United States
Answer ... If the Hart-Scott-Rodino Act thresholds are met, notification under the act is mandatory. However, the notification requirements do not apply to:
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the acquisition of non-voting securities;
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certain acquisitions of voting securities ‘solely for the purpose of investment’;
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the acquisition of goods or realty in the ordinary course of business;
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certain acquisitions that require the prior approval of another federal agency;
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stock dividends and splits;
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certain acquisitions by securities underwriters, creditors, insurers and institutional investors; and
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certain financing transactions where the acquiring person contributes only cash to a non-corporate entity and will no longer control the entity after it realises its preferred return.
United States
Answer ... Yes. A party (or both parties) can always approach the agencies prior to formal notification, provided, that the merger or acquisition agreement permits that pre-filing approach. The value of doing so depends in large part on a substantive assessment of the transaction. A relatively simple transaction with limited product or geographic overlap will not likely warrant such a call, and even a more complex transaction might warrant caution if the parties believe the agencies will come to the right conclusion during their initial 30-day review and allow the transaction to close. On the other hand, a deal with obvious complexities that may very well result in an extensive ‘second request’ for information may merit some attention upfront not only to alert the agencies, but also to start the process of educating the staff lawyers and economists involved on the benefits of the proposed transaction and why those outweigh any potential adverse impact.
Remember also that in the United States, merger control filings are made with both the Antitrust Division of the Department of Justice (DOJ) and the Federal Trade Commission (FTC), and the initial 30-day waiting period clock (15 days for cash tenders and bankruptcy acquisitions) does not start running until both agencies receive complete notification forms. (For that reason, it is customary to file with both agencies simultaneously.) If it is unclear which agency will ultimately gain clearance to review the transaction and which particular section within that agency will conduct the investigation, it may very well be premature to attempt to discuss the transaction in advance of any filing. However, some industries have a long history of being cleared to either the DOJ or the FTC (and to a particular section within that agency), and an early pre-filing call to alert the section management and staff, and to start the process of educating them on the particular transaction, may well be fruitful.
United States
Answer ... Notification forms must be submitted by both the ‘acquiring person’ and the ‘acquired person’ in virtually all cases; ‘person’ is defined as the ‘ultimate parent entity’ that controls the buyer or sell, but is not controlled by any other person in the corporate structure.
United States
Answer ... There are three filing fee levels for smaller, mid-sized and larger transactions. The filing fee for each is a set amount that depends on thresholds that are pegged to the value of the transaction, as adjusted each April, at the start of the government’s new fiscal year, based on the US gross national product.
For the remainder of 2019 and the first three months of 2020, the filing fees and threshold are as follows: $45,000 filing fee for transactions valued above $90 million and less than $180 million; $125,000 for transactions valued at or above $180 million and less than $899.8 million; and $280,000 for transaction valued above $899.8 million.
- $45,000 filing fee for transactions valued above $90 million and less than $180 million;
- $125,000 for transactions valued at or above $180 million and less than $899.8 million; and
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$280,000 for transaction valued above $899.8 million.
Special rules apply to acquisitions of voting securities to simplify the notification and avoid redundant fees. So, for example, a party has one year from its notification to acquire enough shares to cross the value-of-transaction threshold in effect at the time of its notification. Once it does so, it may acquire additional shares at any time over the next five years up to the next threshold without any further notification. If the party fails to acquire sufficient shares to cross the threshold within one year of its notification, however, its filing will lapse and a new notification will be required if it subsequently acquires voting securities with a value above the then-applicable threshold.
The acquiring person is responsible for paying the filing fee; however, the parties can vary that by contract and it is not unusual for parties to a merger, for example, to split the filing fee evenly.
United States
Answer ... Notification in the United States consists of a standard form that requires the same basic information in virtually every reportable transaction:
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a short description of the deal and the parties’ corporate structure ;
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the identification of major shareholders; and
- identification of all overlapping product lines (by North American Industrial Code classification) and geographies.
In addition, the actual transaction documents must be submitted, along with certain documents called for in ‘Item 4’ of the Hart-Scott-Rodino notification form. The transaction documents may contain important terms that signal how the parties view the antitrust risks of their deal – for example, an asset purchase agreement may contain risk-sharing provisions, a break-up fee or specific divestiture obligations if an agency extends its investigation beyond the initial 30-day waiting period. Accordingly, the antitrust provisions may be of great interest to the agencies and parties should factor that into their negotiation and drafting process.
Item 4 documents are of even greater importance to the agencies, potentially. Item 4, in essence, mandates that the parties hand the agencies upfront any board or executive-level assessment of the competitive effects of the transaction – for example, any impact it will have on market shares, prices, output or other elements affecting the industry’s competitive dynamics, such as innovation efforts or synergy analyses. The precise definitions in Item 4 are more detailed, but the point is to allow the agencies to cut to the chase and see precisely how the parties (and, in particular, the acquirer) anticipate the transaction will affect its ability to compete. Does it anticipate having a high market share with the unilateral ability to increase prices and are those budgeted into its pro forma assessment of the transaction? Does it anticipate that industry concentration will increase to a level that makes price increases more likely or more effective? Or does it anticipate cost savings from more efficient manufacturing operations and, thus, the potential to grab market share by selling more at lower prices?
The Item 4 documents, like the transaction documents themselves, often provide the agencies with a very important ‘first impression’ of how the parties view the transaction. Companies should therefore take care in preparing potentially responsive documents to make sure they fully and accurately describe the transaction’s potential impact and do not leave misimpressions or inaccuracies or contain unwarranted or speculative opinions. Parties should take care to produce all Item 4 documents in their possession. The penalties for intentionally withholding responsive documents can be severe and can include significant dollar fines and ultimately jeopardize the parties’ ability to close their transaction.
The filing must also be accompanied by a sworn and notarized certificate (eg, from a corporate officer or director of a corporation), stating that the submission is complete.
United States
Answer ... There is no deadline for filing notification in the United States. If the parties close on their transaction without filing, however, they proceed at their peril, as both the DOJ and the FTC have unwound closed deals (‘unscrambled the eggs’) and imposed significant fines for failure to file a notifiable transaction. It is therefore recommended that the parties submit their notification forms within a reasonable period after signing a definitive agreement or binding letter of intent (eg, 10 business days).
Importantly, transactions below the notification thresholds are still subject to government review. The thresholds do not immunise transactions below the thresholds; they simply require the parties to affirmatively notify the agencies of deals above the thresholds. Both the DOJ and the FTC regularly investigate transactions below the thresholds and, at times, have unwound those deals too.
United States
Answer ... Yes. A transaction can be notified upon a contract or letter of intent if the party submitting the notification attests that it has a good-faith intention of completing the deal.
United States
Answer ... Yes. The purpose and design of the Hart-Scott-Rodino Act is to ensure that the government has an opportunity to review all notifiable transactions before closing and to assess whether they will likely have an adverse impact on competition.
United States
Answer ... The fact of a notification is not made public by the agencies, although it is frequently announced by the parties themselves. If the parties request early termination of the initial waiting period when submitting their Hart-Scott-Rodino form and the reviewing agency subsequently grants early termination during the initial 30-day waiting period, the fact that early termination has been granted is published in the Federal Register and online.
All the information submitted by the parties in notifying the agencies (the form itself and all attachments, such as the transaction agreements or the Item 4 documents) is confidential under regulations governing the review process conducted by either agency. Likewise, the parties can invoke confidentiality over anything submitted voluntarily or pursuant to request during the initial 30-day waiting period, or pursuant to subpoena if a ‘second request’ is issued.
As a result, the norm is that no information at all is public, unless the parties choose to make it so. Of course, if an investigation commences, the agencies necessarily gather documents and even testimony from other participants in the industry (competitors, customers and suppliers); and while the agencies are prohibited from disclosing any specific information provided by the parties to the transaction, those knowledgeable in the industry may, at times, be able to draw some broad inferences about the parties and/or the proposed transaction.