October 15, 2016

Antitrust Reverse Termination Fees--2016 Q3 Update

This post updates the public deal antitrust reverse termination fee database through September 30, 2016.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1010 strategic negotiated transactions announced between January 1, 2005, and September 30, 2016. Of these, 118 transactions, or 11.7% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the sample was 5.5% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.6% of the transaction value. The fees ranged from a low of 2.3% to a high of 21.0%.

The chart below gives the frequency of antitrust reverse breakup fees across the sample set.

Frequency of Antitrust Reverse Breakup Fees

NB: The percentage intervals on the horizontal axis are not of equal size.

Since January 1, 2005, of the 107 transactions with an antitrust reverse termination fee for which the antitrust reviews have been completed, 75, or about 70%, were cleared without any antitrust challenge. Two transactions (AT&T/T-Mobile and Halliburton/Baker Hughes) were terminated in the course of litigation with the U.S. antitrust enforcement agencies, two transactions (Sysco/US Foods and Staples/Office Depot) were terminated after the FTC obtained a preliminary injunction in federal district court, and 28 tranactions were subject to a DOJ or FTC consent order.

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2005, through September 30, 2016)

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July 14, 2016

Antitrust Reverse Termination Fees--2016 Q2 Update

This post updates the public deal antitrust reverse termination fee database through June 30, 2016.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 978 strategic negotiated transactions announced between January 1, 2005, and June 30, 2016. Of these, 114 transactions, or 11.7% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the sample was 5.5% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.6% of the transaction value.

If we just look at the deals announced since January 1, 2011, the mean was 5.7% and the median was 5.1%, suggesting a slightly higher fee over the last five years. Since January 1, 2011, the fees ranged from a low of 2.3% to a high of 21.0%. The chart below gives the frequency of antitrust reverse breakup fees since January 1, 2011.

Frequency of Antitrust Reverse Breakup Fees

NB: The percentage intervals on the horizontal axis are not of equal size.

Since January 1, 2011, of the 48 transactions with an antitrust reverse termination fee for which the antitrust reviews have been completed, 34, or about 71%, were cleared without any antitrust challenge. Two transactions (AT&T/T-Mobile and Halliburton/Baker Hughes) were terminated in the course of litigation with the U.S. antitrust enforcement agencies, two (Sysco/US Foods and Staples/Office Depot) were terminated after the FTC obtained a preliminary injunction in federal district court, and ten were subject to a DOJ or FTC consent order.

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2005 through June 30, 2016)

Categories: US Mergers

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July 14, 2016

ValueAct Settles for Record HSR Fine

Activist investor ValueAct Capital agreed to pay an $11 million fine and also agreed to injunctive relief to settle the DOJ’s allegations that it violated the HSR Act in connection with its acquisition of over $2.5 billion of voting securities of Halliburton and Baker Hughes after the two companies announced their (now abandoned) merger in 2014. ValueAct initially contested the DOJ’s claim, arguing that its actions were exempt under the HSR Investment-Only exemption. With this record settlement, the DOJ and FTC once again affirmed that they will read this HSR exemption very narrowly. Investors must tread carefully when relying on the exemption as it applies only when the investor’s sole intent in acquiring the shares is passive.

Categories: US Mergers

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