this article has been written by Aishwarya Shankar from Amity Law School. It has been edited by Khushi Sharma (Trainee Associate, Blog iPleaders).

Introduction

Growth of a company 

At what stage does a company decide to merge with another company or acquire another company?

The chart depicts the trajectory of growth of the company and the funding around it as it grows.

Let’s take an example of Byjus must have initially started of with the savings of the owner that is Ravindra Byjus or from funding from his friends or family. With the increase in growth of e-learning byjus would have next approached the angel investors (high-net-worth individual who provides financial backing for small start-ups or entrepreneurs, typically in exchange for ownership equity in the company).This happens the pre revenue stage of the company where company is not making much money.

As time passes revenue starts growing with more of capital expenditure e.g. Advertisements, brand promotions, hiring costs etc.

Next company would approach the venture capitalists (a private equity investor that provides capital to companies exhibiting high growth potential in exchange for an equity stake.) E.g. Byjus raised lots of money from the American venture capital firm called Sequoia capital.

To grow further and expand its operation around the country company comes to a stage where it will start looking different strategies apart from the usual funding routes to thrive further

These options are:

1. Build (organic)- increasing hiring , geographical expansion, product launches etc.
2. Borrow– Franchising, joint ventures.
3. Buy( inorganic)- Merger or Acquisition with other company.

This depends on the growth objectives of a company and by doing a cost benefit analysis.

This is where M&A comes into picture.

What are Merger and Acquisitions

MERGER– ‘Merger’ has not been defined under the Companies Act, 2013 or Income Tax Act, 1961, but as a concept ‘merger’ is a combination of two or more entities into one; with the accumulation of their assets and liabilities, and coming together of the entities into one business.

Mergers usually take place between companies that are equal in repute and scale of operations.

Merger is also called ‘Amalgamation’. Under The Income Tax Act, 1961 (ITA) ‘amalgamation’ is defined as the merger of one or more entities with another company, or the merger of two or more entities forming one company.  It also mentions other conditions to be satisfied for an ‘Amalgamation’ to benefit from the beneficial tax treatment.

In India it is a complex court driven process wherein the NCLT has to mandatorily approve of the merger and if the two merging companies have a registrar office in different states then the approval of state NCLT is also essential.

A and B merge to form a new company C and they cease to exist as independent companies.

At times the new company can retain the name of either company A or B if they feel they can reap benefits of the goodwill and reputation of the merging company A or B.

In a merger NCLT supervision is important for protecting the interest of the creditors and shareholders as the company goes through a complete reorganisation of its capital structure and gets a new management. It usually takes 8-12 months to achieve a successful merger.

Consideration of a merger can flow to the shareholders of merging company either in cash or shares. They have a preference of cash if they do not want to be a part of the new merging entity, but if they choose to continue then they are allotted shares of the merged company.

ACQUISITION– It is the process of procurement of one company by the other. The two companies involved are the acquirer or buyer which is the bigger fish in the sea and the acquired company or seller also called the target company.

The Buyer Company can do this by buying a significant amount of shares or assets of the target company depending on the way the deal is structured.

The basic difference between a merger and acquisition is that in an acquisition a company that has been acquired retains its separate legal identity or existence ( only in case of stock deal not in an asset deal) 

The objectives of mergers & Acquisitions are manifold – economies of scale, acquisition of technologies, access to varied sectors / markets etc

Types of merger

1. Horizontal Merger- When the merging and the merged company operate in the same industry, same line of business and same level of supply chain. They are usually competitors. The Merge for expansion of customer base, increase market share and market power, creation of synergy etc. E.g. Lipton India & Brooke Bond, Vodafone & Idea.

2. Vertical Merger— When the merging and the merged company operate in same line of production but at different stages of supply chain. This is mostly done to achieve economies of scale. E.g. Amazon & whole foods, Reliance and Flag Telecom Group.

3. Reverse Merger- A Merger where a parent company merges with its subsidiary or a profit making firm merges with a loss making firm. It also called a triangular merger. Eg. Godrej soap merger with Gujarat Godrej Innovative Chemicals Ltd.

4. Conglomerate Merger- Merger of companies operating in different lines of business. This kind of merger takes place to diversify and spread risk in case the current business does not yield much profit. Eg. L&T and Voltas Ltd.

5. Congeneric Mergers- It is a type of merger where two companies are in the same or connected industries or markets but do not offer the same products. These companies in this merger merge for synergies, to increase their market shares or expand their product lines as they share similar distribution channels, overlapping technology or production systems etc. 

Types of Acquisitions

1. Friendly – A friendly takeover occurs when one company acquires another with both boards of directors approving the transaction. It works towards shared advantage of both companies. In a friendly takeover, both shareholders and management are in concurrence on both sides of the deal. E.g. Flipkart- Walmart, takeover of Whatsapp by Facebook 

2. Hostile Takeover – This kind of acquisition, occurs when the target company does not consent to the acquisition, the acquiring company must gather a majority stake to force the acquisition. A hostile takeover is typically consummated by a tender offer. In a tender offer, the corporation tries to purchase shares from outstanding shareholders of the target company at a premium to the current market price for this the shareholders have limited time to accept. E.g. takeover of Ashok Leyland by Hindujas.

Key corporate and securities law

Companies Act, 2013- Section 230-240- Compromise, Arrangement and Amalgamation ( including takeover)

Section 230- Compromise & Arrangement 

• Under this Section an applicant (member, creditor, company or liquidator of company depending on the situation of the company.) to enter into a compromise, arrangement or amalgamation (including takeover) has to give an application under 230(1) to National Company Law Tribunal (NCLT).
• This application has to be given along with – Material facts, reduction of share capital( if any), consent of creditors (75%), and other disclosures
•  As soon as NCLT receives the application it will immediately order a meeting. 
• The notice of the meeting will go to – all the members, creditors and debenture holders.
• Additionally the notice has to be published on the website of the company and an advertisement in the newspaper (1 English newspaper and 1 vernacular newspaper) has to be given.
• If the company is a listed company the notice has to be given to Securities Exchange Board of India (SEBI) so that SEBI notify the same under its website.
• Notice has to be given to some authorities like – The central Government, Income Tax Authority, Reserve Bank of India RBI, Competition Commission of India (CCI) for their representations or objections within 30 days.
• If the Authorities do not give in their replies within 30 days, the company will assume that there is no objection.
• After the order, the meeting shall be conducted and there shall be proper voting at the meeting which must conclude within the period of 1 month. Voting at the meeting can be done via- voters themselves, Proxy, postal ballet and E- Voting.
• The Resolution at the meeting shall be approved and passed by 75% majority.
• Any person can object to the scheme provided if a shareholder has minimum 10% of share capital or a creditor has 5% outstanding debt.
•  Once the resolution is approved the scheme goes back to the NCLT for passing a Final order along with ancillary orders. This final order has to be filled with ROC within 30 days.

Section 231- Power of Tribunal to enforce compromise or arrangement under section 230

• The tribunal has the power to oversee the implementation of the compromise or arrangement.
• It has power to give further directions.
•  If the tribunal feels that the amalgamation is not taking place according to the terms and conditions ordered by the tribunal or are impossible or impractical to follow the order to do so then it can even order winding up of the company.

Section 232 – Merger and amalgamation of companies

• Section 230 talks about compromise or arrangement( Internal reconstruction) , but if there is a compromise or arrangement that also involves a merger or an amalgamation ( External Reconstruction) then both Section 230 and 232 will apply to such companies.
• This section is a continuation of section 230 for merging or amalgamating companies where in there are some additional requirements to be followed.
• Along with the notice of the meeting in section 230, the following must also be given- Draft scheme of merger and amalgamation (M/A) ,report of effect or impact of such M/A on each class of shareholders, report of valuation and other disclosures.
• While passing the final order, tribunal can make provisions for other required matters.

Section 233- Merger or Amalgamation of certain  companies

• ‘Certain companies’  under this section are – 2 or more small companies merging(private companies having paid-up capital of less than INR 100 million and turnover of less than INR 1 billion per last audited financial statements), holding and its wholly owned subsidiary merging or any other such class of companies as may be prescribed.
• These companies will merge according to section 233 not 232 which is also called Fast Track Mergers. Such companies get an easier route to merge.
• Steps involve in this type of merger are- Step 1- Invite objections and suggestions from Registrar of company (ROC), Liquidator, any other person affected by the scheme.
• Step 2- Scheme shall be approved by 90% majority shareholders.
• Step 3- File declaration of solvency (capability of paying off debts) with ROC.
• Step 4- Scheme shall be approved by 90% majority Creditors
• Step 5- Send the scheme to Central Government and Roc for approval.
• Step 6- If Roc has any objection it has to give to the Central Government within 30 days.
• Step 7- If the central Government feels the scheme is in the interest of public and creditors then it will approve the scheme and will communicate the scheme to Roc but at the same time if ROC had any objections and the central Government feels the scheme is not in the interest of public and creditors then it will refer the companies to NCLT ( section 232- No easy route available)

Section 234- Merger or Amalgamation of a company with a foreign company

• If an Indian company wants to merge with a foreign company then it has to follow the procedure given under Section 232 and additionally approval of the RBI must be obtained and the scheme must provide for the manner of payment of considerations.

Section 235- Power to acquire shares of shareholders dissenting from the scheme approved by majority

• Step 1– The Transferee Company offers to acquire shares from shareholders of Transferor Company. Out of all the shareholders 90% or more accept the offer and the rest 10% or less dissent and are not willing to sell their share holding.
• Step 2 – Now the transferee Company will send a notice to dissenting shareholders saying that since 90% shareholders have agreed to sell their shares the company will acquire the rest as well.
• Step 3- Dissenting shareholders will give an application to NCLT against acquisition of their shares.
• Step 4- Transferee Company will give an application to NCLT to acquire the shares.
• Step 5- Since more than 90% shareholders have accepted to the offer thus NCLT passes a final order to Transferor Company to register the transfer and order the transferee company to pay the consideration. NCLT does not reject the application of the transferee company at this stage as it does not favour in affecting the decisions of the transferee company due to only a mere 5-10% of  shareholders dissenting. 

Section 236- Purchase of minority shares 

• In this section, if the acquirer along with persons acting in concert (PAC –persons who have a common objective or purpose to acquisition shares or voting rights or control over a company) already holds 90% or more shares of the target company then the acquirer will give the remaining shareholders an offer to sell their shares as well.
• For this the acquirer company with keep the consideration money in a separate bank account and will pay off the remaining shareholders within 60 days.

Section 237- Power of the Central Government to provide for Amalgamation in public interest

• If it is essential in public interest, the Central Government by notification in the official gazette can order amalgamation of the companies.
• Central Government usually passes such amalgamation order between a healthy company with a sick company to revive the sick company and its employees.
• Central Government will have to give orders for pending legal proceedings by or against Transferor Company.
• Central Government will also have to give orders for all members, creditors to have nearly same interest in the transferee company and if there is any difference then they have to be compensated. 
• If any person is aggrieved by the compensation can appeal to the NCLT.
• If the transferor and transferee company have any objections with the order for amalgamation then they can put forward their objections to the NCLT. NCLT will hear their objection and pass a final order.

Section 238 Registration of offer of schemes involving transfer of shares

• Whenever a transferee company wants to give a circular (offer and details of share transfer) to the shareholders, it has to first get the circular registered with the ROC only then it can give the same to the shareholders.

Section 239- Preservation of books and papers of the Amalgamated company

• Books and papers of the Amalgamated Company (the company that ceases to exist after the merger) shall not be disposed off, without the permission of the Central Government.
• Before giving the permission the Central Government has to appoint a person to examine books and papers.

Section 240- Liability of officers in respect of offenses committed prior to the merger or amalgamation

• The liability of officers who had committed an offense prior to merger or amalgamation will continue even after merger or amalgamation.

Securities and Exchange Board of India (takeover code ), 2011

• The Securities and Exchange Board of India (SEBI) is the nodal authority regulating entities that are listed or to be listed on stock exchanges in India. The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Code) limits and inspects the acquisition of shares, voting rights and control in listed companies.
• If an acquirer (company or individual) intends to acquire such number of shares of a listed target company that the aggregate shareholding touches 25%, then it would first have to make a mandatory open offer to shareholders to acquire 26% shares of total share capital. They cannot register the additional shares in their name unless they make this open offer. This is mandated by SEBI to ensure that the interest of the shareholders is protected and that they are given an easy way to exit if they do not want to be part of the new scheme.
• If the acquirer is already holding 25% or more shares in target and has previously made an open offer for the same and now intends to acquires more than 5% shares in target company in one financial year, then the acquire has to again first give an open offer to at least 26% of the total share capital.
• If any who holds 25% more shares in target company if acquires 5% shares in a financial year is not required to give an open offer to public shareholders, this concept is called creeping acquisition. This way an acquirer can increase his share holding in the target by acquiring 5% shares in each financial year without having to make an open offer.

Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015

• This Regulation provides broad framework for governing various types of listed securities. 
• SEBI has laid down conditions to be followed by a listed company while making an application to the NCLT, for approval of schemes of merger/amalgamation/reconstruction. 
• These conditions are– 1. Filing of scheme with stock exchanges: Any listed company going for a scheme of arrangement, must first file the draft scheme with the stock exchange, before filing them with the NCLT, so as to receive a no-objection letter from the stock exchange.
• 2. Compliance with securities law: The listed companies shall ensure that the scheme does not violate or override any provisions of the applicable securities law or requests of the stock exchanges.
• 3. Change in shareholding pattern: It is a mandate for the listed companies to file the pre and post arrangement shareholding pattern and the capital structure with the stock exchanges as per their requirements.
• 4. Corporate actions pursuant to merger: The listed company shall to reveal to the stock exchange all information affecting the operations of the listed entity and the price sensitive information.

Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”)

• Preferential Allotment is the bulk allotment of fresh issue of shares by a company to any person like Individuals, Venture Capitalists and others at a pre- determined price.
• A company makes Preferential Allotment to people who want to acquire a calculated stake in the company; these include shareholders like Promoters, Venture Capitalists, and Financial Institutions.
• The provisions of these regulations shall apply, if the acquisition of an Indian listed company entails the issue of new equity shares or securities convertible into equity shares by the target (issuer) to the acquirer.
• The major provisions under this regulation are: 1. pricing of the Issue- A floor price for issuance is set under this regulation. This floor price depends on the average of the weekly high and low closing price of the stock of company over a period of 26 weeks preceding the relevant date.
• 2. Lock-in- The Securities issued to the acquirer ( except the promoter ) are locked-in for a time period of 1 year from the date of trading approval

Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”)

• Under the SEBI Act, 1992 the penalty for insider trading is at least INR 10, 00,000 and may extend to INR 25, 00, 00,000 or three times the sum of profits from insider trading, whichever is more. This act was replaced by SEBI India (Prohibition of Insider Trading) Regulations, 2015.
• For a listed company or a company about to be listed the , PIT prohibits the following: an insider from communicating unpublished price sensitive information ( UPSI), any person from obtaining UPSI from an insider and an insider from trading in securities when in ownership of UPSI. Therefore, the PIT prohibits the distribution as well as the acknowledgment of UPSI.
• Under PIT an ‘Insider’ is a person who is either a connected person or in ownership of or has right to use or access of UPSI.
• A connected person is someone who is directly or indirectly related to the company through regular communication with its officers or by being in a fiduciary, contractual or service relationship or by having any position including a professional or business relationship with the company whether temporary or permanent that allows that person, access to UPSI either directly or indirectly.
• Even persons who do not hold any position in the company but are in frequent communication will also be included under connected persons. 
• Immediate relatives, holding or subsidiary company are deemed connected persons.
• UPSI is any information about a company or their security that is not normally available to the general public, which when becomes available is likely to substantially affect the price of the securities. Example- Information regarding financial results; dividends; change in capital structure; mergers, demergers, acquisitions, de-listing, disposals and expansion of business and changes in key managerial personnel.
• The communication of UPSI by an insider and the receipt of UPSI by a person from an insider are permitted if such communication or receipt is for legitimate purposes, execution of duties or discharge of legal obligations.

The Competition Act, 2002

• This Act was subsumed by an earlier law called the Monopolies and Restrictive Trade Practices Act, 1969(MRTP). Competition and combinations in India are regulated by the Competition commission of India (CCI). It is also called the antitrust watchdog. CCI is empowered to issue directions, orders and impose penalties to ensure fair competition in the market.
• When certain practices restrict healthy competition in the marker it is called the Appreciable Adverse Effect on Competition. (AAEC). This can happen in three ways- (i) anti-competitive agreements, (ii) abuse of dominance, and (iii) combinations).
• (i) Anti-competitive agreements (Section 3)- The competition act inspects and examines 2 major types of anti competitive agreements – Horizontal agreement i.e. These are agreements between companies which engaged in same level or stage of production (seller-seller, producer-producer etc) , while Vertical agreements are agreement that take place between persons at different stages of production, supply, distribution, storage etc. (manufacturer, distributor, supplier etc) .
• Horizontal Agreements consequential in AAEC-Ascertains purchase or sale prices; checks and limits production, supply, markets, technical development, funding or supply of services; Shares the market or source of production or supply of services by way of allotment of geographical area of market, or kind of goods or services, or number of consumers in the market or any other parallel way; Results in bid rigging or collusive bidding.

• Vertical Agreements resulting in AAEC- Tie-in arrangements: agreement imposing on purchaser of goods, due to such purchase, to buy a few other goods. (e.g. Microsoft made it obligatory for purchasers to buy all MS Office products with Windows; this was held anti-competitive U.S. courts).
• (ii) Abuse of dominance (Section 4)- When an entity grows to such an degree that affects healthy competition in the market and gains total control over the market and customers then it is said to have obtained dominance. When it uses this dominance, in the relevant market to:

1. function autonomously of competitive forces existing in the relevant market,
2. Affect its competitors or consumers or the relevant market in its favour, it is said to have abused its dominant position

• Abuse of dominance includes- Imposes unfair or discriminatory price or condition in purchase or sale, limits production or scientific development, denies market access in any manner, predatory pricing, uses power in one relevant market to enter into other relevant market
• Predatory Pricing is to sell goods or offer services, at a price which is below the cost, or reduce the price to loss making level for a short term so as to eliminate the competitors”. 
• (iii) Combinations (Section 5, 6, 20, 29, 30 and 31)- Combination includes merger, amalgamation, and acquisition of shares, and acquiring of control. Entities intending to enter into combinations are mandated to notify the CCI. CCI takes 90 working days either to permit or deny such combination else combination is deemed to have been approved.
• CCI checks for combination on the basis of following factors- Market share,  Effective competition before and after combination,  probability of increase in prices or profit margins,  Contribution to economic development
• Under Section 32 of the Competition Act, the CCI has extra-territorial jurisdictional powers. If any acquisition where assets/turnover are in India, and surpass particular set restrictions, would come under the radar of the CCI, even if the acquirer and target are located outside India.
• The financial thresholds are:

		Assets	OR	Turnover
Enterprise Level	India	> INR 2000 crore	> INR 6000 crore
Worldwide (with India component)	>USD 1 bn with at least INR 1000 crore in India	>USD 3 bn with at least INR 3000 crore in India
OR
Group Level	India	> INR 8000 crore	OR	> INR 24000 crore
Worldwide (with India component)	> USD 4 bn with at least INR 1000 crore in India	> USD 12 bn with at least INR 3000 crore in India

Exchange control

• Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017 (the “FI Regulations”) and Industrial policy and procedure issued by the Secretariat for Industrial Assistance (SIA) governs the Investments and acquisitions (complete and partial) of, Indian companies by foreign entities and individuals.
• FEMA rules say that any exchange attempted comparable to a cross-outskirt merger as per the FEMA Guidelines will be considered to be endorsed by the RBI as mandatory as far as Rule 25A of the Organizations Merger Rules along with Section 234 of the Companies Act.
• The Foreign Direct Investment (“FDI”) system in India has progressively liberalized and the importance of FDI in economic development of a country has been finally recognized. Foreign corporations are allowed to invest directly in India, either as wholly owned subsidiaries or as a joint venture. In an international joint venture, any anticipated funding by a foreign company in an existing company can be done either through equity expansion or by acquiring the existing equity.
• Where a person resident in India transfers shares by sale under a private agreement to a person resident outside India then the price of shares will not be less than the market price listed on the stock exchange or the value of the shares calculated as per the guidelines of Controller of Capital Issues and certified by a Chartered Accountant. The remittances in these cases must come into India via normal banking channels.
• Following must be duly filed to affect the transfer: – i) a declaration in the form FC TRS should be filed with an authorized dealer along with the consent letter representing the details of transfer.
• ii) Shareholding pattern of the investee company after the acquisition of shares by an individual residing outside India proving equity contribution of residents and non residents.
• iii) Certificate indicating fair value of shares from a chartered accountant or in case of a public listed company copy of the broker’s note.
• iv) An Undertaking from the buyer to the effect that he is eligible to acquire shares in accordance with the FDI policy.

Tax implications in M&As under the Income Tax Act, 1961

• Under ITA ‘Amalgamation’ is defined as the merger of one or more companies with one more company or merger of 2 or more companies to form one company.
• The ITA validates the following types of mergers and acquisitions: Amalgamation; Demerger or spin-off; Slump sale/asset sale; and Transfer of shares.
• Under ITA following conditions must be met to qualify as Amalgamation: a) all the property of the amalgamating company becomes the property of the amalgamated company; b) all the liabilities of the amalgamating company become the liabilities of the amalgamated company and c) shareholders owning at least 75% of shares of the amalgamating company happen to be shareholders of the amalgamated company. Amalgamation possibly is considered tax neutral and exempt from capital gains. At times amalgamated company may also be permitted to carry forward and set off the losses of the amalgamating company against its own profits.
• The following provisions would be applicable to a merger once the conditions above are satisfied: a) the transfer of shares by shareholders of the transferor company in lieu of shares of Transferee Company on merger is not regarded as transfer and hence gains arising from such transfer is not taxable in the hands of shareholders of the transferee company.’ b) Under a merger cost of acquisition of shares of the transferee company which were acquired in accordance to merger will be the cost sustained for acquiring the shares of transferor company.

• The following taxes are applicable on the various types of M&As:

• I) Capital Gains Tax –Gains earned from transfer of capital assets including shares are taxable. In case the resulting company in the scheme of amalgamation or demerger is an Indian Company, then the company is absolved from paying capital gains tax on the transfer of Capital Assets.

• II) Tax on transfer of Share – Securities Transaction Tax and Stamp Duty may apply on transfer of shares. Dematerialized form of shares does not attract stamp duty.
• III) Tax on transfer of Assets/Business – Transfer of property also attracts tax which is usually imposed by the states. 
  • Immovable Property – Stamp Duty and Registration fee on the instrument of transfer will apply on Transfer of Immovable property.

• Movable Property – On the transfer of Movable Property Stamp Duty would apply on the Instrument of transfer. Stamp duty can be a significant transaction cost, especially where the duty is calculated on an ad valorem basis.
• IV) Transfer of tax Liabilities – Income Tax – The predecessor is responsible for all Income Tax payable till the successful date of restructuring. After the date of restructuring, successor becomes liable.
• Indirect Taxes– when a registered person transfers his business to another person, the successor should apply for a new registration and the predecessor should apply for deregistration. 

NCLT permissions

• All mergers have to be approved by NCLT. The Companies Act, 2013 lays that the concerned NCLT bench of the area where the transferor and the transferee companies have their individual offices those NCLT shall have the jurisdiction to order any winding up or regulate merger of companies.

Intellectual property in M&As

• The developing profile, frequency, and value of intellectual property related transactions have increased the need for all legal and financial professionals and IP proprietors to have meticulous expertise of the estimation and the evaluation of these assets, and their obligation in business transactions.
• Intellectual Property due diligence usually gives out crucial information particular to future benefits, financial life and ownership or possession rights and the restrictions of the assets all of which affects ultimate value. Therefore due diligence is precondition to the evaluation process, despite the method used.
• IP Due diligence is the procedure of scrutinizing a party’s ownership, right to use, and right to impede others from using the IP rights involved in sale or merger —the essence of transaction and the rights being obtained will decide the degree and focus of the due diligence evaluation.
• Due-diligence should disclose– Who owns the rights? Are the rights legitimate and transferable and enforceable? Are there any agreements or restrictions that prevent the party for granting rights to other? Is the assets registered in the correct office? , Any inadequacy or non-payment? • Any past or probable litigation? Any encumbrances? Has the property being employed in the past rendering right unenforceable?
• Every merger and acquisition poses a Question: whether merging companies intellectual property license rights would remain intact pursuant to merger. General principles of contract law provide that rights under agreements are presumed to be assignable unless the statute, the contract, or public policy provides otherwise or there exists material adverse consequences to the other party. 
• Case example: General radio and appliances Co ltd v MA Khader 1986 air 1218, 1986 SCR (2) 607 (https://indiankanoon.org/doc/167519/) FACTS-transferor company in amalgamation was tenant; rent agreement specifically prohibited subletting without written consent of landlord. Landlord instituted eviction proceedings against the transferee. Court held transfer of tenancy rights under scheme of amalgamation was bad in law being made without consent of the landlord. There is analogous stand in law with trademark and copyright licenses as well.
• Share purchases will convey the full rights in the intellectual property by procedure of law.
• If the purchase is arranged as a stock purchase, documents conveying the assets usually are not obligatory, instead, documents which transport the stock will permit the buyer to indirectly become the owner of the assets. For intellectual property assets, mostly they will be individually transferred to a holding company or licensed back to the operating company or become the matter of a consequent sale to the final purchaser.
• If the transaction is arranged as an asset purchase, the intellectual property assets will be either exclusively disclosed in the acquisition agreement or become the question of a distinct bill of sale. Conversely most often than not intellectual property assets are the matter of a separate agreement in terms of that they require record of the new owner in the particular jurisdictions in which they are legitimately owned and used. Moreover, the other various necessities for valid transfers vary from country to country and become a matter of public record.
• In case of M&A of companies, all the assets of the transferor company including intellectual property assets like patents, copyrights, trademarks and designs lays with the transferee. Where the transferor company owns these assets, then they are transferred to the transferee concern under the scheme of arrangement.
• Unregistered trademark/copyright is transferable like any other right in a property under the scheme of arrangement whereas in case of registered trademarks/copyrights or patents, the transferee corporation is obligated to apply to the particular Registry for registering its title in accordance to the order of the High Court warranting the scheme.
• The transfer of the trademark/copyright rights in the license may be allowed in cases where the licensor himself permits such transfer of a license consequent to a merger.
• EXAMPLES– In 1988, UK company GrandMet acquired the Pillsbury company .It was predicted that 88% of the price it paid consisted of “goodwill” i.e., GrandMet paid roughly $990 million (L608m) to acquire the Pillsbury brand name and its other well-known properties (Green Giant, Old El-Paso, Häagen-Dazs, etc.).
• Volkswagen, purchased the assets of the Rolls-Royce automobile company for $780m for a net tangible asset value of US$250 million But it somehow did not include the brand in the deal The rights to use the Rolls-Royce trademark were subsequently purchased by rival BMW for $65m and many analysts believe that BMW got the better deal.

References

• https://www.investopedia.com/terms/m/mergersandacquisitions.asp
• https://www.legalserviceindia.com/article/l463-Laws-Regulating-Mergers-&-Acquisition-In-India.html
• https://singhania.in/blog/mergers-acquisition-laws-in-india-frequently-asked-questions
• https://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Mergers___Acquisitions_in_India.pdf
• https://taxguru.in/company-law/merger-acquisition-india-issues-challenges.html
• Company law ( Avtar Singh)
• https://indiankanoon.org/doc/167519/

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