September 23, 2022

Antitrust: Sharing Competitively Sensitive Information in M&A

This Mintz blog provides some helpful insights on navigating the potential antitrust minefield associated with sharing competitively sensitive information with a potential merger partner.  The blog points out that antitrust regulators understand the need for due diligence & don’t view information sharing between competitors in this context as per se illegal. Instead, they take a holistic approach in which the scope of the information being exchanged, the purpose for its exchange, and the protections put in place to ensure that it is not misused prior to closing are all taken into account.  Here’s an excerpt from the blog’s discussion of how to mitigate antitrust risks when sharing information:

Be mindful of the stage of transaction negotiations. In the early stages, many firms may bid for the target. In these cases, sellers should consider sharing only general information on the target and reserving more detailed or competitively sensitive information for later in the process. Parties can wait until later-stage negotiations or an auction to assemble “clean teams” or utilize third-party consultants to undertake a “black box” analysis. Quite often, potential bidders/buyers have a very detailed information “wish list”; that list should be reviewed carefully with the seller’s antitrust counsel before responding or before anything is made available in a clean room.

Operational personnel may need to access information that is competitively sensitive to make important decisions on the transaction. As an example, if a substantial portion of the purchase price is allocable to the target’s innovative intellectual property, the buyer itself will want to get under the hood before it commits to the transaction. If so, access should be given as close as practical to signing, and thoughtful attention should be paid to the manner of disclosure. Presenters of this information should limit records and documentation as much as possible to insure that it is only the minimum information necessary to complete the objective. Again, the use of a third-party consultant is often appropriate here to stay on a solid antitrust footing.

The acquirer should consider where certain objectives can be met through personnel with no operations responsibility when seeking information to integrate customer information, pricing, and HR data into its IT systems — thereby avoiding problematic information exchange, such as in an IT integration. Aside from this, parties may be justified in adopting a pragmatic approach to the buyer’s access to the target’s competitively sensitive data on a need-to-know basis.

The blog notes that the parties can’t afford to relax restrictions on information exchanges as the closing draws near.  Instead, their businesses must be conducted as independent competitors until the deal actually closes.

John Jenkins