India healthcare M&A: Structuring compliant mega deals

In the past decade, India’s legal and regulatory framework for the healthcare sector has transformed. Once on the market periphery, healthcare M&A is now firmly in the mainstream. Recent deal activity sees significant shifts towards larger, platform-led transactions and cross-border strategic investment. In 2025-26 alone, the sector saw USD3.5 billion of investment in 46 M&A deals. However, as the sector moves from greenfield expansion to acquisition, regulatory considerations are now essential in structuring M&A deals.

The structure of deals is critical to managing regulatory risk and ensuring business continuity. The choice between share acquisition, asset purchase, business transfer and merger is driven less by commercial considerations than by licensing implications, approval timelines and operational sensitivities. Due diligence and regulatory strategies shape the final structure. An M&A outcome is as much a matter of regulatory analysis as it is a financial decision. The healthcare sector is highly regulated. It is subject to the governance of foreign investment, clinical compliance, pharmaceutical and medical device licensing, data protection, telemedicine rules and digital health record regimes. Every healthcare institution is subject to specific licensing requirements.

Transactions should assess whether a change in ownership requires new registrations or notifications to authorities. Due diligence should review licence validity and renewal timelines, as well as compliance with biomedical waste, radiation and fire safety and pollution-control standards.

Such regulatory considerations are central to deal structuring. Although many apply to both mergers and acquisitions, mergers may require greater attention to the transfer, migration, or revalidation of licences, registrations and environmental approvals.

Most healthcare sub-sectors permit 100% foreign investment under the automatic route, needing no government approval. However, transactions involving foreign investors must comply with the Foreign Exchange Management Act, 1999 (FEMA). The impact depends on whether the deal is structured as an acquisition or a merger.

In acquisitions, the FEMA governs share transfers involving foreign investors through sectoral caps and pricing guidelines. Brownfield pharmaceutical acquisitions exceeding 74% require prior government approval. Insurance-linked healthcare businesses must comply with the foreign ownership and control directions of the Insurance Regulatory and Development Agency of India. FEMA’s pricing rules affect valuations, indemnity holdbacks and closing adjustments. Its 25% cap on deferred consideration payable within 18 months affects escrow, earn-out and option structures.

The Competition (Amendment) Act, 2023 and the Competition (Combination) Regulations, 2024 reformed the Competition Commission of India (CCI), modernising merger control. A key change, deal value threshold (DVT), mandates approval of the CCI for transactions exceeding USD22 million, if the target has substantial business operations in India. This ensures that high-value deals, in which assets may not reflect true market significance, are effectively scrutinised.

Recent significant M&A deals saw Singapore’s Temasek-backed Manipal Hospitals acquire Sahyadri Hospitals from the Ontario Teachers’ Pension Plan for USD700 million in July 2025. Aster DM Healthcare merged with Quality Care India for USD94 million. In single-specialities, global investment company KKR & Co acquired a 54% controlling stake in Healthcare Global for USD400 million. BPEA EQT took a majority stake in Indira IVF, valuing the chain at more than USD1 billion.

One of India’s largest third-party administrator deals was the Medi Assist Healthcare Services’ 100% acquisition of Paramount Health Services and Insurance TPA for USD3.44 million in July 2025. Such large-scale deals prove the momentum of healthcare M&As, driven by the consolidation of hospitals, speciality chains and digital health platforms. Regulatory compliance and commercial strategy are inseparable. Licensing, merger controls, data protection and FEMA regulations shape not only deal execution, but also their structure and timing.

Investors and acquirers must factor regulation into transactions to ensure operational continuity and to mitigate risks.

Harshita Srivastava is a partner and Palomita Sharma is an associate at Shardul Amarchand Mangaldas & Co.