Category: Corporate

1. Introduction

In recent years, the Indian merger control framework in the Competition Act, 2002 (“Competition Act”), relied heavily on asset and turnover based triggers to determine the necessity of prior regulatory approval. While this model has served well in capital-intensive sectors, it has struggled to address the rising prevalence of asset-light, high-potential digital businesses. A tech startup, generating minimal revenue yet harboring substantial market value and innovation potential, could be acquired by a larger player entirely outside the eyes of the Competition Commission of India (“CCI”). Such transactions when quietly executed, carried the risk of eroding competition without scrutiny.

To bridge this oversight gap, the Indian government enacted a landmark reform introducing the Deal Value Threshold (“DVT”) via the Competition (Amendment) Act, 2023 (the “Competition Amendment Act”). Operational details arrived through the Competition Commission of India (Combinations) Regulations, 2024 (“Revised Combination Regulations”) after careful examination of the stakeholder inputs to the “Draft” Combination Regulations, 2023. Together, they constitute a fundamental shift in merger control. For the first time, the economic value of a transaction, rather than just the size of the parties, becomes a regulatory trigger. This ensures that strategically significant yet asset-light deals, especially those in the digital space, cannot evade oversight simply by virtue of low domestic turnover or assets.

The Competition Law Review Committee, in its 2019 report, particularly flagged the rise of digital market acquisitions so-called ‘killer acquisitions’ that escaped scrutiny under the old regime.

As part of that legislation, Section 5(d) of the Act now expressly empowers the CCI to require notification when a combination involves a deal whose value exceeds INR 2,000 crores (approximately USD 240–267 million) and the target has Substantial Business Operations in India (“SBOI”).

The regulations, notified on September 10, 2024, added operational content, confirming that this DVT, along with the SBOI test, applies transparently and retroactively to certain unclosed deals.

2. India’s Motivation: Moving Beyond Turnover

India’s move to adopt a DVT did not happen in a vacuum. Over the last decade a number of competition authorities, most prominently in Central Europe have faced the same structural problem i.e., how to capture high-value, strategic acquisitions of asset-light targets that traditional turnover or asset-based thresholds miss. Germany and Austria were early movers on this front, introducing a subordinate, transaction-value based filing route precisely to catch acquisitions where the purchase price more accurately signals competitive importance than the target’s current revenues. These reforms were expressly aimed at the phenomenon often described in policy literature as “killer acquisitions,” where established players acquire emerging rivals mainly to eliminate future competitive threats rather than to integrate businesses that already generate significant revenue.

Practically, the German and Austrian regimes share two design features that are rhetorically familiar to Indian reformers. First, the trigger is the value of consideration, a concept that looks beyond headline cash to include deferred payments, non-cash consideration and related contingent arrangements. Second, that value trigger is tied to a local-nexus test which basically means that the target must have “significant” or “substantial” domestic activity for the for the transaction-value threshold to be triggered. That pairing viz., value plus local nexus, was intended to limit overreach while ensuring that deals which could materially affect domestic markets do not slip through. The early experience in those jurisdictions has been instructive. The courts and authorities have since refined how far the threshold reaches and how the local nexus should be evidenced.

Beyond Europe, the policy conversation has been broader and multidisciplinary. International fora and competition scholars have flagged the tension between forward-looking competitive potential and backward-looking turnover tests, urging merger control frameworks to adapt to dynamic markets where data, networks and IP drive value. The OECD’s work on merger control in dynamic markets, and comparative commentaries by global firms, reflect a consensus that regulators need tools that can assess likely future competitive effects rather than only past financials. India’s DVT should therefore be seen as part of this wider rethinking of merger policy and not merely an isolated statutory tweak.

That intellectual and comparative backdrop helps explain the specific policy choice India made in the Competition (Amendment) Act, 2023 and the CCI’s subsequent Combinations Regulations. With the rapid growth of digital platforms, cross-border startup acquisitions, and PE/VC driven consolidations, Indian lawmakers introduced a targeted reform. The aim was to future-proof merger control against value-rich but turnover-poor targets while avoiding blanket extra-territoriality.

3. Deal Value Threshold and the Significant Business Operations Test

The revised notifiability architecture in India now functions as a two-limb regime which basically means that a transaction will require prior CCI approval if it satisfies either the pre-existing asset/turnover thresholds in Section 5 of the Competition Act, 2002, or the new DVT limb. The DVT limb itself is inherently two-sided, both the value of the consideration and a demonstrable local nexus in the form of SBOI must be met before the CCI can claim jurisdiction. In effect, the legislature has opted for a hybrid framework retaining the traditional size-based thresholds while introducing a value-based route designed to capture transactions whose competitive significance is not evident from the target’s financial statements.

On the value side, the statutory trigger is bright, where the aggregate value of the transaction exceeds INR 2,000 crore (roughly USD 230–270 million, depending on exchange assumptions), the DVT limb is prospectively engaged. But the Regulations and CCI guidance make clear this is not limited to simple cash prices. The definition of ‘value of transaction’ is intentionally broad. It covers all forms of consideration whether paid upfront or later, in cash or non-cash, including IP licences, earn-outs, service arrangements, contingent payments, and assumed liabilities. The aim is to ensure that parties cannot avoid notification by breaking up or recharacterising parts of the deal.

The SBOI limb is the statutory guardrail designed to tether the DVT to India. The Combinations Regulations and subsequent CCI FAQs set out objective indicia for digital and non-digital enterprises alike. For online/digital service providers, metrics such as 10% or more of global users being located in India, or 10%+ of global GMV/turnover attributable to India in a relevant period, will typically satisfy the test and for bricks-and-mortar or non-digital businesses, the regulations pair a percentage test with an absolute-value floor (for example, local GMV/turnover that exceeds both 10% of global and an INR 500 crore threshold). This calculated approach signals the legislature’s intent which is to reach truly India-relevant transactions while avoiding fishing expeditions into deals that, although large globally, have negligible Indian footprints.

Several practical consequences flow from that two-limb design. First, transaction teams must now treat global headline price-tags and non-cash economic arrangements as material for merger control even where the target’s Indian revenue or assets are small. Second, because the SBOI inquiry is metrics-driven, deal counsel must be prepared to assemble user-geography data, GMV reports, turnover allocations and contractual schedules early in diligence to test notifiability. Third, the DVT regime operates alongside other changes to the filing regime including the CCI’s standstill posture and the application of the DVT to certain deals signed but not closed before the Regulations were notified meaning timing and sequencing of filings now have real commercial leverage.

Notwithstanding that clarity, the Regulations leave real and immediate areas of uncertainty that will shape the first wave of filings and disputes. Valuing contingent or performance-linked consideration, attributing global deal components to India for the SBOI calculation, and agreeing whether certain commercial arrangements should be aggregated into the “value” for threshold purposes are all contested questions. The CCI’s early guidance and practitioner commentary suggest a precautionary approach. This dynamic raises both compliance costs and strategic structuring questions for acquirers and sellers.

4. Deconstructing Deal Value: Computation, Contingencies, and Considerations

The Combination Regulations take an intentionally broad view of what counts as the value of transaction. Rather than limiting the threshold calculus to headline cash paid at closing, the rules require parties to aggregate every valuable consideration that flows from the transaction whether direct or indirect, immediate or deferred, cash or non-cash. In practice, that means the headline purchase price is only the starting point. The “deal value” deliberately reaches into the economic architecture that gives the target its competitive worth.

What components must be counted is now largely spelled out by regulators and commentators. The calculus subsumes the entire consideration (including purchases of assets, IP, brand and goodwill) separately priced covenants such as non-compete payments, the full theoretical ceiling of contingent or performance linked payments (for example, earn-outs and milestone payouts) and the economic value of liabilities assumed by an acquirer.

Two features of the drafting will be particularly important for deal teams. First, the Regulations (and CCI guidance) require parties to include consideration payable as part of arrangements entered into as part of or incidental to the transaction for a defined window which includes amounts payable within a two-year period and certain prior steps linked to the transaction, making the test backward-and-forward looking rather than purely prospective. Second, when contingent payments are involved, the rules emphasise valuation on the basis of best estimates or the maximum possible payout unless parties can demonstrate a bona fide and good-faith valuation to the contrary

These textual choices are purposeful. They close a number of structuring loopholes parties previously relied on to fragment consideration or recharacterise value into post-closing service contracts.

From the deal drafting perspective, parties should therefore consider targeted SPA clauses and schedules that:

1. transparently disclose all components of consideration,
2. set out the methodology for valuing contingent and non-cash elements,
3. include clear aggregation language addressing inter-connected steps, and
4. where commercially feasible, negotiate escrow, indemnity or adjustment mechanisms that make the valuation record contemporaneous and defensible.

These are not mere drafting details, they are the foundation for rebutting a regulatory aggregation hypothesis and for steering the timing and scope of any CCI inquiry.

5. Impact on the Indian M&A Landscape: Startups, PE/VC, and Global Deals

The DVT’s most immediate ambition is to bring strategically significant tech and startup deals into the CCI’s purview. For high-valuation, asset-light targets in ed-tech, fintech, e-commerce, digital health and platform segments, the statutory change is existential. A pre-revenue business with a global headline price above INR 2,000 crore can no longer rely on low Indian turnover to stay outside the notification net if it has a measurable India presence. That shifts the early diligence focus for acquirers from purely financial and IP checks to competition mapping to, who are the target’s users in India, how sticky is the user base, and could the acquisition materially alter incentives to exclude or foreclose rivals?

For private equity and venture capital investors, the reform reframes exit playbooks. Secondary sales, strategic exits to global platforms or consortium transactions that clear valuation hurdles will often trigger an Indian filing and an associated standstill. PE/VC managers will therefore factor competition clearance timing and the risk of remedies into pricing, escrow sizing and exit conditionality thereby treating CCI approval as a commercial closing condition for large exits. That change is more likely to lengthen timetables for some exits and raise transaction costs earlier in the lifecycle.

Cross-border strategic M&A is also affected. Deals signed overseas but involving targets with Indian users, R&D, data collection, or monetisation must now be tested against the SBOI metrics and, where they breach the DVT, notified in India as part of a multi-jurisdictional filing portfolio. This increases the coordination burden across antitrust counsel globally and can produce sequencing challenges where different authorities take divergent views on remedies or timings. International buyers will need to map the Indian filing as early as they map EU, UK or US pre-merger filings.

At an institutional level the CCI and market participants both expect a rise in filings. To balance the added workload, the legislative package and the CCI’s instruments include procedural measures intended to streamline clearance of non-problematic transactions. Commentators have suggested that while there may be a short-term administrative load and some deal slowdowns as market players adapt, the ultimate effect should be a more transparent, predictable framework that limits problematic consolidations and fosters competition-sensitive growth.

Taken together, these impacts are not uniformly negative. For acquirers focused on integration and value-creation, the DVT creates a stronger, visible regulatory baseline and reduces the chance that a post-closing divestiture or challenge will derail long-term plans. For targets and founders, the prospect of an Indian regulatory review may slightly slow exits but also legitimises valuations of India-facing user bases and IP as assets of true economic consequence.

6. Conclusion

The DVT marks a watershed in Indian merger control. It signals a decisive shift from backward-looking tests of turnover and assets to a framework that recognises how modern markets generate value through in users, data, networks, and intellectual property. In that sense, the amendment brings India in step with global practice and equips the CCI to examine the kinds of transactions that matter most in the digital economy.

A note of caution, however, is warranted. All this depends majorly on how the CCI applies the concept of “substantial business operations” in practice, and how deal value is calculated where earn-outs, non-cash consideration, or intangibles are involved. These uncertainties can add friction and cost, particularly in the fast-paced world of startup acquisitions and PE/VC exits. The risk is not over-regulation per se, but unpredictability and it will fall to the CCI, through decisional practice and clear guidance, to provide the certainty the market needs.

For businesses and advisors, the path forward is to treat DVT assessment as a standard part of deal planning, build robust valuation records, and be thoroughly prepared for notification timelines where thresholds may be crossed. If that discipline becomes routine, the regime will not only mature India’s competition law but also foster confidence in the stability and fairness of its deal-making environment.