When two companies propose a merger, there are a lot of things that need to fall into place to make the deal successful. Aside from the business, financial and logistical aspects of the merger, there are various legal issues that must be addressed. This includes submitting the merger to the scrutiny of federal regulators.
The Federal Trade Commission is the primary agency companies deal with in the merger review process, though the Department of Justice also sometimes handles merger reviews as well. There are various steps to this process, beginning with the filing of a notice of the proposed merger, moving on to obtaining clearance to one antitrust agency (either the FTC or the DOJ), going through a waiting period, and responding to any additional requests for information. If all goes well, the waiting period expires with all objections resolved and the companies are free to close the deal.
The primary concern for the government, of course, is the effect the merger will have on market competition. Problems can and do come up in the review of merger agreements around the issue of competition, of course, though often these issues end up being resolved. In many cases, the reviewing agency and the companies seeking a merger resolve any issues with a consent agreement, but this doesn’t always happen. In some cases, companies will abandon their plans for merger when they learn that the reviewing agency is likely to challenge the merger.
Companies that run into real challenges in the review process and still want to push forward often get hung up in the so-called Second Request stage. In our next post, we’ll take a look at this stage of the process and what options companies have to advocate for their merger proposal.