Traditional merger thresholds look backwards. They ask what assets an enterprise owns and what turnover it has already earned. Digital and innovation-led acquisitions look forwards: the purchase price may reflect data, intellectual property, network effects, technical talent or the possibility that a small platform will become a competitive threat. A target with modest revenue can therefore command a very large price. India’s deal-value threshold (DVT) is designed to capture precisely that mismatch.
Effective from 10 September 2024, Section 5(d) of the Competition Act, 2002 treats a transaction as a combination where its value exceeds ₹2,000 crore and the target has substantial business operations in India. It supplements, but does not replace, the conventional asset and turnover tests. For deal teams, merger control can no longer begin after signing with a quick review of audited accounts. It must begin while consideration, side arrangements and user metrics are still being designed.
The threshold has two independent gates
First, the value of the transaction must exceed ₹2,000 crore. The Act defines value broadly to include every valuable consideration, direct or indirect and immediate or deferred. Regulation 4 of the official CCI (Combinations) Regulations, 2024 prevents parties from reducing the analysis to headline equity price. Interconnected steps, separately priced covenants, call options, contingent payments and consideration attached to incidental arrangements can enter the calculation. Technology assistance, intellectual-property licences, branding, supply or facility-use arrangements connected with the deal may matter, including specified consideration payable during the two years after effectiveness.
Second, the target must have substantial business operations in India. This is a target-side nexus test. A global acquirer’s Indian presence does not substitute for the target’s operations, and a transaction does not trigger solely because its global price is high.
Digital services face a deliberately sensitive India nexus
For a target providing digital services, substantial operations exist if any one of three tests is met: Indian business or end users constitute at least 10 per cent of global users; Indian gross merchandise value for the preceding twelve months is at least 10 per cent of global GMV; or Indian turnover in the preceding financial year is at least 10 per cent of global turnover. The additional ₹500 crore Indian GMV or turnover floor that applies to non-digital businesses does not apply to digital services.
The user test makes early-stage products particularly visible. A freemium app may earn little in India while maintaining a large Indian user community. The definition of digital services is also broad enough to cover digital content and internet-enabled activity whether supplied for consideration or otherwise. Classification is therefore not a label chosen in the transaction document. A hybrid enterprise may need product-level evidence showing which services are digital and how users, GMV and turnover were measured.
Transaction value is wider than the share-purchase agreement
DVT diligence should reconcile every document that transfers value: the share-purchase agreement, founder non-compete, transition-services agreement, licence, earn-out, option, retention package and prior interconnected acquisition. Deferred consideration is not made harmless merely by postponing payment. If a contingent amount can be estimated, the approving authority should record a defensible best estimate. If transaction value cannot be established with reasonable certainty, the regulations can deem the value to exceed the threshold. Poor documentation can therefore become a jurisdictional risk.
Parties should also resist artificial fragmentation. Several steps that are economically connected may be analysed together even if executed through different entities or on different dates. Conversely, professional fees and regulatory charges are not consideration paid for the target and should be identified separately rather than buried in a single deal-cost figure.
The small-target exemption is not a DVT safe harbour
One of the regime’s most important features is that a financially small target can still be notifiable under Section 5(d). The policy would be defeated if the conventional de minimis exemption automatically removed high-value acquisitions of low-turnover innovators. Deal teams must therefore run the DVT analysis separately before relying on a small-target exemption. Other transaction-specific exemptions under the applicable combination rules may still require examination, but they should not be assumed from financial size alone.
If notification is required, Section 6 imposes a standstill obligation: the combination must be notified after the triggering document or approval and before consummation. The statutory outer review period is now 150 days, although many transactions are cleared earlier. Access to sensitive information, operational integration, control rights and closing mechanics should be designed to avoid premature implementation.
A practical deal-room test
Before signing, the acquirer should require a DVT memorandum approved at the appropriate level. It should map all consideration, explain interconnected transactions, identify the relevant date, classify the target’s services, and preserve the source data for Indian and global users, GMV and turnover. Definitions used by product analytics must match the legal tests; monthly active users, registered users and paying users are not interchangeable unless the regulations make them so.
The DVT is not simply an anti-tech rule. It is a valuation-sensitive jurisdictional filter for acquisitions in which price reveals competitive significance before accounting figures do. Its discipline is straightforward: if the deal is buying future market power, the merger-control analysis must also look to the future.