2 Nov 2010

Outbound Acquisitions by Indian Companies

In the paper entitled Rising Multinationals: Law and the Evolution of Outbound Acquisitions by Indian Companies, Afra Afsharipour of University of California has  penned upon an area critical to the success of the Indian aspirations of translating itself into a developed country. The success of a liberalized regime is evident from the rise of Indian companies who have begun, and that too successfully, to undertake outbound acquisitions. The law needs to work with time and thus the paper stresses upon the need to ensure that Indian corporate law works in tandem so as to ensure that the success stories are only emulated from hereon.
The paper provides an articulated insight to argue that some of the aspects of Indian law that may need further reform in order to allow Indian firms to achieve their M&A goals.The paper also points out that "some of the current legal constraints on M&A activity by Indian firms, such as roadblocks in their ability to carry out cross-border stock swap transactions, and the traditional promoter-controlled governance of Indian firms impose substantial restrictions not only on the methods used by Indian multinationals in pursuing outbound acquisitions, but also on the future potential of Indian multinationals" to hope that "by comprehensively laying out the existing roadblocks in Indian law, scholars and regulators can begin to develop solutions".

The abstract reads as under;
India is one of the fastest growing economies in the world and is predicted to become the third-largest economy in the world after the United States and China. India's economic transformation has allowed Indian firms to gain significant attention in the world economy, particularly as acquirers of non-Indian firms. In the past decade, Indian companies have launched multimillion and multibillion dollar deals to acquire companies around the globe, with a significant concentration of targets in developed economies, in particular the United States and the United Kingdom.

Finance and business scholars have addressed outbound acquisitions by Indian multinationals, emphasizing the business and economic motivations for such transactions. However, there has been little analysis from a legal perspective of the significance of India's legal norms and rules, including recent shifts in the country's regulatory and legal regimes, in the rapid expansion of Indian multinationals. This Article fills this void by analyzing the role of India's post-liberalization legal reforms in outbound acquisitions by Indian companies. This examination presents a more complete picture of the legal environment and legal rules that have facilitated outbound acquisitions by Indian multinationals, but also reveals how limitations in India's legal reforms have constrained these deals.

This Article argues that Indian corporate law plays a number of important roles in the emergence of Indian multinationals. First, legal reforms since economic liberalization have set the stage for outbound acquisitions by Indian multinationals. Second, Indian legal reforms and legal history have shaped outbound acquisitions both in terms of transaction structure and transaction size. Third, legal constraints on Indian firms' mergers and acquisition activity impose substantial restrictions not only on the methods that Indian multinationals use in pursuing outbound acquisitions, but also on the future potential of Indian multinationals.

No comments: