MCA notifies ₹2,000 crore deal value threshold for mergers and combinations

In a major update for the Indian merger and acquisition landscape, the Union Ministry of Corporate Affairs (MCA) has officially notified the deal value threshold (DVT) provision under the Competition (Amendment) Act, 2023..Effective September 10, this new regulation introduces a higher level of scrutiny for high-value transactions in the digital market..The DVT provision mandates that mergers or acquisitions with a deal value exceeding ₹2,000 crore must be reviewed by the Competition Commission of India (CCI) if the target company has substantial business operations within India. This addition aims to fill potential gaps left by traditional asset or turnover-based thresholds, particularly in the context of digital markets..In addition to the DVT provision, the MCA has also introduced new rules under the Competition (Minimum Value of Assets or Turnover) Rules. These Rules provide a safe harbour for certain combinations, exempting transactions from CCI approval if the involved enterprise has assets less than ₹450 crore and a turnover of less than ₹1,250 crore. This threshold aims to reduce the regulatory burden on smaller transactions that are unlikely to raise anti-competitive concerns..Following the notification, the CCI has introduced new regulations under the Competition Commission of India (Combinations) Regulations, 2024.These regulations stipulate that the transaction value for the purpose of calculating deal value threshold will include all forms of valuable consideration, whether direct or indirect, immediate or deferred, and in any form - cash or otherwise. This encompasses consideration for covenants, obligations, or restrictions imposed on the seller, inter-connected steps and transactions related to the deal, payments for technology assistance, intellectual property rights, branding, and supply of goods or services within two years of the transaction, as well as call options and shares assuming full exercise of such options. Additionally, it includes future payments based on best estimates outlined in transaction documents..The new Regulations prescribe fees to be paid by parties to a combination, depending on whether they have filed notice of the combination under Form I or Form II. If the combined market share of the parties to the combination is more than 15% in any of the relevant markets, or their individual or combined market share is more than 25%, they are required to give a notice under Form II.The fees to be paid for combinations filed under Form I is ₹30 lakh. For Form II combinations, the fees is ₹90 lakh..If the CCI is of the prima facie opinion that the combination has caused or is likely to cause an appreciable adverse effect on competition within the relevant market in India, it may direct for publication of details of the combination.The new Regulations have an overriding effect over all other regulations filed under the Competition Act, in all matters relating to combinations..The Competition (Amendment) Act, 2023, passed by the Lok Sabha in March last year, is designed to complement existing merger control thresholds by introducing a new criterion focused on deal value. Initially, the amendment proposed that both the acquiring and target companies must have substantial business operations in India. However, based on recommendations from a parliamentary panel, the requirement was refined to apply only to the target entity..[Read notifications]