Inordinate delay in approvals, bureaucratic stonewalling and a policy paralysis - the deadly cocktail is dampening the spirit for many in India Inc in their quest to operate in the already difficult domestic environment.
The shadow of the government is also increasingly looming large over transactions which in the past had seen limited regulatory interference.
The 10-month delay over the approval of the Cairn-Vedanta deal is just one example of this.
Mergers and acquisition in the telecom sector is becoming tougher though it is fraught with stringent conditions stipulated to avoid competition, say lawyers and sector experts.
The Delhi High Court's order against Idea on six overlapping licenses of Spice has put Idea on the back foot.
The court had earlier approved the merger between the two telcos. The 52-page judgment says Idea suppressed information from the courts to get the approval.
Lawyers say it would be wiser to get a prior approval from the Department of Telecommunications, before going for a deal, to avoid complications.
This setback will also affect the industry, which is on the verge of getting a new telecom policy with mergers and acquisition guidelines. Shardul S Shroff, the managing partner of Amarchand Mangaldas, calls this a caution point.
"The case of Idea and Spice might not be applicable to all other cases, but what people will do now is to go for an approval before closing a deal. But the government too has to make sure the approval process is expedited," said H P Ranina, a senior advocate with the Supreme Court.
Experts say if a government approval is necessary for a deal or investment between private parties, there is also a chance of "changes"
This could happen even in the case of deals with telecom operators, where licences are involved. "In case a licence is granted by the government and requires prior approval, the government has the right to make changes in the conditions," said Shroff.
"In sectors such as telecom, oil and gas, the government's interference on security grounds is a global phenomenon. Even in developed markets, we have seen bulge bracket deals getting politicised. It is part of the game and not unique to India," said an investment banker who has carried out deals in these sectors.
But what's making matters worse, say experts, is that bureaucracy has become overly cautious, while granting approvals of any kind, after allegations of corruption and ongoing investigations.
Senior Supreme Court advocate and a advisor to Idea Gopal Jain, calls it the return of the licence raj. "It is disturbing as it sends a strong signal that the government can undo a merger or a scheme, while at the same time it is formulating an M&A policy," he said.
Rajiv Luthra, founder and managing partner of Luthra & Luthra said in the current form, the M&A guidelines are tricky for acquisitions.
"The company, which acquires, does not get spectrum, but can get subscribers. How do you provide service to the subscribers?" he questions.
With as many as 13 operators, the sector is fraught with high competition and diminishing margins, acquisitions in the sector would be those where there would be cases where two companies operate in the same circle.
Analysts hope that it would become easier for these mergers to take place.
