This post focuses on the emerging peculiarities of M&A and will help you understand the intricacies of due diligence for technology mergers and acquisitions in India. In this country, as in many others, the past year has been surprisingly rich in technological mergers and acquisitions. A billion or more figured in many deals. Fintech companies have borrowed some of the record amounts paid. But even in the traditional IT market, there have been many large and important transactions.
Selecting the target company
For the purpose of making a successful M&A in India, it is not the leader in a certain industry but at the same time not the weakest company, but the second or third in terms of efficiency is chosen. This is logical, as, in the end, you have to pay a rather high price for a leading company, while it is very difficult to transform a weak firm into a well-functioning company.
In order to find a target company in India, the buying corporation usually first determines the basic parameters that the target company must meet. Then negotiations are held on the terms of the transaction and the obligatory and most important stage - due diligence of the target company in India.
Due diligence phase
This phase is characterized by a comprehensive assessment of the target firm, namely financial, operational, legal, environmental due diligence, strategic, cultural aspects, risk analysis, identification of synergies, etc. Verification and transfer of intellectual property rights take a special place in technological M&A transactions.
Having received the necessary information about the potential opportunities of the company, the buying corporation decides for itself to conclude a deal with this company or look for another company.
Simultaneously with the due diligence of the target company, the planning of the transaction must take place. The main terms of the transaction considered by the buying company, as a rule, are the price, the design of the transaction, the way of organizing work during the transition period, employee policy, and other issues.
IP in focus
Due diligence of technology M&A in India primarily searches for publicly available information. For example, in the relevant government registries, you can find information on the registration of patents, designs and other registered intellectual property in India.
The due diligence of technology mergers in India and other countries is notable for its focus on technology and intellectual property assets.
In India, copyrights, patents and trademarks can be registered. But trade secrets are not subject to registration but can be protected using NDA agreements.
The due diligence of an Indian tech company is conducted to define whether:
- IP has been registered in the name of the seller, and whether any further registration applications have been filed;
- IP was acquired from a third party;
- any disputes resolved in India regarding the target IP or any ongoing disputes.
Crucially, in the context of contractor-created intellectual property and technology, find out if an assignment tool exists. It also makes sense to ask whether the stamp duty has been paid.
All M&A transactions are carried out only when the interested parties see the benefits for themselves. Several successive waves of M&A have played a significant role in the processes of reconfiguring the organizational structure of technology-related companies and their core competencies. They facilitated the realignment of firms' assets and thus influenced the shape of industries and their overall performance.
If you are planning an M&A deal in India, it is worth paying special attention to the due diligence of the transaction and IP assets. If you need professional advice on this issue, please reach out to us in a convenient way for consulting on M&A.