No deal too small: navigating US and EU scrutiny of below-threshold deals

August 2025  |  SPECIAL REPORT: COMPETITION & ANTITRUST

Financier Worldwide Magazine

August 2025 Issue

Antitrust regulators in both the US and the European Union (EU) are paying closer attention to deals that do not meet traditional notification thresholds for pre-closing review. This increased focus stems from concerns that certain transactions, such as ‘serial acquisitions’ (a string of smaller purchases by one buyer) and ‘killer acquisitions’ (where established firms buy nascent competitors), might be harming competition and innovation without adequate review. While this signals a more complex landscape, businesses can navigate these waters with informed strategies and proactive risk management.

The US approach: leveraging broad powers and new guidelines

In the US, the Department of Justice and Federal Trade Commission (FTC) are utilising their existing powers under the Clayton and Sherman Acts to scrutinise transactions that fall below the Hart-Scott-Rodino (HSR) Act’s reporting thresholds. The 2023 Merger Guidelines, which the new agency leadership has confirmed remain in effect, highlight this approach and apply to all mergers, irrespective of HSR reportability.

An area that is attracting more scrutiny by US agencies is serial acquisitions strategies. Guideline 8 of the 2023 Merger Guidelines explicitly highlights that the agencies may examine the cumulative impact of multiple acquisitions by a single firm. This is particularly relevant for private equity (PE) firms, which have previously come under increased scrutiny for such ‘roll-up’ strategies. Underscoring this focus, the agencies issued a Request for Information in May 2024, seeking public input to identify serial acquisitions that may have harmed competition. The FTC’s action against US Anesthesia Partners and PE firm Welsh Carson, alleging an anticompetitive roll-up in Texas anaesthesiology practices, is a case in point. This resulted in a consent order under the existing administration with Welsh Carson that includes requirements for prior FTC notification for certain future acquisitions.

‘Killer acquisitions’ are another major concern for US enforcers, especially in innovative sectors like technology and pharmaceuticals. The 2023 Merger Guidelines address this through Guideline 4 (concerning the elimination of potential entrants) and Guideline 6 (regarding the entrenchment or extension of a dominant position). The FTC’s challenge to Sanofi’s proposed licensing deal with Maze Therapeutics for an early-stage drug candidate, which Sanofi ultimately abandoned, demonstrates a willingness to intervene even when innovation is at a nascent stage.

The evolving EU landscape: renewed focus and new tools

The EU is also adapting its approach, though its path involves navigating a more complex jurisdictional framework. A pivotal development is the Court of Justice of the European Union’s judgment in Illumina/Grail, which significantly clarified the application of article 22 of the EU Merger Regulation. The court ruled that a member state can only refer a transaction to the European Commission (EC) under article 22 if that member state itself has national jurisdiction to review the deal. This has led to an increased emphasis on national competition authorities (NCAs) and their ‘call-in’ powers, which permit review of transactions below standard thresholds if a potential impact on local competition is identified. The EC is encouraging the adoption and use of these powers, though their scope varies across member states, leading to a more diverse review environment.

The Digital Markets Act (DMA) introduces another dimension in the EU. The DMA requires designated “gatekeeper” platforms to inform the EC of all their intended acquisitions, irrespective of whether they meet traditional notification thresholds. This information is then disseminated to NCAs, potentially facilitating article 22 referrals if national jurisdiction (including through call-in powers) is established. While the DMA enhances transparency, its direct impact on initiating merger reviews is now closely linked to the post-Illumina/Grail interpretation of article 22. The EC is also looking at articles 101 and 102 of the Treaty on the Functioning of the European Union for ex-post challenges and is undertaking a review of its Merger Guidelines, expected to conclude in 2025, with a focus on innovation and digitalisation. The Lear Report on killer acquisitions in the pharmaceutical sector, for example, noted a detection gap for below-threshold deals and advocated for broader use of existing antitrust tools.

Practical strategies for mitigating antitrust risks

This evolving regulatory climate means businesses must adapt their M&A strategies. A number of key considerations are outlined below.

Comprehensive antitrust risk assessment. It is no longer sufficient to assume a transaction has less antitrust risk simply because it falls below HSR or EU/national notification thresholds. A substantive antitrust assessment is advisable for all deals.

Careful transaction structuring. Transaction agreements should address and allocate antitrust risk. This includes considering cooperation clauses and efforts standards. In the EU, be aware that a call-in or article 22 referral usually imposes a standstill obligation, which can affect deal timelines.

Internal document management. Internal communications, such as emails and strategic plans, can be persuasive evidence for regulators in assessing anticompetitive intent. Companies should ensure employees are aware of how to communicate appropriately and ensure that the procompetitive rationales for transactions are clearly documented. The expanded US HSR filing rules now also require the submission of more ordinary course business documents that discuss competition.

Data-driven economic analysis. Companies should invest in robust economic analysis early in the process. This can help to demonstrate that the transaction is unlikely to harm competition – for example by showing that the relevant market is broader than regulators might initially assume or that there are other competitive dynamics that will ensure a robust innovative environment.

Strategic engagement with authorities. For potentially sensitive below-threshold deals, companies should consider the possibility of informal consultations with antitrust agencies. While this requires careful evaluation, it can sometimes pre-empt more formal investigations. Parties should be prepared to respond to agency inquiries even for transactions that are not formally notifiable.

‘Fix-it-first’ remedies. If a transaction raises clear, but narrow, competition concerns, parties might consider proactively divesting the problematic assets before or concurrently with the main transaction. This ‘fix-it-first’ approach can sometimes pre-empt a lengthy and costly investigation.

Third-party advocacy. There are benefits to identifying and engaging with supportive third parties, such as customers, suppliers or industry groups, who can advocate for the transaction’s benefits to regulators. Their perspectives can provide a valuable counterpoint to any complaints from competitors.

Proactive public relations and government affairs. For high-stakes deals, companies should consider developing a public relations strategy to shape the public narrative around the pro-competitive benefits of the transaction. Engaging with government affairs professionals can also help in communicating with policymakers and regulators.

Stay updated on policy and enforcement trends. The regulatory environment is continuously changing. It is important to monitor updates to guidelines (such as the EC’s 2025 Merger Guidelines Review), legislative reforms (like new EU national call-in powers) and significant court decisions. Certain sectors, including technology, healthcare and pharmaceuticals, are facing particularly close scrutiny.

The bottom line: proactive compliance

Regulators on both sides of the Atlantic are sending a clear signal that no transaction with the potential to significantly lessen competition is entirely off-limits for review. The heightened focus on serial and killer acquisitions, coupled with evolving legal tools and assertive enforcement, necessitates a more vigilant and strategic approach to M&A. Companies that proactively assess risks and integrate robust compliance measures into their dealmaking processes will be better equipped to navigate this increasingly complex environment.

 

Hugh Hollman is a partner at Baker Botts LLP. He can be contacted on +1 (202) 639 1324 or by email: hugh.hollman@bakerbotts.com.

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BY

Hugh Hollman

Baker Botts LLP

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