DealLawyers.com Blog

October 11, 2016

Heads Up! Immediate Change to HSR Threshold Calculation

This Goodwin Procter memo notes that last week, the FTC announced an immediate change in the way debt is addressed in calculating whether the HSR filing threshold as been crossed.  As a result of this change, that deal you thought was exempt from filing may no longer be.  Here’s an excerpt:

Under the HSR Act, a pre-closing filing may be required if the deal value – or the “size of transaction” – is more than $78.2 million. A basic principle has always been that only debt which is taken on by a buyer (or any entity that is controlled by the buyer, such as a newly formed acquisition vehicle) to finance a transaction is included in the size of transaction.

Until yesterday, the FTC was of the view that new debt which is taken on by the target to help finance a transaction would be specifically excluded from the size of transaction. The FTC announced on October 6th that this old rule is no longer applicable – and the change in the treatment of debt is effective immediately.

Effective October 7, 2016, all new debt – whether it is taken on by the buyer or the target – must be taken into account in determining whether the $78.2 million size of transaction test is met.

John Jenkins