Tips for achieving antitrust clearance in large cross-border M&A deals
September 2013 | SPOTLIGHT | MERGERS & ACQUISITIONS
Financier Worldwide Magazine
Large, cross-border M&A transactions often require that antitrust clearances be obtained in a number of jurisdictions before the deal may proceed. For the largest global M&A deals, it is not uncommon for parties to have to file notifications in more than a dozen jurisdictions around the world. These regulatory requirements raise a host of complex issues, and a prolonged review in multiple jurisdictions can be time consuming and costly, if not frustrating, for company officials eager to move forward with the deal. Indeed, a lengthy antitrust review in a single country – including where the parties have a relatively small presence – can add significant delay to the parties’ ability to close the entire transaction. Careful planning is thus critical in any large multi-jurisdictional transaction, especially in mergers that may raise substantive antitrust issues. Parties involved in these types of transactions, however, can take a number of steps to maximise the chances of obtaining antitrust clearance in a timely and efficient manner.
Consider antitrust implications early in the process. For deals involving parties with sales or operations in multiple jurisdictions, it is important to determine as early as possible the extent of merger notifications that are likely to be required. Many jurisdictions have ‘suspensory’ filing obligations, meaning that the parties must notify the proposed transaction to the local antitrust authority and observe a mandatory waiting period before the deal may close. In some jurisdictions, these suspensory filing obligations apply even if the parties do not compete or have minimal operations within the jurisdiction. As a result, it is critical to conduct an initial assessment of the jurisdictions in which the transaction may need to be notified. Also essential is conducting a preliminary risk assessment of the likelihood the transaction may raise competitive concerns that may lead to a detailed merger investigation or challenge. Experienced antitrust counsel should be involved as early as possible in these assessments, which will help inform the transaction timeline, negotiations of the transaction agreements, and the extent of antitrust impediments to completing the transaction. For example, a transaction that does not raise competitive concerns may receive clearance during the initial review period (which, in many jurisdictions, is 30 days or less), but a transaction that raises potential competitive concerns could be subjected to an extended review lasting six months or longer, a requirement to divest assets or agree to other commitments, or a challenge to the entire transaction.
Understand the nuances of the local review processes. After identifying the jurisdictions in which a transaction may need to be notified, parties should consider retaining local counsel in those jurisdictions. Although the review process is set by statute in many jurisdictions, there are often unwritten rules and customs that attorneys experienced in working with the local antitrust authority will understand. Knowledgeable local counsel assisting primary deal counsel can be a valuable asset and, at times, a key factor in obtaining prompt clearance or being subject to an extended review.
Develop a coordinated approach and consistent themes. If the transaction has the potential to raise competitive concerns, it is critical for the parties to develop a coordinated approach across jurisdictions and maintain consistent themes in filings and other communications with various regulatory authorities. This is particularly important because the antitrust authorities likely will seek a waiver from the parties allowing them to communicate with each other during the course of their investigations. Representations or arguments made to one authority are likely to be communicated to another authority. As a result, local market dynamics in each of the jurisdictions must be analysed to ensure that key arguments are accurate and consistent across jurisdictions. This approach typically requires parties to interview key business people and analyse key documents during the diligence process so that the key arguments in favour of the transaction across all jurisdictions can be developed. In addition, the timing of merger notification filings also should be considered up front. In some cases, parties may find it advantageous to prioritise or sequence merger notifications depending on the jurisdictions involved.
Be prepared. Once the merger review process has begun, parties should be prepared to respond to questions raised by the antitrust authorities quickly. This requires advance planning and working closely with antitrust counsel, as well as local counsel in each jurisdiction, to gather information the antitrust authorities may require both in the initial merger notification form and in subsequent informal or formal requests. This information typically includes documents discussing the transaction and the parties’ business plans, marketing plans, market share data, industry reports, customer information, win/loss reports, and sales data. To manage this process, it is often helpful to designate a key contact within each company that will be responsible for providing information responsive to each antitrust authority’s information request. Given that many jurisdictions have initial review periods of 30 days or less, responding quickly to information requests can mean the difference between early clearance or an extended review. Parties also should be prepared to attend in-person meetings with the authorities and to make senior company officials available to be interviewed by the authorities about the transaction.
Eliminate potential distractions. The regulatory review process also can be significantly delayed if the antitrust authority believes the parties may have engaged in other conduct, such as improper information sharing or ‘gun-jumping’. Although parties typically want to move forward with a deal as quickly as possible, the parties must take care not to share competitively sensitive information or take steps that could be perceived as integrating the businesses prior to obtaining regulatory clearances and consummating the transaction. Antitrust counsel should be involved in the diligence process and review any merger agreement covenants governing the target’s conduct of business between signing and closing. All integration planning should be conducted with the input of counsel, and agendas should be prepared and approved by counsel before integration meetings are held involving both parties. It also may be useful to establish ‘clean teams’ involving third parties (such as industry consultants) or company personnel that do not have responsibility for sales, marketing, or pricing for both the diligence review and integration planning processes.
Consider the end game. Lastly – and perhaps most importantly – if the transaction is likely to require a remedy to proceed (i.e., the transaction is unlikely to obtain antitrust clearance unless the parties divest assets or take other action to resolve the anticompetitive harm resulting from the transaction), parties should consider remedy options before signing the merger agreement. Finding the appropriate scope of divestiture assets or divestiture buyers that will satisfy multiple antitrust authorities across jurisdictions can be complex and difficult, especially where the products at issue do not involve an entire standalone business. Moreover, because certain antitrust authorities may require parties to identify a buyer and negotiate a divestiture agreement before granting clearance, remedies designed to resolve concerns in a number of jurisdictions will need careful planning and coordination.
Although this article provides just a few tips, parties that consider the antitrust implications of a large, cross-border M&A transaction early on in the process can better position themselves to maximise the chances of timely and efficient antitrust clearance and lessen the risk of any unexpected ‘surprises’ that may delay or even derail a transaction.
Jeff White and Brianne Kucerik are antitrust associates at Weil, Gotshal & Manges LLP. Mr White can be contacted on +1 (202) 682 7059 or by email: email@example.com. Ms Kucerik can be contacted on +1 (202) 682 7034 or by email: firstname.lastname@example.org.
© Financier Worldwide
Jeff White and Brianne Kucerik
Weil, Gotshal & Manges LLP