Startup M&A and Reverse Flips in India: The 2026 Rules

The deal market in 2025 and 2026

Tracxn counted 136 acquisitions of Indian tech startups in 2025, against 127 in 2024, and 42 IPOs ¹³. The largest acquisitions included Resulticks by Diginex for $2.0 billion and Minimalist by Hindustan Unilever for $350 million ¹³. Activity slowed through the year: Entrackr counted 85 M&A deals in the first half and 47 in the second ¹⁴.

Public markets became a real exit route: 18 new-age tech companies raised ₹41,283.2 crore through IPOs in 2025, about 52% of it through existing shareholders selling ²².

Competition approval: the deal value threshold

Since 10 September 2024, deals worth more than ₹2,000 crore need approval from the Competition Commission of India if the target has substantial business operations in India, even when the target is too small to meet the usual asset and turnover tests ¹. For digital businesses, that means 10% or more of global users in India; otherwise, 10% or more of global turnover or GMV and more than ₹500 crore ¹.

The overall review period was cut from 210 to 150 calendar days ¹. Deals with no horizontal, vertical or complementary overlaps can use the green channel and are deemed approved on filing ². Smaller targets, with assets under ₹450 crore or turnover under ₹1,250 crore, were exempt under a notification valid until 7 March 2026 ³; check the current position before relying on it.

Mergers: the fast-track route

Startups and small companies can merge through the fast-track procedure in section 233 of the Companies Act, approved by the Regional Director instead of the National Company Law Tribunal. Amendments effective 4 September 2025 extended the route to more unlisted companies, holding-subsidiary pairs and demergers ⁶.

Reverse flipping: moving the parent back to India

Many Indian startups were set up with a holding company in Singapore or the US. Since 17 September 2024, a foreign holding company can merge into its wholly owned Indian subsidiary through the fast-track route, with prior RBI approval and without going to the tribunal ⁴⁵. The move can carry a large tax cost for investors at the time of the flip ¹⁵²⁰.

Foreign investment rules that shape a deal

• Deferred consideration: up to 25% of the price on a share transfer between a resident and a non-resident can be paid within 18 months of the agreement ⁷.
• Share swaps between residents and non-residents have been permitted since August 2024 ⁸.
• Investors from countries sharing a land border with India have needed government approval since April 2020 ⁹. Since March 2026, a non-controlling beneficial stake of up to 10% from those countries can use the automatic route ¹⁰.

Going public

• Founders may keep ESOPs granted at least one year before filing the draft IPO prospectus ¹¹.
• SME IPOs now need operating profit of ₹1 crore in two of the last three years, and the offer for sale is capped at 20% of the issue ¹².

Tie-ups and the people side of a deal

Our observations from hiring around acquisitions and partnerships:

• Check the foreign investment route and the competition thresholds before agreeing terms for any strategic investment or joint venture.
• Agree how unvested ESOPs will be treated, and who the key people are, before announcing the deal. Retention is usually decided in the first weeks.
• Expect leadership gaps after integration: finance, HR and technology leaders are often the first roles to change.