Antitrust regulators recognize that companies considering an M&A transaction have a legitimate need to share detailed business information during the due diligence and negotiation process. But information about prices, costs, strategies and certain other matters may be competitively sensitive – and “oversharing” can get companies into hot water with the DOJ & FTC.
In order to help companies stay onside, the FTC recently blogged guidance – I love that they blog guidance – about how to avoid potential problems with information sharing during a transaction. This excerpt addresses setting up and managing the information sharing process:
Antitrust counsel can undertake several steps to help prevent problematic information sharing. First, companies should be reminded that designing, maintaining, and auditing effective protocols to prevent anticompetitive information sharing are extremely important during pre-merger negotiations and due diligence. If competitively sensitive information must be exchanged for diligence and integration planning purposes, parties should employ third-party consultants, clean teams, and other safeguards that limit the dissemination and use of that information within the parties’ businesses. Clean teams should not include any personnel responsible for competitive planning, pricing, or strategy.
Second, antitrust counsel should ensure that merging parties follow whatever protocols they establish. Merging parties’ adherence to established protocols should be monitored with an eye towards identifying potentially problematic information sharing or sloppy information sharing practices.
Finally, if antitrust counsel discovers any problematic document sharing or coordination of business activities between the merging parties during the HSR waiting period, counsel should instruct the parties to stop the activity or document exchange immediately (because that is what the FTC staff will insist upon). For any problematic documentary information exchange uncovered, antitrust counsel should determine whether and how the information was used as well as the extent of the information exchanged, and would be well advised to inform FTC staff about this before staff discovers the documents in the merger investigation.
The FTC also provides suggestions that both providers and recipients of information as to how they can properly safeguard competitively sensitive information shared during due diligence and negotiation. It also reminds parties that the issues about information sharing don’t end until the deal is closed.
– John Jenkins