Companies merge together to extend the company’s services to the world on a large scale. The main goal of a market extension merger is to gain a more extensive client base and to access the larger market. In which two companies can be operating in the same industry or related industries. Companies that offer complementary products or services to other products to provide comprehensive products to the customer also fall under this preview. It benefits large companies by reducing risk, reaching out on a large scale, saving costs, diversifying, accessing new markets, synchronizing with other companies, and creating a competitive position with similar companies.
The 2G scam and Reliance Jio’s disruptive pricing led to a merger between Vodafone India and Idea Cellular Limited. This strategic move aimed to create a stronger entity to compete effectively in the market. The merger, valued at $23 billion, resulted in the formation of Vi. Similarly, in the case of Pepsi and Pizza Hut merged to reach out to the market and showed an increasing sale. At the same time, these acts have to be looked into: The Competition Act, 2002, The Foreign Exchange Management Act, 1999 (FEMA), Sector-specific regulations, Indian Contract act,1872, the CCI’s decisions on merger cases and general legal principles to provide guidance.
Companies contemplating market extension mergers in India should carefully evaluate the potential benefits and risks, consult legal experts, and comply with the applicable legal requirements. By doing so, they can navigate the complexities of the Indian legal landscape and successfully achieve their strategic goals.
AUTHOR:
J. Jeslin Jesiya, 5th year BBA. LL.B (Hons.), Saveetha School of Law, Chennai