DealLawyers.com Blog

Earlier this month, the CLS Blue Sky Blog ran a post from Paul Weiss discussing ways the DOJ and FTC’s proposed merger guidelines will impact private-equity-sponsored acquisitions. While the post notes that other guidelines could be relevant to specific transactions depending on the facts, it highlights two guidelines with particular significance for private-equity-sponsored deals, including the guideline on serial acquisitions and the guideline on partial ownership acquisitions. Here’s the description of the draft guideline on serial acquisitions:

The draft guidelines state that the agencies may investigate whether a series of “acquisitions in the same or related business lines” may violate the law “even if no single acquisition on its own would risk substantially lessening competition or tending to create a monopoly.” In this analysis, the DOJ and FTC “will consider individual acquisitions in light of the cumulative effect of related patterns or business strategies.”

Notably, the serial acquisitions guideline does not appear to be a standalone basis for challenging a transaction. Rather, “[w]here one or both of the merging parties has engaged in a pattern or strategy of pursuing consolidation through acquisition, the Agencies will examine the impact of the cumulative strategy under any of the other Guidelines to determine if that strategy may substantially lessen competition or tend to create a monopoly.” […]

One significant practical effect of the new serial acquisitions guideline may be to substantially increase the burden on parties to a merger investigation involving such an acquisition. The proposed guidelines call for an expansive investigation in which the agencies say that they may look into “the actual acquisition practices (consummated or not) of the firm, both in the markets at issue and in other markets, to reveal any overall strategic approach to serial acquisitions.” (Emphasis added.) Therefore, companies may be faced with requests to produce material related to prior acquisitions – or at least “acquisition practices” – in markets that have nothing to do with the deal being investigated. This could be in addition to significantly expanded requests to produce material related to prior deals in the relevant market. (Currently, the agencies typically limit the requirement to produce material related to past acquisitions to a few years.)

– Meredith Ervine