Date: December 7 th, 2005 M&A-the boot on the other foot? Samir Dudhoria Partner Luthra & Luthra Law Offices Date: December 7 th, 2005

WHY M & A Access to new markets and established customer bases Technology access and sharing Brand equity and diversification Acquisition of suppliers Synergies Economies of scale Consolidation

Date: December 7 th, 2005 Indian Law on Overseas Investment Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations 2004  Direct Investment in a JV/ WOS outside India (other than in financial services) on the automatic route, subject to conditions including  Total financial commitment < 200% net worth  Bona fide business activity  Funding of investments- sources and limits  Valuation and Pricing regulated  Investment under swap or exchange of shares arrangement  Bidding or tender process

Date: December 7 th, 2005 Groundwork  Identify prospective target / partner  Corporate assessment  Market assessment  Technology assessment  Legal and regulatory framework  Cultural assessment  Term Sheet  Confidentiality and Non-Disclosure  Exclusivity

Date: December 7 th, 2005 Groundwork Contd..  Comprehensive Due Diligence and Risk Matrix  Material existing contracts  Title to property and assets  Litigation: Contingent Liabilities  Labour related issues/ pending dues  Intellectual property  Environmental matters  Statutory dues

Date: December 7 th, 2005 Structuring the Transaction - Issues  Board Representation/ Control over Management  Limits on foreign directors  Fiduciary duty of directors  Transfer Restrictions  Lock in provisions  Enforceability  Minority Protection  Special and ordinary resolutions  Affirmative vote matters

Date: December 7 th, 2005 Structuring the Transaction - Issues Contd..  Special Rights  Tag along  Drag along  ROFR  Representations and Warranties  Indemnity  Aggregate Liability  De Minimus  Threshhold  Exit Options/ Mechanism  Listing  Call and Put Options  Labour retrenchment  Winding up

Date: December 7 th, 2005 Structuring the Transaction - Issues Contd..  Confidentiality  Information  Technology  Non Compete/ Non Solicitation/ Exclusivity  Extent  Enforceability  Deadlock/ Dispute Resolution  Time and cost efficient  Arbitration v Litigation  Governing Law and Jurisdiction

Date: December 7 th, 2005 The Challenges Ahead  Compliances  Integration  Work, management and business models  Ideologies  Management and workforce  Social and cultural aspects

Date: December 7 th, 2005 Summary of Key Issues  Identification of appropriate modes of investment  Identification of appropriate target company  Comprehensive due diligence  Securing your interest- contractually  Integration  Exit mechanism