Build more time into your merger agreements because under the federal government’s aggressive antitrust stance you’ll need more time to get deals through, attorneys who specialize in mergers and antitrust law say. 

Not only is more documentation needed under the Hart-Scott-Rodino review process, but the chance the proposal goes into a second review is greater and so is the likelihood the government will try to block the merger, the specialists said. 

“It's important in [drafting contracts] to give the parties enough time to impose deadlines to make sure that they have enough time to get through the HSR process and potentially litigate with the government,” said David Brenneman, a partner in the Washington, D.C., office of Morgan, Lewis & Bockius.  

The Federal Trade Commission and the Department of Justice revised the HSR requirements in June and proposed new merger guidelines in July. The changes are part of the federal government’s stepped-up effort to curb mergers on antitrust grounds.  

Among other things, the government is looking more closely at how a deal would impact labor markets, board leadership, data consolidation and market concentration. 

Heavy documentation

Companies can expect to file almost as much information under the HSR review process that in the past they only had to file if the proposal was flagged for second review. That means deals will require more upfront work even if they end up sailing through the process. 

“If I’m a general counsel, here’s what I am going to do,” said Michael Keeley, a partner in the Washington, D.C., office of Axinn, Veltrop & Harkrider. “Whether I do a lot of mergers, or I just think that it's possible that my company might want to do one sometime soon, it's important to start getting ready to collect the information that's required to do an HSR form,” he said. 

The FTC and DOJ have said in their proposed merger guidelines they’re going to use a 30% market concentration threshold for blocking a deal. That’s lower than what courts have traditionally applied, opening the door for companies to challenge the government if the deal is blocked. But companies have to be prepared to make the investment in time and build that extended period into the contract. 

“It remains to be seen how the courts will view the [30% threshold for] creating a presumption of anti-competitiveness,” said Carl Hittinger, a partner in the Philadelphia, Pa., office of Baker Hostetler. 

In the courts, the application of antitrust laws hasn’t changed considerably over the last several years, so although the government is putting in place a lot of tools to investigate transactions, the risk that the government will win in litigation has not changed significantly, said Brenneman.  

Critics say the agencies have pushed legal and economic theories that run counter to precedents. That’s contributed to the government’s struggle in court. In the last two years, it’s lost several key cases, including to Microsoft in its battle to acquire gamemaker Activision Blizzard and to Meta in its effort to acquire health app company Within Unlimited. 

But the proposed guidelines suggest the government is prepared to double down on its effort. 

Eye on rollups

If you’re with an acquisitive company or if your company’s strategy includes acquisitions as part of a rollup, a proposed merger could meet resistance even if the deal by itself wouldn’t create an apparent anticompetitive impact; under the government’s focus, what’s important is the cumulative impact of the acquisition strategy. That puts a target on the back of rollups. 

When a merger is part of a series of acquisitions, Hittinger said, the government will examine the deal in the context of the whole series.  

“That’s something new,” he said. 

The FTC or DOJ could even try to undo a prior transaction on those grounds, even if it were previously approved, Hittinger said.

Because of that, in-house counsel should ask whether a deal is part of a rollup strategy, and if it is, whether it could be considered a tipping point from a competitiveness standpoint, said Brenneman. 

One deal on its own might not change anything, he said, but if it’s part of a strategy where companies are being purchased “one-by-one-by-one,” then one of the deals might be the point that tips the strategy into a government investigation.

Labor impact

On the labor front, the agencies will examine whether a merger substantially lessens competition for workers and affects their rights, which can put the focus on unionization efforts.  

If the deal would appear to make it more difficult for workers in one or both companies to unionize, that could increase the likelihood the government will flag the merger for a deeper look, Brenneman said.

No-poach and noncompete agreements are also potential trouble spots, Hittinger said. If your company is taking on no-poach or noncompete agreements in the merger, that could be seen as tying up workers in the workplace, raising another flag.  

If regulators don't think those agreements are legal, the merger review could very well result in a lawsuit. If that happens, Hittinger said, “forget the merger; you can now be in another world” dealing with labor issues.

The 60-day comment period on the proposed merger guidelines ends Sept. 18. More than 5,000 members of the public have contributed feedback, according to the agencies.  

While the guidelines are still in the comment period and haven’t been finalized, they shouldn’t be disregarded, Brenneman said. 

They put on paper the policies the regulators have been pushing over the last couple of years, Keeley said.