This article has been written by Alok Ranjan Guru pursuing a Diploma in US Contract Drafting and Paralegal Studies at LawSikho and edited by Shashwat Kaushik. 

It has been published by Rachit Garg.


As per the Corporate Affairs Ministry, mergers are regarded as a tool of strategic planning by registered companies in India. Sections 391 to 394 (5) of the Companies Act, 1956, give direction to govern mergers and acquisitions in India. The process has to be governed by courts, and the concern of the High Court is highly preferred for the start of any such procedure.

Download Now

Apart from that, The Competition Act of 2002 primarily and widely speaks about the rules that govern mergers and acquisitions in India. Under the Competition Law, Sections 5(3) and 6(4), which regulate mergers and acquisitions, have been in effect.

On Wednesday, March 29, 2023, Indusind Bank cleared the deck for the merger of two entertainment and media giants, Japan’s Sony with Zee Entertainment, after a part settlement with Zee Entertainment Enterprises Limited following the withdrawal of its Liquidation petition under the Insolvency and Bankruptcy Code 2016 before the National Company Law Tribunal.

History of the two media giants

Zee which was launched as Zee Telefilms Limited in 1991 and was renamed Zee Entertainment Enterprises in 2006 following the launch of Zee Motion Pictures and Zee Limelight, is perhaps the most praised and nostalgically followed network for entertainment by Indian viewers, especially before the initiation of OTT platforms in India.

Whereas Sony Pictures Network India Pvt. Ltd., a wholly owned subsidiary of Culiver Max Entertainment, founded in 1995 and again renamed in 2015 as Sony Pictures Network India (SPNI), has been successful in winning the hearts of millions of Indians by producing effective entertainment contents and is perhaps highly preferred by companies for broadcasting their advertisement contents.

This was a positive and welcome move when Zee and Sony Entertainment decided to merge, and both companies have agreed to combine linear networks, digital assets, production operations, and programme libraries as part of the deal.

Necessity for the merger

Both companies, although they have their own fan following, differ in their balance sheets and targeted groups among the viewers. Both have different approaches to content creation and management procedures.

While Sony scores high in fetching the highest revenues, due to non flexible management, the net profit is almost one-fourth of what Sony shows in his books of accounts. It is only for this reason that Sony Entertainment, which has a robust and output-effective management culture inside the company and better bargaining power with advertisements and publications, got an advantage in the merger deal. So it is expected that the merger of these two giants will help both of them achieve “unparalleled bargaining power” for accelerated growth and a significant opportunity to create tremendous value for their entire stakeholder base.

The second reason is the intention to compete on OTT platforms, which are at present completely dominated by US multinationals such as Amazon, Netflix and the Disney-Hotstar collab. Although Sony can compete with Disney’s Hotstar collab on the OTT platform, it still needs ZEE’s current theatre and entertainment network to stream, generate and promote internationally.

Despite two years of COVID’s impact and growing traffic on the OTT platforms, Zee and Sony can only secure 9 % and 4% of the market, respectively. This merger will give them a better opportunity to release quality products in order to extend their viewership.

The third reason is an array of events and unhealthy competitive practises prevalent between corporations to take down each other and increase stakes in the merged company.

Here there are 3 players, INVESCO (a US investment firm with 18 percent stakes in Zee Entertainment), Reliance’s VIACOM 18 ( whose merger with Sony Entertainment recently failed), and Zee’s CEO  Punit Goenka ( whose 4 percent share in Zee Entertainment is challenged by INVESCO).

Zee’s founder, Subhash Chandra Goenka, had also expressed doubt about INVESCO’s intention behind the proposed merger with Reliance Group, which claims if the merger happens, he will lose his position and deal the same heavy financial loss to the newly merged company.

Apart from challenging INVESCO in court, after INVESCO sought to recast the board and oust Goenka from the company, Zee initiated merger talks with Sony Entertainment, and the idea clicked for both. Reliance has denied any such allegations of abetment in the said scenario.

Market opportunity or competitive disadvantage

So far as striving in the Indian market is concerned, whether a merger will amount to opportunity or disaster depends on a number of variables.

The opportunities it carries are:

  • The addition of goodwill and faith among customers and stakeholders.
  • Reputation and value creation.
  • Increase in financial capacity.
  • Relaxation through availing tax benefits and minimising documentation.
  • Diversification among enhanced services for different targeted groups of customers.
  • Good management and market research.

Only then does the business show growth in its mutual customer base by eliminating competition in the market and demanding performance output from the employees of the company. But an effective and productive merger happens when there is:

  • Proper evaluation process of each of the company’s values and assets.
  • They have a good record from their prior partnership experiences.
  • Each of them follows a different but genuine work and management framework.
  • Proper interaction and intention between the merging companies to learn and grow cooperatively.

A merger idea is very constructive in nature only if both entities equally understand the interests of the customers and the challenges they may face if they don’t exchange support. It is sometimes called a business of think-alike minds ready to adapt and accept ideas effective to the current prevailing market’s taste.

The market opportunity for a merger is huge unless it loses the faith of stakeholders and consumers. Indian corporate history shows a 50/50 chance of thriving after a merger materialises. Some of the biggest mergers and acquisitions to date are:

1. PVR Ltd. with INOX Leisure,

2. Indus tower with Bharti Infratel,

3. Vodafone with Idea,

4. Arcelor and Mittal,

5. Tata and Corus steel,

6. Walmart’s acquisition of Flipkart, and

7. Vodafone Hutch with Essar.

Most of the mergers mentioned in the list resulted in success, except for some, like Vodafone Hutch with Essar. Unfortunately, Vodafone gets embroiled in a tax controversy over the purchase with the Indian Income Tax Department, and Tata and Corus Steel have to lay off and sell some of their operations due to recessions in 2008 followed by reduced demand for steel. Both of them are unforeseen external factors and have nothing to do with the benefits of getting merged.

Likewise, in the case of the Sony ZEE merger, because the combined entity is expected to take down large broadcasting networks, like Disney Hotstar, by attracting a large share of advertising and influencing more and more content producers to work with them, some external factors were eventually built to affect the share price and stakeholder confidence in the merged entity.

Following which, the Competition Commission of India, on prior incidents, raised some queries regarding the proposed merger, suspecting the merger would hurt healthy competition in the market. But it finally gave the green light for the merger between these two entertainment giants.


There are instances when the Indian Government has made laws with retrospective effect and derogatory to the functioning of a foreign company in India, like in the cases of Vodafone Hutch and Essar. The same goes for Indian homegrown companies too. It must be understood that mergers at the present time not only strengthen the economic backbone of a country but also help the country attract foreign reserves and foreign direct investment into the country. While you have allowed PVR to merge with INOX Leisure and are not able to restrict US entertainment giants like Netflix and Amazon, the collaboration of Japan’s Sony with Indian homegrown ZEE Entertainment should be welcomed.

The watchdogs, i.e., the Competition Commission of India (CCI), the Securities and Exchange Board of India (SEBI) and the National Company Law Tribunal (NCLT), should judge a case of merger or acquisition from a legal, economic, and social perspective before allowing it.

So far as the entertainment industry is concerned, it always depends on the taste of the viewers and the unbiased decision of a consumer to avail of the services or not. Viewers of YouTube, Tik Tok, etc. have their own consumer base. It hardly matters from a consumer perspective, what platform his choice of entertainment is coming from.

So if a merger is about providing quality content along with economic immunity, then that should be welcomed.


The second largest populated country is a heaven for foreign companies to extend their consumer base. Not only do they come with better management systems, but they also create an array of job opportunities for the large majority of society. Not only the Indian company but also the merging foreign entities take high risks to strike down all the factors that are responsible for shutting down a Merger or Acquisition in India. In most of the cases we discussed above, we have seen the acquirer or the company with a higher stake doing well, but the acquired company turning out to be a disaster due to multiple external reasons.

Therefore, the merger should be decided with extra precautions and utmost diligence, and both entities should understand that while merging, they are not only taking advantage of each other’s assets but also having liabilities and roadblocks to deal with.


Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.

LawSikho has created a telegram group for exchanging legal knowledge, referrals, and various opportunities. You can click on this link and join:

Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.


Please enter your comment!
Please enter your name here