Dechert’s Antitrust Merger Investigation Timing Tracker (DAMITT) is at it again compiling data from 2015.
- Merger investigations in 2015 took an average of 9.6 months to conduct (more than 1/3 longer than the average from 2011-2013)
- Federal enforcement activity resulted in 37 significant merger investigations (7 generated complaints seeking to block proposed deals and 24 were resolved by consent orders)
- Each of these figures was a record for the 5 years in which DAMITT has been tracking antitrust merger investigations
Longer Investigations/More Enforcement
The duration of significant merger investigations remained highly variable, ranging from 19.3 months (Applied Materials/Tokyo Electron, eventually abandoned by the parties) to 1.9 months (Mylan/Perrigo, a hostile tender offer that never resulted in an agreed deal but did result in the quickest consent order of the year). The median investigation length (9.9 months) was nearly equal to the mean (9.6 months), reflecting relative balance between longer and shorter investigations. Significantly, only 10 of these 37 investigations were resolved in less than the 7.1 months that used to be average.
Federal agencies increased enforcement activity by more than 30%. The willingness and ability of the agencies to litigate merger cases is apparent from the 2015 results. The 7 complaints filed in 2015 were more than double from 2013 or 2014. Four of those complaints were filed by the FTC during Q4 2015 and remain pending. Two earlier FTC complaints produced one win and one loss for the FTC. The sole DOJ complaint in 2015 went to trial but the merging parties terminated their agreement before the conclusion of the trial, stipulating to dismissal without prejudice.
However, the agencies remain willing to resolve investigations with consent orders when the parties are able to address the agencies’ competitive concerns.
All signs indicate 2016 will be a repeat of 2015 unless a significant drop off in merger activity due to market volatility lightens the workload at the agencies. There are a number of potentially significant merger investigations in the pipeline that have been ongoing for more than seven months, and the techniques employed to analyze these transactions are more complex than ever. While the Presidential election in November likely will result in a change in enforcement agency leadership, and possibly some change at the margin on enforcement priorities, investigations will continue to be staff driven and to apply analytical approaches similar to those we have seen in the past year.
What Companies Can Do to Streamline the Process
Merger investigations are taking longer to complete and companies contemplating antitrust-sensitive transactions in 2016 need to build their deal timing around this reality. Well-advised merger partners will focus pre-announcement efforts on:
- assembling the information likely to be sought by the agencies; and
- developing the advocacy to enable the agencies to come to resolution more quickly.
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.
Over time, familiarity with these approaches may shorten antitrust merger investigations but any significant reduction in the duration of investigations seems unlikely to take hold in the next year.