DealLawyers.com Blog

Receiving an HSR Second Request from the DOJ or FTC on a pending transaction has always been kind of a deflating experience. Even in the more M&A friendly environment of years past, a Second Request added a significant amount of work, expense, and uncertainty to the deal process.  According to a recent Legal Dive article, in the current environment, Second Requests aren’t just deflating – they’re frequently deal-killing. Here’s an excerpt summarizing the article’s key takeaways:

Almost three-quarters of proposed mergers that are subject to a second request under the federal government’s pre-merger review process are voluntarily restructured or abandoned, a report released a few weeks ago by federal antitrust regulators shows.

That rate of abandonment or restructuring is substantially higher than in the previous administration and during the second term of the Obama administration, according to the report from the Federal Trade Commission and the Department of Justice. The data covers the first two fiscal years of the Biden administration.

A drop in the two agencies’ efforts to negotiate settlements with companies might be behind the increase in abandonments and restructurings. The DOJ has entered into only four settlements and the FTC only one during the period. “Perhaps because formal settlements with the agencies are an unlikely outcome, there has been a recent uptick in parties taking matters into their own hands,” an analysis by Morgan Lewis says.

The statistics on deal abandonments & restructurings contained in Morgan Lewis’s analysis are pretty eye-popping – the firm found that “recent data suggests that over the past year or two, roughly 35–45% of all transactions in which a Second Request has been issued now end in abandonment as a result of an antitrust investigation prior to litigation, and even more are restructured.”

– John Jenkins