On July 7, the Federal Trade Commission (FTC) and Department of Justice (DOJ) announced significant changes to the Premerger Notification Rules under the Hart-Scott-Rodino Act and the Premerger Notification Form. These changes will become effective 30 days after publication. While the revised rules in some instances streamline the information required, they also require additional information to make the premerger notification review program more effective for both agencies. This additional information in many cases is likely to increase the time, expense, and difficulty of complying with the premerger notification review requirements.
One of the more burdensome and subjective aspects of compliance with the premerger notification review process has been ensuring that all "4(c) documents" are included in the filing. Item 4(c) of the instructions to the premerger notification form requires that studies, surveys, analyses and reports prepared by or for any officer or director for the purpose of evaluating or analyzing an acquisition with respect to market shares, competition, competitors, markets, potential for sales growth or expansion into product or geographic markets be filed with the FTC and DOJ.
The revised rules require that Confidential Information Memoranda that specifically relate to the acquisition and were prepared by or for any officer or director be filed irrespective of whether they were prepared for the purpose of evaluating or analyzing the acquisition or contain competition-related content (new Item 4(d)(i)). The revised rules now also require filing of pitch books and similar materials prepared by third-party advisors during an engagement or for the purpose of seeking an engagement, if they contain competition-related content that specifically relates to the acquisition (new Item 4(d)(ii)). In addition, studies, surveys, analyses and reports that evaluate or analyze synergies and/or efficiencies, prepared by or for any officer or director for the purpose of evaluating or analyzing the acquisition, must also be filed (new Item 4(d)(iii)).
The revised rules also require certain disclosures relating to "associates" if the acquiring person's associates derived revenues in an overlapping industry with the target or have less than majority holdings in companies that derived revenues from overlapping industries with the target. Intended to enable the FTC and DOJ to analyze the holdings of entities that are under common investment or operational management with the person filing notification, this change is likely to particularly impact private equity firms and hedge fund investors.
While the rules as adopted are an improvement over the initial proposal by the FTC, the additional filing requirements under new Item 4(d) and the filing obligations with respect to associates nonetheless expand substantially the scope of information required to be produced at the time of filing and the efforts required to marshal this information, while further raising the prospect that a filing may be found deficient for failure to comply with these new requirements.
For the FTC and DOJ release announcing these changes, together with links to the full release, see the FTC webpage.