Category 'US Mergers'

November 6, 2014

Sample Antitrust-Related Provisions in M&A Agreements--2014 Edition

This note provides a much expanded sample of antitrust-related provisons in M&A agreements over the one we posted in April 2013. As before, the sample provisions have been taken (sometimes with a little modification) from actual M&A agreements. 

This sample will give you with a good idea of the wide variety of provisions parties have used in dealing with 

  • the jurisdictions and the timing where merger control filings are to be made;
  • the level of cooperation the parties owe each other in defending the transaction;
  • who controls the defense strategy
  • the antitrust-related conditions precedent
  • whether the parties are obligated to litigate an adverse agency decision and, if so, who controls the litigation strategy and how long will the parties have to litigate before the drop-dead date;
  • whether the buyer is obligated to "fix" any antitrust concerns through consent decree relief and how far this obligations goes;
  • whether an antitrust reverse termination fee is to be paid in the event of a failure of the antitrust conditions; and
  • the conditions under which the agreement may be terminated or the drop-dead date extended

Of course, every deal stands on its own. The language that has been used in one deal may not be appropriate for another deal, and inclusion of a provision in this sample does not constitute an endorsement of the language. Still, I find the collection helpful in drafting and negotiating the antitrust provisions in M&A agreements.
 

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Categories: EU Mergers, US Mergers

0 Comments

May 14, 2014

Antitrust Reverse Termination Fees--2014 Update

This post updates one we did over a year ago analyzing antitrust reverse breakup fees in public deals since January 1, 2005.

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 760 strategic negotiated transactions announced between January 1, 2005, and May 1, 2014. Of these, 79 transactions, or about 9.8% 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 5.8% 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 4.3% of the transaction value.

Significantly, of the 72 completed transactions with an antitrust reverse termination fee, 50 were cleared without any antitrust challenge. One transaction (AT&T/T-Mobile) was terminated in the course of litigation with the Antitrust Division, 19 were subject to only a DOJ or FTC consent order, one (Boston Scientific/Guidant) was subject to both an FTC consent order and EC undertakings, and one (Federated/May) was subject to an assurance agreement with a group of state attorneys general.

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2005 through May 1, 2014)

Categories: EU Mergers, US Mergers

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March 6, 2014

Reasonable Best Efforts: Cold Comfort to Sellers

New York M&A partner Peter Lyons, antitrust partner Beau Buffier and M&A associate Tammara Fort, along with J. Reuben Clark Law School (Brigham Young University) associate professor Matthew Jennejohn, published an article, "Reasonable Best Efforts: Cold Comfort to Sellers,” in the January 2014 issue of The M&A Lawyer.

The article examines a preliminary bench ruling from the Delaware Chancery Court in the matter of Cooper Tire & Rubber Company v. Apollo (Mauritius) Holdings Pvt. Ltd., et al, which refused Cooper Tire’s assertion that Apollo has failed to use its reasonable best efforts to complete negotiations with Cooper Tire’s labor union and close their then-pending merger. According to the authors, the case “provides a rare Delaware court interpretation of the actions required to satisfy the “reasonable best efforts” standard that has become commonplace in antitrust covenants in merger agreements.” They add that, based on Cooper, “a reasonable best efforts standard alone provides cold comfort to sellers seeking deal certainty in circumstances where there is a meaningful likelihood that the antitrust authorities will require economic concessions in order to approve a transaction.” In the end, according to the authors, the lesson of Cooper is clear: “if a strategic buyer comes offering assurances of reasonable best efforts without any specifics, let the seller beware.”

Categories: EU Mergers, US Mergers

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January 23, 2014

FTC Announces 2014 HSR Act Reporting Thresholds

Every year, the dollar thresholds under the HSR Act are adjusted for changes in the gross national product. The new thresholds will take effect on February 24, 2014.

Most importantly, the size-of-transaction threshold will increase from the current $70.9 million to $75.9 million, so that once effective, acquisitions of voting stock or assets valued at more than $75.9 million may be reportable.

For more information on the revised thresholds, click here.
For the text of the FTC's Federal Register notice, click here.

Kelly Karapetyan
+1.212.848.8636
kelly.karapetyan@shearman.com

 

Resources:
The Hart-Scott-Rodino Act
The HSR Act form and instructions
FTC HSR web page

Categories: US Mergers

0 Comments

January 13, 2014

Bazaarvoice Shows Courts’ and Agencies’ Orthodox Approach to Mergers in High-Tech Markets

On January 12, 2014, the District Court for the Northern District of California found that Bazaarvoice’s June 12, 2012 acquisition of PowerReviews violated Section 7 of the Clayton Act, which prohibits any merger that may substantially lessen competition. The decision demonstrates that agencies and courts will continue to apply traditional methods of merger analysis based on market definition and market concentration even when customers have not opposed the transaction and the overlapping revenues involved appear to be small. The Court rejected claims that Google, Amazon, Facebook and other e-Commerce giants were competitive constraints and placed particular weight on the parties’ internal documents, once again showing how difficult it can be for merging parties to impeach their own unhelpful documents.

Click here for an S&S client memorandum analyzing the case.  

 

Resources:
United States v. Bazaarvoice, Inc., Memorandum Op., No. 13-cv-00133 (N.D. Cal. Jan. 8, 2014)

Categories: US Mergers

0 Comments

April 27, 2013

Sample Antitrust-Related Provisions in M&A Agreements--2013 Edition

This note provides a much expanded sample of antitrust-related provisons in M&A agreements over the one we posted in August 2012. As before, the sample provisions have been taken (sometimes with a little modification) from actual M&A agreements. 

This sample will give you with a good idea of the wide variety of provisions parties have used in dealing with 

  • the jurisdictions and the timing where merger control filings are to be made;
  • the level of cooperation the parties owe each other in defending the transaction;
  • who controls the defense strategy
  • the antitrust-related conditions precedent
  • whether the parties are obligated to litigate an adverse agency decision and, if so, who controls the litigation strategy and how long will the parties have to litigate before the drop-dead date;
  • whether the buyer is obligated to "fix" any antitrust concerns through consent decree relief and how far this obligations goes;
  • whether an antitrust reverse termination fee is to be paid in the event of a failure of the antitrust conditions; and
  • the conditions under which the agreement may be terminated or the drop-dead date extended

Of course, every deal stands on its own. The language that has been used in one deal may not be appropriate for another deal, and inclusion of a provision in this sample does not constitute an endorsement of the language. Still, I find the collection helpful in drafting and negotiating the antitrust provisions in M&A agreements.
 

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Categories: EU Mergers, US Mergers

0 Comments

February 1, 2013

New 2013 HSR Reporting Thresholds

Every year, the dollar thresholds under the HSR Act are adjusted for changes in the gross national product. The new thresholds were published in the Federal Register on January 11, 2013, and will go into effect on February 11, 2013.

Most importantly, the size-of-transaction threshold will increase from the current $68.2 million to $70.9 million, so that once effective, acquisitions of voting stock or assets valued at more than $70.9 million may be reportable.

For more information on the revised thresholds, click here.
For the text of the FTC's Federal Register notice, click here.

Kelly Karapetyan
+1.212.848.8636
kelly.karapetyan@shearman.com

 

Resources:
The Hart-Scott-Rodino Act
The HSR Act form and instructions
FTC HSR web page

Categories: US Mergers

0 Comments

November 30, 2012

Antitrust Reverse Termination Fees--November Update

In July, we posted our mid-year study and data spreadsheet on antitrust reverse termination fees in public deals announced from January 1, 2005, through June 30, 2012. Surprisingly, there were no deals with antitrust reverse termination fees that satisfied our screening criteria in the last seven months of that period.

Since that time, however, we have added four new deals to the spreadsheet:

  • Thomson Reuters/FX Alliance ($622.9 million, with a 2.3% termination fee of $14.5 million)
  • DigitalGlobe/Geoeye ($466.6 million, with a 4.3% termination fee of $20.0 million)
  • Aetna/Coventry Health Care ($5.63 billion, with a 3.0% termination fee of $167.5 million)
  • McKesson/PSS World Medical ($1.46 billion, with a 3.4% termination fee of $50 million)

With the new additions, there were 62 deals with antitrust reverse termination fees over the period January 1, 2005, through November 30, 2012. These fees have a median of 3.9% and a mean of 5.6%. The higher mean is due to some large outliers, including:

  • Google/Motorola Mobility ($11.9 billion, with a 21% termination fee of $2.5 billion)
  • Smithfield Foods/Premium Standard Farms ($674 million, with a 14.8% termination fee of $100 million)
  • Monsanto/Delta and Pine ($1.5 billion, with a 39.8% termination fee of $600 million)
  • Seagate/Maxtor ($1.9 billion, with a 15.8% termination fee of $300 million)

With the disclosure by AT&T that the total outlay of the antitrust reverse termination fee it paid in its deal with T-Mobile was $4.2 billion (and not the $6.0 billion often reported), the termination fee as a percentage of the $39 billion deal was 10.8%. This is the sixth highest percentage fee in our sample.


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

Since January 1, 2005, only one reverse antitrust termination fee has been triggered (AT&T/T-Mobile), although consent decrees were entered in 15 of the 59 nonpending transactions.

For the updated data spreadsheet, click here.

 

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
Antitrust Reverse Termination Fees--Data Set (January 1, 2005 through November 30, 2012)

Categories: US Mergers

0 Comments

August 28, 2012

Sample Antitrust-Related Provisions in M&A Agreements--2012 Expanded Edition

This note provides a much expanded sample of antitrust-related provisons in M&A agreements over the one we posted last year. As before, the sample provisions have been taken (sometimes with a little modification) from actual M&A agreements. 

This sample will give you with a good idea of the wide variety of provisions parties have used in dealing with 

  • the jurisdictions and the timing where merger control filings are to be made;
  • the level of cooperation the parties owe each other in defending the transaction;
  • who controls the defense strategy
  • the antitrust-related conditions precedent
  • whether the parties are obligated to litigate an adverse agency decision and, if so, who controls the litigation strategy and how long will the parties have to litigate before the drop-dead date;
  • whether the buyer is obligated to "fix" any antitrust concerns through consent decree relief and how far this obligations goes;
  • whether an antitrust reverse termination fee is to be paid in the event of a failure of the antitrust conditions; and
  • the conditions under which the agreement may be terminated or the drop-dead date extended

Of course, every deal stands on its own. The language that has been used in one deal may not be appropriate for another deal, and inclusion of a provision in this sample does not constitute an endorsement of the language. Still, I find the collection helpful in drafting and negotiating the antitrust provisions in M&A agreements.
 

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Categories: EU Mergers, US Mergers

0 Comments

07/20/2012

Antitrust Reverse Termination Fees--2012 Mid-Year Update

This post updates one we did a year ago analyzing antitrust reverse breakup fees in public deals since January 1, 2005. In two related notes, we discussed various means of allocating antitrust risk in an acquisition agreement and provided some sample risk-shifting provisions that have been used in actual deals. We will be updating those posts shortly.

This post examines a particular means of allocating antitrust risk: the antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee. An antitrust reverse termination 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.

In a sample of 633 strategic negotiated transactions announced between January 1, 2005, and June 30, 2012, 58 transactions, or about 9.2% 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 5.8% of the transaction value, although since several high percentage fees skewed the distribution to the high end, a better indicator may be the median, which was 3.9% of the transaction value.

Significantly, there was an antitrust intervention in only only 16 of the 58 transactions since January 1, 2005, with antitrust reverse termination fees. One transaction (AT&T/T-Mobile) was terminated in the course of litigation with the Antitrust Division, 13 were subject to only a DOJ or FTC consent order, one (Boston Scientific/Guidant) was subject to both an FTC consent order and EC undertakings, and one (Federated/May) was subject to an assurance agreement with a group of state attorneys general.

The note begins with an example of an antitrust reverse termination fee provision found in the recent Cardinal Health/Kinray stock purchase agreement. This is a fairly typical provision, although, not surprisingly, the ARTF provisions vary considerably from deal to deal. The middle sections explain how we created our sample set, analyze the occurrence and the magnitudes of antitrust reverse termination fees in the sample, and look at a few sample outliers. Finally, we look at the few deals in which the antitrust conditions failed and the antitrust reverse termination fee was paid.

For the full pdf version of the full note, click here. For the data spreadsheet, click here.

NB:  Surprisingly, there were no deals with antitrust reverse termination fees that satisfied our screening criteria from November 12, 2011, to June 30, 2012. There have been several since then, and we have updated the spreadsheet below through November 30, 2012.

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
Antitrust Reverse Termination Fees--2012 Mid-Year Update
Antitrust Reverse Termination Fees--Data Set (January 1, 2005 through November 30, 2012)

Categories: EU Mergers, US Mergers

0 Comments

January 27, 2012

New 2012 HSR Reporting Thresholds

Every year, the dollar thresholds under the HSR Act are adjusted for changes in the gross national product. The new thresholds were published in the Federal Register on January 27, 2012 and will go into effect on February 27, 2012.

Most importantly, the size-of-transaction threshold will increase from the current $66.0 million to $68.2 million, so that once effective, acquisitions of voting stock or assets valued at more than $68.2 million may be reportable.

For more information on the revised thresholds, click here.
For the text of the FTC's Federal Register notice, click here.


Kelly Karapetyan
+1.212.848.8636
kelly.karapetyan@shearman.com

Resources:
The Hart-Scott-Rodino Act
The HSR Act form and instructions
FTC HSR web page

Categories: US Mergers

0 Comments

October 15, 2011

Antitrust Reverse Termination Fees: 3Q Update

NOTE: An updated version of this post was published on July 20, 2012, and may be found here.


 

In July, we posted a study and a data spreadsheet on antitrust reverse termination fees in public deals announced from January 1, 2005, through May 31, 2011. Since that time through the end of September, we have added two new deals to the spreadsheet:

Google/Motorola Mobility ($11.9 billion, with a 21% termination fee of $2.5 billion)
Honeywell/EMS Technologies ($510 million, with a 3.8% termination fee of $19.6 million)

With the new additions, there were 57 deals with antitrust reverse termination fees over the period January 1, 2005, through September 30, 2011. These fees have a median of 3.9% and a mean of 5.8%. The higher mean is due to some large outliers, including:

AT&T/T-Mobile ($39 billion, with a 15.4% breakup fee valued at $6 billion)
Google/Motorola Mobility ($11.9 billion, with a 21% termination fee of $2.5 billion)
Smithfield Foods/Premium Standard Farms ($674 million, with a 14.8% termination fee of $100 million)
Monsanto/Delta and Pine ($1.5 billion, with a 39.8% termination fee of $600 million)
Seagate/Maxtor ($1.9 billion, with a 15.8% termination fee of $300 million)

 


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

Since January 1, 2005, no reverse antitrust termination fee has been triggered, although consent decrees were entered in 14 of the 52 nonpending transactions.

For the updated data spreadsheet, click here.

 

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
Antitrust Reverse Termination Fees--Data Set (January 1, 2005 through September 30, 2011)

Categories: US Mergers

0 Comments

September 20, 2011

Antitrust Standing Rules for Hostile Takeover Targets

In hostile tender offers, the target company may assert that its acquisition by an unwanted suitor would violate Section 7 of the Clayton Act and seek protection from a federal district court in the form of a preliminary and permanent injunction blocking the suitor from continuing with its offer. The putative antitrust violation may arise from a long-standing relationship in the marketplace of the suitor and the target, or the target may attempt to create an antitrust problem where none before existed by quickly acquiring new lines of business or new business locations that would be problematic for the offeror to acquire.

Serious antitrust problems that cannot be cured by divestiture or other means, while relatively rare, can end a hostile takeover.  But the prospect of being successful is not the only reason to commence an antitrust challenge. Even a target that has little hope of prevailing may have a strong incentive to bring an antitrust action against it suitor, since the prosecution of a merger antitrust action can provide the target with considerable time to pursue its other takeover defenses or to find a "white knight."

Courts have addressed these questions under the rubric of antitrust standing. The full note provides some background and summarizes the results by circuit, a mixed lot at best.

For the full pdf version of the full note, click here.

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

 

Categories: US Mergers

0 Comments

August 15, 2011

Agency Challenges to Non-HSR Reportable Transactions

We often hear that some deals are too small to be of interest to the Antitrust Division or the Federal Trade Commission, even if the deal is anticompetitive. More generally, there is a view that if a transaction is not reported to the antitrust agencies pursuant to the Hart-Scott-Rodino Act, the transaction is safe from challenge. Both views are mistaken.

Since January 1, 2001, the DOJ and FTC have challenged 24 non-HSR reportable transactions. Nineteen of these transactions fell below the minimum reporting threshold in effect at the time of the acquisition. The smallest of these transactions was $4.4 million. Of the five remaining transactions, three were covered by an HSR exemption, one did not involve the acquisition of voting securities or assets, and one had no public explanation.  Twenty of the transactions were already consummated at the time of the challenge, and four of the transactions were pending.

The FTC brought 15 challenges and the DOJ brought nine. The number of challenges has increased during the Obama administration, but not significantly so. Nineteen of the challenges ultimately settled, two were adjudicated on the merits in favor of the defendants, one was mooted (a bankruptcy bid failed), and two are still in litigation.  Eight of the challenges settled simultaneously with the filing of the challenge. Fifteen of the challenges involved active litigation, ranging from about one month to 41 months.

The full note contains a summary of each of the 24 challenges, including the products and services in issue, a brief description of the acquisition and the gravamen of the agency's complaint, the reason (if known) why the transaction was not HSR reportable, and the ultimate disposition of the challenge. The note also contains links to the agency's web page on the case, the complaint, and the proposed and final consent orders.

For the full pdf version of the full note, click here.

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

 

Categories: US Mergers

0 Comments

July 15, 2011

Antitrust Reverse Termination Fees

NOTE: An updated version of this post was published on July 20, 2012, and may be found here.

 

Categories: EU Mergers, US Mergers

0 Comments

February 24, 2011

Sample Antitrust Risk-Shifting Provisions in M&A Transactions

NOTE: An updated version of this post was published on August 28, 2012, and may be found here.

 

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Categories: EU Mergers, US Mergers

0 Comments

February 14, 2011

Antitrust Risks in M&A Transactions

Earlier this month, Steve Camahort, Lisl Dunlop, Mike Kennedy and I gave a CLE presentation in the Bay Area addressing the three aspects of dealing with M&A antitrust risks at the beginning of a deal:

  • Assessing the substantive risk
  • Predicting the possible reviewing agency demands for remedies
  • Allocating the antitrust risks in the purchase agreement
     

The deck we used is self-contained and may be viewed here.

Dale Collins
+1.212.848.412
dale.collins@shearman.com

 

Resources:
DOJ/FTC Horizontal Merger Guidelines (rev. Aug. 19, 2010)
DOJ/FTC Commentary on the Merger Guidelines (2006)
FTC Competition Enforcement Database
FTC Horizontal Merger Investigation Data, Fiscal Years 1996-2007
FTC Staff Statement on Negotiating Merger Remedies
FTC FAQs about Merger Consent Order Provisions
Strategic Deals Require Strategic Thinking: Antitrust Provisions to Consider in Negotiated Transactions
Examples of M&A antitrust risk-shifting provisions

Categories: EU Mergers, US Mergers

0 Comments

January 21, 2011

FTC Announces 2011 HSR Act Reporting Thresholds

Every year, the dollar thresholds under the HSR Act are adjusted for changes in the gross national product. Earlier today, the FTC announced that the new thresholds for 2011, which will become effective in late February or early March.

Most importantly, the size-of-transaction threshold will increase from the current $63.4 million to $66.0 million, so that once effective, acquisitions of voting stock or assets valued at more than $66.0 million may be reportable.

For more information on the revised thresholds, click here.
For the text of the FTC's Federal Register notice, click here.

UPDATE: The new thresholds were published in the Federal Register on January 25, 2011 and will go into effect on February 24, 2011.


Kelly Karapetyan
+1.212.848.8636
kelly.karapetyan@shearman.com

Resources:
The Hart-Scott-Rodino Act
The HSR Act form and instructions
Proposed changes to the HSR Act form
FTC HSR web page

Categories: US Mergers

0 Comments

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