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M&A-the boot on the other foot? Samir Dudhoria Partner Luthra & Luthra Law Offices

M&A-the boot on the other foot? Samir Dudhoria Partner Luthra & Luthra Law Offices Date: December 7 th , 2005. WHY M & A. Access to new markets and established customer bases Technology access and sharing Brand equity and diversification Acquisition of suppliers Synergies

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M&A-the boot on the other foot? Samir Dudhoria Partner Luthra & Luthra Law Offices

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  1. M&A-the boot on the other foot? Samir Dudhoria Partner Luthra & Luthra Law Offices Date: December 7th, 2005

  2. WHY M & A • Access to new markets and established customer bases • Technology access and sharing • Brand equity and diversification • Acquisition of suppliers • Synergies • Economies of scale • Consolidation

  3. Indian Law on Overseas Investment • Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations 2004 • Direct Investment in a JV/ WOS outside India (other than in financial services) on the automatic route, subject to conditions including • Total financial commitment< 200% net worth • Bona fide business activity • Funding of investments- sources and limits • Valuation and Pricing regulated • Investment under swap or exchange of shares arrangement • Bidding or tender process

  4. Groundwork • Identify prospective target / partner • Corporate assessment • Market assessment • Technology assessment • Legal and regulatory framework • Cultural assessment • Term Sheet • Confidentiality and Non-Disclosure • Exclusivity

  5. Groundwork Contd.. • Comprehensive Due Diligence and Risk Matrix • Material existing contracts • Title to property and assets • Litigation: Contingent Liabilities • Labour related issues/ pending dues • Intellectual property • Environmental matters • Statutory dues

  6. Structuring the Transaction - Issues • Board Representation/ Control over Management • Limits on foreign directors • Fiduciary duty of directors • Transfer Restrictions • Lock in provisions • Enforceability • Minority Protection • Special and ordinary resolutions • Affirmative vote matters

  7. Structuring the Transaction - Issues Contd.. • Special Rights • Tag along • Drag along • ROFR • Representations and Warranties • Indemnity • Aggregate Liability • De Minimus • Threshhold • Exit Options/ Mechanism • Listing • Call and Put Options • Labour retrenchment • Winding up

  8. Structuring the Transaction - Issues Contd.. • Confidentiality • Information • Technology • Non Compete/ Non Solicitation/ Exclusivity • Extent • Enforceability • Deadlock/ Dispute Resolution • Time and cost efficient • Arbitration v Litigation • Governing Law and Jurisdiction

  9. The Challenges Ahead • Compliances • Integration • Work, management and business models • Ideologies • Management and workforce • Social and cultural aspects

  10. Summary of Key Issues • Identification of appropriate modes of investment • Identification of appropriate target company • Comprehensive due diligence • Securing your interest- contractually • Integration • Exit mechanism

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