US Antitrust And M&A

US Antitrust Laws and Foreign M&A

The antitrust laws of the United States will play a role in any transactions where the transaction is said to produce a substantial impact and have an adverse effect on US commerce. US antitrust laws are covered by a combination of Federal laws, often mirrored by State laws, enforced by the Federal Trade Commission and the Antitrust division of the US Department of Justice. It is their role to review mergers and acquisitions and prevent illegal conduct, block transactions and unwind illegal transactions. 

The Role of Antitrust Laws

The purpose of antitrust laws in M&A is to prevent transactions that would substantially lessen competition or create a monopoly. The laws are designed to give the US antitrust agencies the ability to review M&A activity and also provide a procedural framework parties must follow to complete a transaction. Antitrust laws can be enforced upon both pending and already completed mergers and acquisitions, with the enforcement agencies having the power to investigate and unwind transactions even if they were previously deemed legal.

Some of the key questions US enforcement agencies will ask is: 

  • How will competition in the marketplace change as a result of this transaction? 
  • Will the rest of the market be unfairly disadvantaged? 
  • Will the new entity have too much power? 
  • How will competitors react? 
  • Will consumers be harmed? 

Preparation and Due Diligence

Perceived violations of antitrust laws can result in long and costly investigations, fines and even criminal sanctions. Transactions under review are subject to wait times during which parties cannot close and poor coordination and preparation can place strains on both parties and risk sanctions.  Therefore, it is important to conduct proper due diligence and thoroughly prepare all documents relating to the merger or acquisition under the assumption that they will be reviewed by the antitrust agencies. Documents should be reviewed by specialist antitrust lawyers prior to being provided to the other parties to the deal. It is important to keep in mind when preparing documents, that antitrust agencies can compel any documents from either party to demonstrate conduct that is prohibited by antitrust laws and documents should therefore, be prepared accordingly. 

During due diligence only individuals necessary to the deal should be involved in the transaction and only information necessary to the deal provided to select parties. All individuals involved in the deal should be recorded and it may be best to implement a clean team. A clean team being an impartial third party who operate and access a virtual due diligence room. A clean team is bound by strict impartiality and confidentiality. They organise, consolidate and sanitise the information in order to release to bidders in a generic form.

Conducting proper and thorough due diligence, carefully preparing documents and limiting the number of individuals involved and exposed to information will go a long way to ensuring that antitrust laws are not violated. 

Business as Usual

Prior to closing the deal, it must be business as usual. If the parties to the deal are competitors, they should continue to compete against one another. You must not agree with your deal partner to refrain from approaching certain customers, projects or geographic regions. You also must not act as if you have already merged, negotiate any deals jointly or be involved in the other company’s business decisions. 

Find Out More 

Navigating international M&A deals with foreign parties can be a difficult, time consuming and stressful event. At Groves & Partners, we have experience closing international transactions with buyers and sellers from the US and around the world. Our expert team, together with specialist antitrust lawyers, can help you navigate the risks associated with US antitrust laws and advise you on company sales, mergers and acquisitions. 

Written by Stephen Groves

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