Dechert’s Antitrust Merger Investigation Timing Tracker (DAMITT) finds that significant antitrust merger investigations in the U.S. currently are taking 10 months which is about 30%−40% longer than in prior years.
DAMITT measures the time from transaction announcement until resolution of the investigation for Hart-Scott-Rodino Act reportable transactions resulting in a closing statement, consent order, complaint challenging the transaction, or abandonment for which the antitrust agencies takes credit. Data from DAMITT have been highlighted in recent stories in The Wall Street Journal, Fortune, Time, MLex and other leading publications.
Through Q3, DAMITT finds that the average significant antitrust merger investigation took 10 months in 2015, which is 30% longer than the 7.7 months recorded in 2014 and more than 40% longer than the 7.1 month average held from 2011−13.
Cause for Concern
Time is often the enemy of deals. Increased deal timing can lead to higher financing and legal costs, disruption to ongoing business operations, and loss of customers and employees. In the extreme,delays associated with antitrust review could open the door to topping bids or lead to termination of the merger agreement for failure to satisfy contractual conditions to closing before the specified “outside” or “drop dead” date.
What Companies Should Do
Fortunately, there are ways to control these risks and avoid significant delays. Companies involved in antitrust sensitive transactions must carefully craft merger and financing agreement provisions to allocate antirust risk through the interaction of covenants, conditions, and termination provisions. But antitrust risk can only be allocated if properly assessed prior to signing up the deal. The deal planning cycle needs to allow enough time upfront to do a thorough antitrust assessment taking into account current enforcement practice. That assessment can also accelerate the antitrust investigation process by allowing for the preparation of data and documents for submission to the antitrust agencies earlier in the investigation. For example, Dechert’s upfront antitrust analysis and carefully crafted risk allocation provisions in the transaction documents helped Ross Aviation complete its sale to Landmark Aviation in approximately three months. A senior official in the DOJ Antitrust Division praised the parties’ strategy to be upfront with the deal’s competitive issues on day one and quickly negotiate a small settlement, which avoided a lengthy investigation and allowed the parties to close more quickly.