Deal Value Threshold Under the Competition Act, 2002: When Does an M&A Transaction Require CCI Approval in India?

Introduction

For most of its history, India’s merger control regime asked a relatively straightforward question: how large are the businesses involved in a transaction? Section 5 of the Competition Act, 2002 traditionally assessed whether a transaction required prior approval from the Competition Commission of India (CCI) by reference to the assets and turnover of the parties, including applicable group-level thresholds.

That approach, however, could fail to capture a particular category of transaction: the acquisition of a data-rich, asset-light digital business for a substantial price, even where the target’s assets and turnover in India were relatively small. A digital platform with a large Indian user base, for instance, could command a significant acquisition value without meeting the traditional financial thresholds for merger notification.

The Competition (Amendment) Act, 2023 addressed this gap by introducing the Deal Value Threshold (DVT) under Section 5(d) of the Competition Act. The provision, together with the Competition Commission of India (Combinations) Regulations, 2024, became effective on 10 September 2024. It introduced an additional basis for merger notification: a transaction may require prior CCI approval where its value exceeds ₹2,000 crore and the target enterprise has substantial business operations in India, even if the traditional asset and turnover thresholds are not met.

For founders, investors and strategic acquirers, this change has important implications for transaction structuring and deal timelines. A business that has never previously required merger clearance may now fall within the notification framework because of its acquisition value, user base or other qualifying business metrics. This article examines how the Deal Value Threshold operates, how substantial business operations in India are assessed, and what parties should consider when negotiating and executing an M&A transaction.

What Is the Deal Value Threshold Under Section 5(d) of the Competition Act?

Section 5(d) of the Competition Act, 2002 introduces an additional notification criterion for combinations. A transaction may qualify as a combination under this provision where:

• The value of the transaction exceeds ₹2,000 crore; and
• The enterprise being acquired, taken control of, merged or amalgamated has substantial business operations in India, as determined under the applicable regulations.

Both conditions must be satisfied for the Deal Value Threshold to apply. Unlike the traditional asset and turnover tests, the DVT focuses on the value of the transaction and the target’s business operations in India. It can therefore capture certain acquisitions that would otherwise fall outside the traditional financial thresholds, including transactions involving businesses with relatively limited assets or revenue but a substantial Indian user base.

The DVT is an additional notification test, not a replacement for the existing asset and turnover thresholds. Parties must assess the applicable tests and exemptions to determine whether a proposed transaction requires notification to the CCI.

Does the Small Target Exemption Apply to the Deal Value Threshold?

The small target exemption generally exempts certain transactions involving targets whose assets or turnover in India fall below the prescribed limits. However, the exemption does not apply to transactions that are notifiable under the Deal Value Threshold.

Consequently, a target may have assets below ₹450 crore or turnover below ₹1,250 crore in India and still trigger CCI notification if the transaction value exceeds ₹2,000 crore and the substantial business operations test is satisfied.

This is particularly relevant to digital businesses, where the commercial value of a target may reflect its user base, technology, network effects or strategic position rather than its current financial performance.

How Is the Value of a Transaction Calculated Under the Deal Value Threshold?

The value of a transaction is not necessarily limited to the headline purchase price stated in the transaction documents. Section 5(d) and Regulation 4 of the Combinations Regulations, 2024 adopt a broad approach to transaction value, capturing valuable consideration whether direct or indirect, immediate or deferred, and whether payable in cash or otherwise.

Depending on the transaction structure, the calculation may include:

• Upfront consideration payable at closing.
• Deferred consideration and contingent payments, including earn-outs.
• Consideration payable through securities or other instruments.
• Payments or other consideration associated with covenants, undertakings, obligations or restrictions imposed on a person, where covered by the applicable rules.
• Other forms of valuable consideration falling within the statutory and regulatory framework.

The precise calculation depends on the facts and the requirements of Regulation 4. Parties should therefore avoid assessing notifiability solely by reference to the initial cash payment or the stated enterprise value.

Do Earn-Outs and Non-Compete Payments Count Towards Transaction Value?

Earn-outs and deferred payments may form part of the transaction value even where the amount ultimately payable depends on future performance or other contractual conditions.

Consideration separately agreed for a non-compete covenant or another obligation associated with the transaction may also be relevant under Regulation 4. The treatment of any particular payment will depend on the applicable regulatory provisions and the transaction documents.

Accordingly, parties should assess the full economic arrangement at the term sheet stage, including contingent consideration, deferred payments and separately agreed obligations, rather than assume that allocating consideration across different contractual components will keep the transaction below the threshold.

How Does the Deal Value Threshold Apply to Multi-Step Transactions?

Multi-step acquisitions require careful analysis because the timing and structure of the transaction may affect the notification assessment.

The CCI has clarified that the DVT framework can apply to transactions where the relevant transaction documents were signed before 10 September 2024 but the transaction had not closed before the framework came into force. In certain multi-step transactions, steps completed before that date do not automatically attract gun-jumping liability merely because the DVT subsequently became applicable. However, remaining steps may still require notification and approval if they meet the applicable criteria.

Parties should therefore assess the legal and commercial relationship between the steps, the applicable notification requirements and the timing of implementation. A staged structure should not be assumed to avoid CCI scrutiny.

What Qualifies as Substantial Business Operations in India?

A transaction does not become notifiable under the DVT merely because its value exceeds ₹2,000 crore. The target must also satisfy the substantial business operations in India (SBO) criteria prescribed under the Combinations Regulations, 2024.

The Regulations use financial and, in the case of digital services, user-based measures to assess the target’s Indian operations. These criteria are intended to capture businesses with a meaningful presence in India even where their local assets or revenue do not reflect the full scale of their commercial activities.

1. Turnover-Based Test

Under the turnover-based criterion, the target’s turnover in India during the preceding financial year must constitute at least 10% of its global turnover derived from all products and services and exceed ₹500 crore.

This test can be relevant to businesses operating in traditional sectors as well as digital businesses. The applicable regulatory treatment of the ₹500 crore threshold must, however, be considered in light of the target’s activities and the specific criteria under the Regulations.

2. User-Based Test for Digital Services

The Regulations provide a separate user-based criterion for digital services. The substantial business operations test may be satisfied where the number of the target’s business users or end users located in India is at least 10% of its total global number of business users or end users, as applicable.

Unlike the financial tests, this criterion does not depend on the target generating a specified minimum amount of turnover in India. A digital business with a substantial Indian user base may therefore satisfy the SBO requirement even where its local revenue is limited.

This is an important consideration for digital platforms, online services and other businesses whose commercial value may be linked to user engagement, network effects or the scale of their operations rather than their current revenue.

3. Gross Merchandise Value Test

The Regulations also provide a gross merchandise value (GMV)-based criterion for relevant transactions. Under this test, the target’s GMV in India for the 365-day period preceding the relevant date must constitute at least 10% of its total global GMV and exceed ₹500 crore, subject to the applicable provisions concerning digital services.

The GMV criterion is particularly relevant to marketplace and platform businesses where the value of transactions facilitated may be a more meaningful indicator of operations than revenue recognised by the platform itself.

The applicable financial threshold and the treatment of digital services should be checked against the current Regulations before a transaction is classified as notifiable.

Why the Substantial Business Operations Test Matters

The SBO test ensures that the DVT is not triggered solely because a transaction has a high price. The target must also have the prescribed connection with the Indian market.

For example, a digital platform with a substantial Indian user base but limited Indian revenue may satisfy the user-based test. A business operating in a conventional sector may instead need to be assessed against the applicable turnover criteria.

The analysis should therefore be based on reliable data covering the relevant period, including the target’s Indian and global turnover, user numbers and GMV, as applicable. The appropriate metric will depend on the nature of the target’s business and the criteria prescribed by the Regulations.

What Does the Deal Value Threshold Mean for Founders and Strategic Acquirers?

The DVT has made merger control an important consideration for transactions involving businesses that might previously have assumed they were too small to require CCI approval. This is particularly relevant to founders negotiating exits to strategic acquirers, investors acquiring significant stakes and businesses purchasing digital platforms or other asset-light enterprises.

1. Assess Notification Requirements at the Term Sheet Stage

The transaction value should be assessed early in negotiations, using the full consideration structure rather than the headline purchase price alone. Founders and acquirers should identify upfront consideration, deferred payments, earn-outs, securities and relevant separately agreed obligations. They should also assess whether the target meets the SBO criteria based on the relevant financial, user or GMV data.

Early assessment can help identify potential filing obligations before the parties commit to a closing timetable that assumes no regulatory approval will be required.

2. Build CCI Clearance into the Transaction Timeline

Where notification is required, the parties must account for the statutory standstill obligation and obtain approval before consummating the combination, subject to the applicable statutory exceptions.

The Competition (Amendment) Act, 2023 introduced a 30-day period for the CCI to form a prima facie opinion on a notified combination. It also reduced the overall statutory review period from 210 days to 150 days. These periods operate within the applicable statutory and regulatory framework; they should not be treated as a guarantee that every transaction will receive final approval within 30 days or that every deal will close within 150 calendar days of signing.

The parties should build an appropriate regulatory timetable into the transaction documents, allowing for filing preparation, information requests, review and any issues that may arise during the CCI’s assessment.

3. Allocate Regulatory Responsibilities in the Transaction Documents

The sale and purchase agreement should clearly address responsibility for preparing and submitting the notification, responding to information requests, paying filing fees and coordinating with the CCI.

The parties should also consider how regulatory risk will be allocated if the CCI identifies competition concerns or requires modifications to the proposed transaction. The agreement may need to address cooperation obligations, the conduct of regulatory proceedings, long-stop dates and the consequences of a failure to obtain approval.

These provisions are particularly important where the transaction involves international parties, complex consideration structures or multiple implementation steps.

4. Avoid Premature Implementation

Where prior approval is required, parties must avoid implementing the combination before clearance, except to the extent a specific statutory exception applies.

Premature implementation may constitute gun jumping and expose the parties to penalties under the Competition Act. This risk can arise where parties transfer control, implement transaction steps or otherwise consummate a notifiable combination before obtaining the required approval.

The parties should identify which actions can lawfully occur before clearance and ensure that closing mechanics, interim operating covenants and implementation steps are structured consistently with the applicable standstill obligations.

Practical Checklist for Assessing the Deal Value Threshold

Before signing or closing an M&A transaction, parties should consider the following:

• Calculate the full transaction value: Include the forms of consideration covered by Section 5(d) and Regulation 4, rather than relying only on the headline purchase price.
• Test the ₹2,000 crore threshold: Determine whether the transaction value exceeds the statutory threshold.
• Assess substantial business operations in India: Review the applicable turnover, user-based and GMV criteria using the relevant financial and operational data.
• Review available exemptions: Do not assume that the small target exemption applies to a transaction that otherwise meets the DVT criteria.
• Examine multi-step structures: Assess each relevant step, the relationship between the steps and the applicable commencement and notification requirements.
• Plan the regulatory timetable: Account for filing preparation, review, information requests and the standstill obligation.
• Allocate responsibilities contractually: Address filing obligations, regulatory cooperation, costs, remedies and long-stop dates in the transaction documents.

Conclusion

The Deal Value Threshold is a significant change to India’s merger control regime. It recognises that a target’s assets and turnover may not fully reflect its commercial significance, particularly in digital markets where user bases, network effects and transaction volumes can contribute substantially to acquisition value.

For founders and their advisers, the practical lesson is to assess merger control requirements early rather than assume that a transaction falls outside the CCI’s jurisdiction because the target’s Indian assets or revenue are limited. The transaction value, the target’s substantial business operations in India and the applicable exemptions must be considered together.

A structured assessment at the term sheet stage, supported by reliable financial and operational data and appropriate transaction documentation, can help parties identify notification requirements, plan for regulatory review and reduce the risk of delays or premature implementation. As the DVT becomes an established part of India’s merger control framework, it is an important consideration in high-value acquisitions across both digital and conventional sectors.

Last Updated on 14 October, 2026