A CHANGE TO THE PRE-MERGER FILING PROCESS under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 has increased the need for attention to accuracy in deal evaluative documents, especially those prepared by consultants.
The Act requires that parties to certain proposed transactions provide pre-merger notification to the Federal Trade Commission and Department of Justice by filing an HSR Form and submitting certain documents (an HSR Filing).
An HSR Filing is required for all transactions valued at $263.8 million or more. In addition, for transactions valued in excess of $66 million but less than $263.8 million, a filing is required if the transaction also satisfies the “size-of-person” test. The “size-of-person” test is met if one party has net sales or total assets of $13.2 million or more and the other party has net sales or total assets of $131.9 million or more.
Recent changes to the HSR Form and rules became effective August 18, 2011 and require the production of documents not previously required to be produced. The new Form Item 4(d) expands the categories of documents that must be produced to include the following:
- All Confidential Information Memoranda or other reports prepared within a year prior to the deal that specifically relate to the sale of the acquired entity/entities or assets, including documents that are and are not tied specifically to the transaction being filed.
- All materials prepared by investment bankers and other third party advisors regarding market share, competition, competitors, markets, potential for sales growth or expansion in product or geographic markets that relate to the acquired entity/entities or assets and were produced up to one year prior to the filing. Again, responsive documents include those that are and are not tied specifically to the transaction being filed.
- All documents analyzing synergies or efficiencies that may result from the transaction being filed; there is no time limit for these documents.
It is important that entities considering a merger or similar transaction that might be reportable carefully word documents. Any documents created that may be responsive to Item 4(c) or 4(d) should first be reviewed by antitrust counsel in an effort to avoid inadvertent errors or mischaracterizations that could lead to an errant analysis of the transaction by the FTC or DOJ after filing. As a result of the new Form Item 4(d), parties should instruct third-party consultants (such as investment banks) that may be involved in early-stage document drafting to use extra caution when drafting, and to label initial versions of such documents as “DRAFT,” so that the documents may be reviewed by antitrust counsel before being finalized.