M&A Antitrust Regulation Changes: What you need to know
Since 2008, there has been an enormous increase in antitrust scrutiny by the Department of Justice (DOJ) and Federal Trade Commission (FTC) in mergers and acquisitions. While many attribute this increase to the political agenda of the Obama administration, the M&A Advisor and Merrill Datasite point to another cause. In their 2014 article, “Halycon Days are Here Again: the Return of Antitrust to M&A,” they argue that unprecedented volumes of digitized data that have become readily available in today’s world have allowed economists to create vast new computerized simulations of post-merger competitive environments, resulting in the need for the DOJ and the FTC to update their guidelines. Indeed, another report from Womble Carlyle confirms, “Merger analysis has evolved from a formulaic, structural analysis to an analysis of the competitive effects of a transaction, based largely on economic analysis.” This economic analysis is becoming increasingly dependent upon large data and advanced data simulation.
Regardless of the reason for the increased number of antitrust cases involved in M&A transactions, we at EHS Support thought you should know the following key findings from the M&A Advisor’s and Merrill Datasite’s study:
- The safe harbor provision, which presumed that as long as the merged firm had a market share below 35%, there were no harmful effects to competition, has been removed. The result of this change is that more deals may be subject to antitrust scrutiny regardless of the size of the new entity.
- No market is too small. Although middle market M&A activity has typically avoided anti-trust scrutiny, smaller deal sizes have become increasingly open to further examination. Between 2009 and 2013, non-reportable investigations (deals under $75.9 million in total transaction value) represented close to 20% of all merger investigations of the Antitrust Division. Furthermore, according to statistics cited by Haynes and Boone, “20 percent of merger investigations opened by the Department of Justice (“DOJ”) between 2009 and 2013 related to non-reportable transactions.”
- Transactions subject to anti-trust review take much longer to be completed, resulting in uncertainty regarding deal completion. Antitrust enforcement can take months to sift through the massive amounts of automated data before coming to a conclusion, resulting in increased deal fatigue for both the buyer and the seller.
Antitrust investigations cannot only delay the closing of a deal, but can even prevent the completion of a deal or unwind it after its closing. How can you protect yourself on your next deal? According to the report, Dealmakers need to “be aware of how results gleaned from modeling results may be used and prepare appropriate responses.” All antitrust issues should be taken seriously, even in the context of non-reportable transactions. Dealmakers should also be sure to bring in antitrust counsel early on in the process. In doing so, dealmakers will receive critical guidance on deal structuring, document creation, information sharing, and the preparation of purchase agreements. Moreover, dealmakers should be forthcoming with why they believe there may be potential litigation risk. In any transaction where there is risk of antitrust scrutiny, bringing in antitrust counsel early on will prove enormously beneficial.
EHS Support is an environmental consulting firm with offices across the U.S. and internationally. We offer a range of environmental services including merger and acquisition due diligence services, remediation management services, health and safety services, environmental compliance services, oil and gas services, and more.
For information on how EHS Support can help you on your next acquisition, please contact Bruce Martin.