[Opinion] Proxy Advisory Firms | Implications on Deal Outcomes and Corporate Governance in Indian M&A

Vidya Sunderam – [2026] 185 taxmann.com 947 (Article)

1. Introduction

Over the last decade, proxy advisory firms have assumed an increasingly important role in shareholder decision-making in India. In the mergers and acquisitions landscape, the recommendations of proxy advisors have been shaping shareholder voting outcomes and, consequently, the certainty and timing of M&A transactions.

This development is driven by rising institutional shareholding in Indian listed companies, with investors relying on proxy advisory firms to evaluate complex transactions prior to exercising their voting rights. As a result, proxy advisors have emerged as a key interface between companies and public shareholders.

Their enhanced influence also extends to corporate governance, particularly in shaping how boards evaluate, structure, and justify M&A transactions.

This shift has necessitated more robust transaction planning, including a clear articulation of the impact of the proposed transaction on shareholders.

2. Evaluation of M&A Transactions

Proxy advisory firms evaluate M&A transactions with a primary focus on the fairness and equity of the transaction from the perspective of public shareholders, as well as its long-term implications. While statutory compliance provides the foundation, greater emphasis is placed on shareholder interests and broader corporate governance standards, particularly fairness, transparency, and accountability.

Their evaluation extends to the substantive terms of the transaction, including whether the consideration and overall structure are balanced from a shareholder perspective. In doing so, proxy advisory firms examine whether the structure reflects an equitable allocation of value and is consistent with accepted corporate governance standards.

In addition, proxy advisory firms assess the decision-making process underlying the transaction. This includes the role of the board and its committees, the independence of the evaluation, as well as whether the transaction is supported by a coherent and credible rationale.

3. Emerging Patterns

Key patterns of proxy advisory observed in recent M&A transactions include:

Heightened scrutiny on transactions involving promoter or related parties M&A transactions involving promoters or related parties have witnessed heightened shareholder opposition where proxy advisory firms have raised concerns regarding fairness or perceived imbalance. Such scrutiny has also extended to assessing whether the transaction structure confers any disproportionate benefit on promoters or related parties and whether adequate safeguards for minority shareholders are in place.
Enhanced Disclosure Standards – In many listed mergers and restructurings, proxy advisory scrutiny has resulted in enhanced disclosures relating to valuation methodologies, assumptions, and the commercial rationale. Companies have supplemented or clarified their initial disclosures to address the concerns highlighted in proxy advisory reports. This has resulted in enhanced transparency in valuation methodologies, clearer articulation of assumptions, and a reasoned basis for the consideration or exchange ratio.
Impact on Transaction Timelines and Execution – Proxy advisory scrutiny has resulted in additional disclosures, increased investor engagement, and delays or revisions to transaction terms, particularly where concerns are raised close to the date of shareholder voting. Transactions have faced shareholder resistance where the consideration was perceived to be inadequately justified, even where valuation methodologies were technically sound.
Implications for Corporate Governance – Proxy advisory recommendations have increasingly considered post-transaction corporate governance arrangements, including board composition, control rights, and minority shareholder protections, which, in turn, have impacted shareholder voting and overall support for the transaction. In this context, fairness opinions are considered as an additional layer of validation but are not treated as determinative.
Scrutiny of Intra-group Arrangements and Restructurings – In group restructurings, proxy advisory firms have closely examined transparency and fairness to assess whether minority shareholders are adversely impacted, particularly whether value is fairly allocated between promoters or related parties and minority shareholders, which has resulted in changes to the structure.
Influence on Investor Perception – Even where transactions secure the requisite statutory approvals, adverse or qualified proxy recommendations may influence investor perception of the fairness and legitimacy of such transactions. The commercial rationale is often assessed alongside valuation, and references to strategy or synergy are expected to be supported by a demonstrable linkage to value creation.