The antitrust risk is on the
buyer to take agreed steps to obtain antitrust approvals, and some of the risk
is allocated to the seller by allowing the parties to walk away from the deal
if the most extreme risks materialize. This article outlines the top ten
techniques for understanding, evaluating, and allocating antitrust risks in
M&A agreements in a manner that may allow the execution of definitive deal
documents to go forward.
Deal certainty is a critical
negotiating point in most M&A transactions. A bidder's ability to offer
deal certainty to a seller in an auction can make or break a bid. Even if the
seller has leverage over the buyer, it would be unusual to allocate all of the
antitrust risk to the buyer by forcing the buyer to "close through" a
failure to get a requisite regulatory approval. It is more common to allocate
some of the risk to the buyer by forcing the buyer to take agreed steps to
obtain antitrust approvals, and to allocate some of the risk to the seller by
allowing the parties to walk away from the deal if the most extreme risks
materialize. Fortunately, there are a number of recognized approaches that parties
can use to understand, evaluate and parse antitrust risks in a manner that may
allow the execution of definitive deal documents to go forward. Each of these
techniques can be customized to take account of the relevant facts and
circumstances of any given deal.
This article outlines the top ten techniques for allocating antitrust risks in
M&A agreements. This article is designed for deal lawyers, not antitrust
advisors, and it is not intended to present an analysis of substantive
antitrust issues that can arise in M&A transactions.
This article is part of the "Speed Reading" series in which the
authors highlight practical tips and recurring issues in M&A transactions
and corporate governance. Lexis.com subscribers may access Special
Committee in going private transactions, 2012
Emerging Issues 6205, Foreign Corrupt Practices Act in M&A Transactions,
Emerging Issues 6206, Designating Directors: Issues and Implications, 2011
Emerging Issues 5788, Charter and Bylaw Issues, 2010
Emerging Issues 5372, Top 10 Due Diligence Issues in M&A deals, 2010
Emerging Issues 5124, Issues in a Public Company Merger Agreement, 2010
Emerging Issues 4883.
1. Information Sharing and Joint Defense Agreements
Well before either party prepares a first draft of the transaction agreement,
both parties should make a critical assessment of the antitrust risks of the
proposed transaction. Each party should consult antitrust counsel, and economists
if needed, to understand what the potential "overlaps" are, whether
there are any reasonable remedies that would satisfy the regulators and allow
the transaction to proceed and, if so, what impact the antitrust approvals
process is likely to have on the transaction timeline. In competitive auctions,
bidders should also assess how high their antitrust risk is compared to other
likely bidders, because this may inform how aggressive the antitrust
risk-sharing proposals of their bid should be.
Each party can complete some of its preliminary analysis independently, based
on publicly available information and its own internal financial data. The
parties can also review internal marketing materials and potential
"4(c)" documents (such as presentations to senior management about
the market share impacts of the transaction) to assess whether they have any
"smoking guns" that cast their antitrust-related issues in a
Parties to transactions involving companies that have assets or sales in non-U.S.
jurisdictions should pay close attention to non-U.S. competition law
requirements. Some of the BRIC countries, among others, have adopted expansive
transaction notification requirements in the past few years. In some cases,
non-U.S. filing requirements have long notice periods that can meaningfully
impact overall transaction timing. Delays in transactions due to competition
law processes expose the transaction to the risk of not closing by making it
more possible for intervening events, changes in market conditions, interlopers
or other disruptive factors to arise.
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