As the M&A bandwagon moves on, there are certain obstacles on the way that need to be overcome. There is this thorny issue of what constitutes corporate control. This concept of management control is not clear in the Takeover Code formulated by the Securities and Exchange Board of India (Sebi).

Then there are other issues such as exorbitant stamp duties, cumbersome court procedure for mergers, dog-in-the-manger role of financial institutions in corporate takeovers and absence of takeover-lending. As the consolidation mania grips the Indian corporate sector, it is essential to review all these issues.

There is tremendous scope for M&A in industries such as cement, which are fragmented. Knowledge-based industries such as pharmaceuticals, information, communication and entertainment are also ripe for consolidation. One should see more M&A deals in these sectors shortly. The information technology sector, where large players are keen to move up the value chain, is an ideal candidate for M&A. If M&A activity is to pick up in all the sectors across the board, it is essential that FIs understand the tactical relevance of M&A in the new economy.

What drives M&A deals is strategy and all other factors are just incidental. Gone are the days when Ram Prasad Goenka and Manu Chhabria bought anything and everything under the sun, regardless of whether an acquisition resulted in an increase in shareholder value. The questions that are increasingly being asked today are: how does this acquisition fit into my business portfolio? What would be my comparative advantage over others in the same business?

Thanks to this change in mindset, M&A activity is turning strategy-driven. Businessmen are becoming more open-minded, mature and investor-friendly. But, the obstacles remain. It is high time the roadblocks are removed so that M&A blossoms into a healthy economic activity.