Antitrust and Other Regulatory Issues
In evaluating proposals, it is vital to keep in mind regulatory issues in general and antitrust concerns in particular. All sizable mergers and acquisitions are subject to the dreaded pre-merger notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR).
If a merger or acquisition is subject to HSR, both parties to the transaction must notify the Federal Trade Commission (FTC) and the Department of Justice (DOJ) of the pending transaction. After filing, there is a 30-day waiting period before the transaction can close. (The waiting period is only 15 days for cash tender offers.) During this 30-day period, the agencies review the filing to determine whether the transaction poses any antitrust concerns. The parties can request an early termination of the waiting period, but the agencies are not obligated to grant the request.
The government may request additional information before the end of the 30-day waiting period. If the agencies make such a second request, the waiting period gets extended for up to 30 more days, but in the meantime, both parties must answer government interrogatories and produce what is usually a huge quantity of documents. If the feds really don’t like what they see, they can seek an injunction against the merger or may demand that one of the parties sell off certain assets or subsidiaries.
So what transactions are subject to the notification requirement and 30-day waiting period? Transactions are subject to size-of-transaction and size-of-person tests; both tests must be met to trigger the pre-merger notification requirement. (If the transaction is sufficiently enormous, only the size-of-transaction test must be met.) The threshold amounts are adjusted for inflation each year; as of early 2018, the HSR thresholds were as follows:
- • Size of the transaction. Greater than $90 million.
- • Size of the person. One party has total assets or net revenue