What You Need to Know Before You Merge



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Is your company acquiring another company or being acquired, merging or forming a joint venture with another party? If so, you may be required to file a formal notification with the Federal Trade Commission and U.S. Department of Justice Antitrust Division prior to closing on your transaction.

If you answered yes to the above, here are some things you should know:

  • The penalty for failure to file when required to do so is a civil penalty of up to $16,000 per day for each day the failure to file continues, plus possible other relief such as an injunction preventing the completed transaction from going forward or divesting the acquired assets or voting securities.
  • The formal notification requirement (often referred to as the Hart-Scott-Rodino Premerger Notification) applies to transactions that are valued at $63.4 million or higher.
  • It applies to for-profit and not-for-profit entities and includes corporations, joint ventures, and partnerships, as well as spinning off of a business line.
  • Another part of the test to determine if a filing is required is whether the parties involved meet the size of the parties test. (One person, including parent, has at least $12.7 million in sales or assets and the other person, including parent, has at least $126.9 million in sales or assets.)
  • If your transaction qualifies, and does not meet certain limited exemptions, there is a required waiting period of 30 days that begins after all parties have properly filed the notification with the antitrust agencies.
  • Preparation of the notification may take 30 days or more depending upon availability of information, and this timing, along with the required 30 day wait, needs to be included when you set the closing date of the transaction.
  • If the transaction involves competitors, then one of the enforcement agencies will review the matter for possible anticompetitive issues or concerns that could be raised by the transaction.
  • The parties are required to submit certain planning and evaluation documents that pertain to the proposed transaction. What is said in these documents may raise antitrust concerns with the reviewing agency.
  • The antitrust enforcement agencies have issued new proposed merger guidelines that set out the various methodology used and evidence relied upon in analyzing such transactions to identify any anticompetitive issues and concerns.

Comments relating to the new proposed merger guidelines and what you need to know will be provided in an upcoming update.



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