The lion’s share of proposed mergers the federal government flagged as posing a potential competitive threat in their market were either abandoned or restructured in 2023, a report to Congress shows. The findings suggest companies are largely unwilling to push back against the Federal Trade Commission and Department of Justice if the agencies think the deals are a problem under antitrust laws.
Out of 28 deals flagged by the FTC and DOJ, 20 were either abandoned or restructured while they were under review, which means in only a handful of cases were companies willing to fight the agencies in court or work out a settlement, according to the agencies’ 2023 Hart-Scott-Rodino report.
Under HSR, companies proposing mergers that are valued at $111 million or more are to submit the deal to the agencies for review. Most deals sail through without a problem, but for those that are flagged, the agencies can withhold approval or ask the companies to restructure them.
If the companies think the deal should go through, or if they think restructuring would kill the economic logic of the deal, they can proceed at the risk of the government suing them.
In 2023, companies submitted 1,805 deals for review, a big drop from the last two years but a level that is aligned with what the agencies typically see, according to the report. Companies submitted 3,152 deals in 2022 and 3,520 in 2021. In the half dozen years prior to 2021, the number of deals was closer to 1,800. The agencies didn’t speculate about why 2021 and 2022 were outliers.
Of the 1,805 deals submitted, second requests were made in 37 cases, 26 by the FTC and 11 by DOJ. In a second request, the agencies ask the companies for more information, and it’s among these deals that those that get flagged as a problem come from.
In 2023, 28 were flagged, 16 by the FTC and 12 by DOJ. Of these, 10 under FTC review were either abandoned or restructured, and 10 under DOJ review were either abandoned or restructured. That left six under FTC review and two under DOJ review that ended up being contested in court or settled.
In one of the most high-profile of these contested cases, the FTC filed a complaint against Microsoft’s $69 billion proposed acquisition of video game company Activision, but the agency lost its bid to block the deal in federal court. An appeal is pending.
In another case, the FTC filed a complaint against Intercontinental Exchange to stop its $13.1 billion acquisition of Black Knight. Both companies provide mortgage origination and servicing systems. In this case, the agency secured a consent order to force Black Knight to sell part of its business to another company to get the deal through.
In most of the flagged deals, companies elected not to fight.
Steel manufacturer Beteler, for example, walked away from a proposed $460 million deal by Tenaris after DOJ said the deal could harm the market for seamless tubing and production casing, which are used in pipes for oil and gas extraction.
And nuclear power plant operator Vistra agreed to sell one of its power plants in Ohio to obtain DOJ approval of its proposed acquisition of Energy Harbor, another nuclear plant operator. In this case, the Federal Energy Regulatory Commission had raised concerns that the deal would lead to an increase in wholesale electricity prices in parts of Ohio.
In addition to the big drop in submissions from 2021 and 2022, the filings last year were notable for deal sizes. A quarter of the deals were valued at $1 billion or more, compared to about 20% in 2022 and 17% in 2021. That’s “continuing a trend in recent years towards larger and more complex transactions,” the report says.
