All that is needed for deal-making

Much as India Inc, bankers, corporate lawyers and the wider investment banking fraternity make a case for more liberal financing norms for mergers and acquisitions (M&As), ghosts that still lurk have to be exorcised.

- RAGHU MOHAN

Take bank board oversight.

This has been found wanting for some time now. With banks financing M&As, independent directors (IDs) with a proven track record in this area will be needed. Bank board remuneration for IDs has to move northwards. Data sharing among banks in M&A arrangements will have to become sharper, and this will be critical if a transaction is to go awry. Banks will be sharing space with private equity and venture capital firms, and coordination between them will be needed. It remains to be seen if in the interests of the stability of their loan-plus-equity exposures, banks will read governance covenants to suit them. A related aspect is whether banks financing M&As should get to have board positions on the companies they fund.

An issue which bankers say in private is that even within a consortium, there are at times “club deals” with the same borrower.

And as a result what you get is a (financial) platypus, a semi-aquatic egg-laying mammal which the naturalist George Shaw was inclined to dismiss as hoax as “there might have been practised some arts of deception in its structure”. Banks not being on the same page has created hassles for resolution under the Insolvency and Bankruptcy Code, 2016.