Law and Outbound M&A by Indian Multinationals

Many thanks to IntLawGrrls for inviting me to say a few words about my forthcoming article, Rising Multinationals: Law and the Evolution of Outbound Acquisitions by Indian Companies, in this guest post. I am working on this piece in connection with my participation in the U.C. Davis Law Review’s 2010 Symposium, entitled “The Asian Century?” As many of you know, in the past decade India has become one the fastest growing economies in the world. During this period, not only have Indian companies achieved significant domestic growth, but they also have launched multimillion and multibillion dollar deals to acquire companies around the globe. What often comes as a surprise is that many of the acquisition targets are companies in developed economies, in particular the United States and the United Kingdom. Just last year, Tata Motors, part of the giant Indian conglomerate The Tata Group, bought Jaguar and Land Rover from Ford in a $2.3 billion deal that received world-wide recognition. This acquisition is one of the many outbound acquisitions completed by the various Tata companies in the past few years (including the acquisition of marquee British brand Tetley Tea). While the mega-deals seen in the 2005-2007 period have certainly slowed down during the economic crisis, Indian companies are continuing to acquire companies in developed countries. In fact, just a few weeks ago, Reliance Industries, one of India’s largest companies, announced its intent to acquire a controlling stake in LyondellBasell, one of the world’s largest chemical companies.
Finance and business scholars have begun to explore outbound acquisitions by Indian multinationals, emphasizing the business and economic motivations underlying these transactions. However, there has been little analysis of the significant role 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. I believe that law plays a number of important roles in the emergence of Indian multinationals. First, legal reforms launched during the economic liberalization period spearheaded by Manmohan Singh, India’s current Prime Minister and former Finance Minister, set the stage for outbound acquisitions by Indian multinationals. Second, legal norms and legal history provide Indian multinationals with competitive advantages that are largely distinct from that of firms from other emerging economies. Third, legal constraints on mergers and acquisition activity by Indian firms impose substantial restrictions not only on the methods used by Indian multinationals in pursuing outbound acquisitions, but also on the future potential of Indian multinationals. An analysis of the role of law and legal norms not only presents a more complete picture of the environment that has both facilitated and constrained outbound acquisitions by Indian multinationals, but also explains in part why Indian multinationals have targeted firms in the west. My article presents this analysis, which I hope other scholars, as well as lawmakers, will find helpful.