CCI Merger Control Reforms: Deal Value Threshold & the Growing Impact on Deal Structuring & Transaction Planning in Indian M&A

Introduction

India’s merger control framework is undergoing a significant shift. The introduction of the Deal Value Threshold (‘DVT’) under the Indian Competition Act, 2002 (‘Act’), along with the updated CCI (Combinations) Regulations, 2024 (‘Combination Regulations’) reflects a move towards closer scrutiny of high-value transactions, even where traditional financial thresholds may not be met. The Competition Commission of India (‘CCI’) has recently issued Frequently Asked Questions (‘FAQs’) which further clarifies the above intent of the law.

For international dealmakers and legal advisors, this development is particularly relevant in the context of joint ventures (‘JVs’) and strategic collaborations involving Indian businesses. Traditionally, merger notifications in India were driven primarily by asset and turnover thresholds. As a result, certain transactions, especially those involving technology driven or early-stage businesses with limited revenues, fell outside the scope of mandatory review. The revised framework moves beyond a purely threshold-driven approach towards a more substantive assessment focused on the economic value and competitive impact of transactions.

Competition law analysis is no longer a late-stage compliance exercise. It has become an integral part of the transaction structuring process, particularly for JVs where parties combine existing businesses, share governance rights, or implement phased investment structures. For international practitioners, this means that joint venture structures or investments involving Indian businesses may now require merger control analysis earlier than might previously have been anticipated, aligning India more closely with jurisdictions such as Germany and Austria, which have introduced transaction value thresholds to capture high-value acquisitions.

Deal Value Threshold

The introduction of the DVT is one of the most significant developments in India’s merger control regime in recent years. This expands the scope of CCI scrutiny by capturing transactions that may previously have fallen outside traditional asset or turnover thresholds.

Under the revised framework, a transaction must be notified to the CCI where:

• the value of a transaction exceeds INR 2,000 crore (Rupees two thousand crore); and

• the entity being acquired has Substantial Business Operations (‘SBO’) in India.[1]

Deal teams must now assess two cumulative factors: (i) determination of the ‘value of the transaction’, and (ii) assessing if the enterprise being acquired has ‘SBO’ in India.

From a cross-border perspective, this is particularly relevant because foreign investors frequently assume that minority investments, collaborative arrangements or early-stage JV structures will fall outside merger filing requirements. The DVT framework challenges this assumption by focusing on enterprise value rather than purely financial metrics such as turnover or assets.

Value of the Transaction

The first practical question deal teams should address under the DVT framework is how to determine the ‘value of the transaction’. Unlike traditional merger thresholds based primarily on revenue or assets, the Combination Regulations adopt a deliberately broad approach to valuation.

The assessment extends beyond the headline purchase price and includes all forms of consideration, whether direct or indirect, immediate or deferred, inter-connected, in cash or otherwise. The calculation also includes payments for covenants, call options, technology assistance agreements, intellectual property licensing, and any other arrangements that may occur as part of the transaction.

While the regulatory framework was intentionally drafted broadly, early market practice revealed uncertainty in applying these principles to complex deal structures. The FAQs issued by CCI on this aspect have brought much-needed clarity and emphasized that the deal value must reflect the economic reality of the transaction rather than its legal form.

In practical terms, several implications arise from these clarifications:

• Call options will generally be treated as equivalent to share acquisitions and included in the transaction value unless vesting is contingent on uncertain future events beyond the parties’ control or occurs beyond 2 (two) years. In relation to put options, CCI clarified that the same will not be treated as shares acquisition and thus will be excluded while computing value of the transaction.

• Share swap arrangements are treated as interconnected transactions, requiring aggregation of the value of both share acquisitions.

• Earn-out mechanisms or performance-based payments should be included in the deal value, either based on estimated amounts or, where no estimate exists, the maximum potential payout.

• Where acquisition structures involve both equity and debt components, pure debt financing alone may not trigger notification. However, debt assumed by the acquirer as part of the overall consideration is included when calculating transaction value.

The FAQs also introduce an important aggregation principle. Investments made within 2 (two) years by an investor or its group in the same target may need to be combined for valuation purposes. From a structuring perspective, this reduces the effectiveness of staggered investments as a strategy to remain below notification thresholds and requires deal teams to assess cumulative transaction value at the outset.

SBO test to be applied at Enterprise Level

The second limb of the DVT analysis requires deal teams to assess whether the enterprise being acquired has ‘Substantial Business Operations in India. While the transaction value determines whether a deal crosses the monetary threshold, the SBO test establishes whether the target has sufficient operations in India to trigger notification.

Under the Combination Regulations, an enterprise may be deemed to have substantial business operations in India if it meets specified thresholds relating to user base, gross merchandise value (GMV), or turnover when compared against global operations. In simple terms, even where the target’s revenue footprint appears limited, significant digital presence, user engagement, or commercial activity in India may bring the transaction within the scope of review.

In practice, there was uncertainty about how the SBO test should be applied in multi-step or layered transactions. There was ambiguity regarding whether the SBO assessment should be limited to the immediate target entity or whether broader group operations and subsequent planned acquisitions are required to be considered when determining whether substantial business operations exist in India.

The FAQs issued by the CCI clarify that the SBO test must be applied at the level of the “enterprise being acquired” in each transaction. In other words, the analysis is not performed once for the overall investment structure but separately for each acquisition step.

This distinction becomes important in staged transactions. For example, where an investor acquires Company A and Company A later acquires Company B:

• for the investor’s acquisition, the SBO assessment focuses on the enterprise being acquired at that stage, which may include Company A and its controlled operations; whereas

• for Company A’s acquisition of Company B, the analysis is conducted independently with reference to Company B.

As a result, parties should avoid relying on a single consolidated SBO analysis. Each limb may require separate evaluation.

Conclusion

For joint venture transactions, these developments represent a meaningful shift in how merger control risks must be assessed in India. Joint ventures may broadly be categorised as either ‘greenfield’ arrangements, involving the formation of a new enterprise, or ‘brownfield’ structures involving investment into or restructuring of an existing business. Newly formed greenfield joint ventures established purely through capital contributions and without the transfer or acquisition of existing operating businesses may fall outside merger notification requirements because the newly incorporated entity may not qualify as an enterprise with sufficient assets, turnover or substantial business operations in India. JV structures involving contributions of existing businesses, phased investments, equity swaps or subsequent acquisitions require careful evaluation under both the DVT and SBO framework.

Parties planning and negotiating joint ventures in India should incorporate merger control analysis at the earliest stage of deal planning and structuring. This includes a proactive assessment of transaction value, the target’s business operations in India, and the overall structure of staged investments or collaborations. Early analysis can significantly reduce execution risk and avoid unexpected filing obligations or delays.

[1]             Section 5(d) of the Act.