Process of M&A

So far we have talked about why M&A happens and what it actually is. But here is the question that most people do not think to ask — how does it actually happen? How does a deal go from an idea in a boardroom to two companies actually combining?

The answer is that M&A is a process. A structured, staged process with very specific steps. And understanding that process is what separates someone who has read about M&A from someone who actually understands it.

Let us walk through it — from the very first conversation to the day the deal closes.

Stage 1 — The Idea

Every deal starts with a strategic decision. A company's leadership — its board, its CEO, its investors — decides that acquiring another company makes commercial sense. Maybe they want to enter a new market. Maybe a competitor is available at an attractive price. Maybe they see synergies that would accelerate growth.

At this stage, nothing is on paper. It is just a commercial idea being evaluated internally. Investment bankers are often involved here — they approach companies with opportunities, run preliminary valuations, and help identify potential targets.

Stage 2 — The NDA and First Conversations

Once a potential target is identified and there is mutual interest, the first formal step is signing a Non-Disclosure Agreement — an NDA. Before either side shares any sensitive information about their business, they need legal protection ensuring that information stays confidential.

Think of the NDA as the handshake before the handshake. It does not mean a deal is happening — it just means both sides are willing to talk seriously.

Stage 3 — The Term Sheet

If the initial conversations go well, the parties agree on the broad commercial terms of the deal — the price, the structure, the timeline. These are captured in a document called a term sheet or letter of intent.

The term sheet is mostly non-binding. It is not the final deal. But it records what both sides have agreed to in principle so that everyone is on the same page before the real work begins. Two things in the term sheet are binding though — confidentiality and exclusivity. Exclusivity means the seller agrees not to negotiate with any other potential buyer for a fixed period of time. This gives the acquirer the space to do their homework without worrying about being outbid.

Stage 4 — Due Diligence

This is where the real work happens — and for lawyers, this is where a significant portion of the deal time is spent.

Due diligence is the acquirer's process of investigating the target company in detail before committing to the deal. Think of it as looking under the hood before buying a car. The acquirer wants to know everything — the target's contracts, its litigation history, its intellectual property, its employees, its regulatory licences, its financial position, its tax compliance.

If something significant is found during due diligence — a hidden liability, a contractual problem, a regulatory issue — it can change the price, change the structure, or in serious cases, kill the deal entirely.

We will go much deeper into due diligence in Chapter 4.

Stage 5 — Negotiation and Signing

Once due diligence is complete, the parties negotiate and finalise the transaction documents — primarily the Share Purchase Agreement, or SPA. This is the main contract that governs the entire deal. It covers what is being bought, for how much, on what terms, and what happens if something goes wrong.

Negotiating the SPA is where lawyers earn their fees. Every clause is contested — representations and warranties, indemnities, conditions to closing, price adjustment mechanisms. It can take weeks.

Once both sides are satisfied, the documents are signed. This is called signing or execution. But signing is not the end — it is actually the middle.

Stage 6 — Conditions Precedent and Regulatory Approvals

Between signing and closing, there is a gap. During this gap, a set of conditions — called conditions precedent or CPs — must be satisfied before the deal can actually complete.

The most common CPs in Indian M&A are regulatory approvals. Depending on the deal, this could mean:

• CCI approval — if the deal crosses competition thresholds

• SEBI approval — if the target is a listed company

• RBI approval — if there is a foreign exchange component

• Sectoral regulator approval — if the industry requires it

Until every CP is ticked off, the deal cannot close. This is why large M&A transactions can take months between signing and closing — they are waiting on regulators.

Stage 7 — Closing

Closing is the day the deal actually happens. Both sides fulfil their obligations simultaneously — the buyer pays the consideration, the seller delivers the shares, and ownership transfers. Board resolutions are passed, share transfer forms are signed, and the target company formally changes hands.

After closing, there are usually post-closing obligations — filings with the Registrar of Companies, SEBI disclosures if the target is listed, and transitional arrangements between the two businesses.

And that is it. The deal is done.

The process at a glance

If you want a simple way to remember this:

Idea → NDA → Term Sheet → Due Diligence → Negotiation and Signing → Regulatory Approvals → Closing

Each stage builds on the previous one. You cannot negotiate an SPA without completing due diligence. You cannot close without satisfying your regulatory conditions. The process is sequential, and skipping steps creates problems.

In the next chapter, we go deeper into one of the most critical stages of this process — due diligence. What lawyers actually look for, how it is organised, and what a due diligence report looks like in practice.