Mergers, Acquisitions, Takeovers and Corporate Control Transactions
Domain overview
Mergers, Acquisitions, Takeovers and Corporate Control Transactions tests the SEBI Takeover Code, control premium, mandatory open offers, exemptions, and squeeze-out rights. Questions often turn on the exact trigger, offer size, and pricing rather than the commercial rationale.
Core rules
- SEBI SAST 2011 triggers a mandatory open offer when an acquirer crosses 25% voting rights or acquires control.
- The open offer must be for at least 26% of the total voting capital, not merely the incremental shares.
- An acquirer holding 25% or more may acquire up to 5% in a financial year without an open offer, subject to the 75% maximum non-public shareholding.
- Disclosure obligations start at 5% and continue at prescribed thresholds; the 25% threshold triggers the mandatory open offer.
- Sections 235 and 236 of the Companies Act, 2013 provide squeeze-out and minority buy-out after a 90% acquisition in specified cases.
- Exemptions include inter se transfers among promoters or within a group, subject to conditions.
Worked example
An acquirer holds 20% of Target Ltd and buys 8% from a strategic seller. It crosses 25%, so a mandatory open offer for at least 26% of Target's total voting capital is triggered. The offer price is the highest of the negotiated price, the 60-day volume-weighted average price, and other prescribed parameters. The acquirer cannot limit the offer to the 3% excess; that is the classic error.
Traps
Offering only the shares that took the acquirer past 25%; ignoring indirect or creeping acquisitions; assuming 25% exactly is safe; confusing control with a fixed percentage; missing the 5% annual creep cap; overlooking delisting or buy-back rules.