video conferencing.29

26
VikramNarula, ShilpiSharan, “Gun Jumping in M&A”, Mondaq, September 27, 2019, available at
https://www.mondaq.com/india/antitrust-eu-competition-/849280/gun-jumping-in-mergers-and-acquisitions, (last
visited on March 5, 2021, 4:47 PM).
27
Supra Note 2.
28
KanikaKamothi, “Cross-Border M&A deals in the Times of Covid-19”, July 16, 2020, available at
https://www.rfmlr.com/post/cross-border-mergers-and-acquisitions-deals-in-the-times-of-covid-19, (last visited on
March 6, 2021 1:15 PM).
29
CCI Notice dated March 30, 2020, available at
https://www.cci.gov.in/sites/default/files/whats_newdocument/30thcircular.pdf, (last visited on March 6, 2021 5:32
PM).

19
PANDEMIC- AN ADVANTAGE

The Covid-19 crisis has also opened gates for new opportunities. Companies which were
planning to opt for mergers and acquisition as their last resort, are now more troubled as the
pandemic has caused great losses to the company and in turn lowered their valuation in the short
term. But this also gives them the space to rejuvenate again and achieve higher returns in the
long run.30 While the transient impact of the Covid-19 pandemic on the M&A scene will be
uncommon, it is normal that this emergency would likewise encourage an adjustment in the
viewpoint of purchasers and a realignment of needs at the level of the public authority towards
areas like medical care and pharmaceutical, just as associated fields like medical research,
equipment, and so forth. In addition to the fact that this would bring forth openings for expanded
localization and bring the community more close.31

The pandemic also brought the world closer virtually by sitting at their respective homes. New
things such as telemedicine, where the doctor prescribed medicine through video conferencing
and also door-to-door delivery of retail medicine got its pace. 32 With the help of technology and
artificial intelligence, not only India but every country around the globe got new ideas in times of
need, on how to run a normal life in the new normal.

Though, in these unprecedented times, the world suffered great losses but some sectors like the
medical research, pharmaceuticals, FMCG and IT witnessed growth in their graphs. Insurance
sector also experienced growth in sales of health insurance 33 as people in India generally do not
have insurance but due to the uncertainty of the Covid-19 disease, they were convinced in buying
health insurance for their secure future.

CHAPTER 5

30
Supra Note 18.
31
Supra Note 2.
32
Ministry of Health and Family Welfare notification dated March 26, 2020 available at
https://www.mohfw.gov.in/pdf/Doorstepdelivery26B.pdf, (last visited on March 6, 2021, 6:11 PM).
33
Press Release by Press Information Bureau dated May 8, 2015 available at
https://pib.gov.in/newsite/PrintRelease.aspx?relid=121445, (last visited on March 6, 2021, 7:19 PM).

20
CONCLUSION

Cross border mergers signify the vibrance of a particular economy. The simple fact signifying
the aforementioned point is that 70% of the total mergers happening across the world come
through cross border mergers.34 Global players like Tata Steel and Videocon are some important
examples in regards to the same as they have been the largest overseas acquirers till date. No
foreign company merging with an Indian company has come into the picture apart from some
significant examples that have already been mentioned in the paper. The reason why a cross
border merger remains to be a tedious task is because of the regulatory compliances that one
needs to abide to in regards to the Companies Act, 2013 and Competition Act, 2002. The biggest
obstacle that remains my head office is the knowledge of how a merger of an Indian company
can be consummated with the foreign company in compliance with several company laws.

Competition Act, 2002, remains to be the supervisor of the entire cross-border regime in order to
make sure that there is no monopoly created by supremacy or dominance in the industry. A
careful analysis of the Act signifies Noble intentions behind curbing an anti-competitive
combination of an Indian economy. The need for rectification in the Act continues to exist.
Promotion of beneficial M&A and prohibition of anti-competitive M&A remains to be the
ultimate goal. A balance needs to be maintained. The amendment of 2007 to the Competition
Act, aims at removing flaws from the Act. It can be assumed that only half of the part has been
covered and several conflicts are yet to be resolved.

If India has to become a global M&A player, the loopholes in several legislations need to be
resolved as the Indian markets cannot function in isolation. Foreign investors must be given
special emphasis. Expansion of territorial boundaries have led us to this economic world of cross
border M&A and therefore International cooperation becomes necessary for resolving the
existing and future problems.

Moreover , in regards to the Jet-Etihad merger, the researchers firmly stand by the majority
ruling of the CCI that there is ample competition in the relevant market and therefore chances of
AAEC occurring are close to none. Moreover, in case of a division in regards to investigation
concerns are related, the point stating that fresh approvals need to be sought from the appropriate

34
Supra Note 1.

21
 authorities in case of a modification or alteration runs in consonance with the several concerns of
the CCI.

The recent Covid-19 crisis has greatly affected the M&A deals and has the parties in a
detrimental position, at least till the pandemic exists. The parties will have to be careful while
executing the contract, the clauses like the Material Adverse Effect (MAE) clause, Force
Majeure clause and clauses relating to warranties and guarantees of the parties are to be
considered. The companies will be more conscious in assessing the risks and the decision
making will be harder this time.

Cross-border mergers and acquisition will not just be a transaction this time but it would be like
climbing a mountain because of the travel restrictions. The time taken for the closure of the deal
will be more than the normal in the new normal; it will be difficult to acquire all the regulatory
approvals. But as low as it sounds, there is always an optimistic side. 2020 may be the worst year
of the century but it has definitely taught everyone new methods to conduct business online
without moving from one place to another. With slow growth, companies will still need to
acquire and merge with other companies, to cover up the losses, to develop technology and many
more but most essentially to keep the business going and growing.

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24