Rising Multinationals: Law and the Evolution of Outbound Acquisitions by Indian Companies
University of California, Davis - School of Law
September 17, 2010
UC Davis Law Review, Vol. 44, p. 1029, 2011
UC Davis Legal Studies Research Paper No. 228
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 not only 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.
Number of Pages in PDF File: 61
Keywords: India, cross border mergers and acquisitions, takeovers, outbound acquisitions, corporate governance
JEL Classification: G34, K22
Date posted: September 19, 2010 ; Last revised: August 5, 2011