November 14, 2019

Antitrust: Regulators Continue Aggressive Merger Review Posture

Dechert’s most recent quarterly review of merger investigations during the current year provides several data points supporting the view that companies are facing a more challenging environment when it comes to antitrust review of proposed acquisitions.  Here are some of the highlights:

– The Trump administration’s efforts to block mergers are at near record levels, with 5 significant investigations resulting in complaints in 2019 YTD. That’s on-pace with the Obama adminstration’s record of 7 complaints during 2015.
– The number of significant antitrust merger investigations is up, with 20 resolved in 2019 YTD compared to 15 for the same period in 2018.
– The average duration of significant investigations continues its climb, reaching 12.6 months for 2019 YTD, up from 9.8 months for the same period in 2018.
– Merger review reforms at DOJ are having an impact, with DOJ significant investigations taking 3.9 months less on average than FTC significant investigations.

Companies expecting to confront significant antitrust issues may delay HSR filings or “pull & refile” in the hope that providing regulators more time at the front end will avoid or streamline a second request. The memo says that this isn’t usually a successful strategy:

Despite the increasing use of this pre-second request strategy over the past several years, merging companies might not be making a wise investment of their time if their goal is to achieve shorter overall investigations. For 2019 YTD, when companies subject to a significant investigation allotted more than the median time (73 days) for pre-second request discussions, the average duration of the significant investigation was 14.2 months. By contrast, merging companies allotting less than the median time endured significant investigations lasting an average of 10.9 months. DAMITT shows a similar trend for the 2011–2018 period.

The memo also says that U.S. regulators’ insistence on identification of upfront buyers as a condition to approving a deal based on divestitures has become nearly a universal practice. During the first 3 quarters of 2019, 80% of divestiture consents requiring upfront buyers. For the rolling 12 months ended Q3 2019, 88% of consents required an upfront buyer, compared to 73% of consents requiring an upfront buyer in the rolling 12 months ended Q3 2018.

John Jenkins