March 16, 2018
Antitrust: Mitigating the Risk of Post-Closing Challenges
Earlier this year, I blogged about recent post-closing lawsuits brought by the DOJ & FTC alleging that the deals in question violated the antitrust laws. This Perkins Coie memo notes the rise in post-closing challenges to deals that flew under the HSR Act’s radar, and provides some tips on how companies can mitigate the risk of being on the receiving end of a lawsuit.
The memo lists several actions that buyers should take to mitigate the risk of a post-closing challenge to a deal – and this excerpt addresses the most important of those actions:
Finally, and most importantly, cultivate positive relationships with the acquired firm’s key customers. Post-closing investigations are typically a response to customer complaints. Because non-reportable deals are often signed and closed simultaneously, customers learn about them only after closing. Their response is the single most important factor in whether the government opens an investigation.
To prevail in a post-closing challenge, the government need not prove the buyer increased its prices after closing. Nevertheless, if a buyer increases those prices,it increases the likelihood of customer complaints and materially strengthens the government’s case if it decides to challenge the deal. Buyers should think long and hard before they do anything likely to turn long-standing customers into government informants.
Actions to help guard against possible post-closing challenges are essential. Post-closing investigations & lawsuits are lengthy, costly and – since they’re usually prompted by complaints from angry customers – usually result in a victory for the government.
– John Jenkins