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

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

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)

Antitrust Reverse Termination Fees

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

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

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