What is Acquisition? How SEBI Regulates Takeovers in India
An acquisition is when one company buys controlling stake in another.
An acquisition occurs when one company purchases a controlling stake (typically above 25%) in another company. Unlike a merger which creates one entity, an acquisition may keep both companies operating separately with the target becoming a subsidiary of the acquirer.
When Tata Group acquired Corus Steel, it bought a controlling stake making Corus a Tata subsidiary. In India, SEBI's Substantial Acquisition of Shares and Takeovers (SAST) Regulations govern how acquisitions must be conducted to protect minority shareholders.
When does SEBI's takeover code trigger?
Acquiring 25% or more voting rights triggers an open offer to remaining shareholders. Acquiring control (even below 25%) also triggers it. Annual creeping acquisition above 5% triggers it. The open offer must be for at least 26% additional shares.
What is the open offer price?
At least the highest price paid by the acquirer in the last 26 weeks or the average of 60 trading days, whichever is higher. This protects minority shareholders from being trapped at lower prices.
Track acquisition announcements and open offers on Stockk Equity with real-time corporate action alerts. Explore F&O hedging during takeovers at Stockk Knowledge Center.
Investments in securities market are subject to market risks. This article is for educational purposes only and does not constitute investment advice. INDIRA SECURITIES PRIVATE LIMITED : SEBI REG. NO.: INZ000188930, NSE TMID: 12866, BSE TMID: 663, CDSL DPID: 17000, MCX TM ID: 56470, NCDEX TM ID: 01277, CDSL REG.NO.: IN-DP-90-2015, CIN:U67120MP1996PTC085111, RA SEBI REG. No.: INH000023269, IA SEBI REG No.: INA000021410. For any complaints pertaining to securities broking please write to [email protected], for DP related to [email protected].
Frequently Asked Questions
Should I sell in an open offer?
If the offer price is above your cost and above your valuation, yes. If you believe the company will grow more under the new owner, hold. Use StockkAsk at stockk.trade/stockkask for valuation assessment.
Can acquisitions be blocked?
CCI (Competition Commission) can block anti-competitive acquisitions. Target company's board can recommend rejection. Shareholders can oppose in voting.
What is a friendly vs hostile takeover?
Friendly: target management supports the deal. Hostile: acquirer goes directly to shareholders against management's wishes. Hostile takeovers are rare in India.
How does acquisition affect target stock price?
Typically positive. Target stock rises toward the offer price upon announcement. The gap between current price and offer price reflects deal completion probability.
What happens to target company employees?
Depends on the acquirer's plans. Some acquisitions lead to restructuring and layoffs. Others retain all employees. Employee protection varies by case.
Investments in securities market are subject to market risks. This article is for educational purposes only and does not constitute investment advice.
INDIRA SECURITIES PRIVATE LIMITED : SEBI REG. NO.: INZ000188930, NSE TMID: 12866, BSE TMID: 663, CDSL DPID: 17000, MCX TM ID: 56470, NCDEX TM ID: 01277, CDSL REG.NO.: IN-DP-90-2015, CIN:U67120MP1996PTC085111, RA SEBI REG. No.: INH000023269, IA SEBI REG No.: INA000021410
