The FTC and DOJ recently issued their annual merger report, reviewing their key merger enforcement actions during 2013.
The report is a goldmine of useful information for companies seeking to evaluate their business strategies and comply with the regulators.
TRANSACTIONS AND DEAL SIZE WERE DOWN
First, the basic numbers. Last year, there were 1,326 transactions filings, down 7.2 percent from the 1,429 reported in 2012 – a much greater decline than the 1.4 percent decline between 2011 and 2012.
HSR Merger Transactions Reported Fiscal years 2004-2013
Click here to view graph.
NOTE: All charts are from the FTC/DOJ Report.
November 2013 had more transactions reported (260) than any other single month in the last ten years.
Measured by size, 20.4 percent of the transactions fell into the US$100 million to US$150 million range; 19.5 percent fell into the US$500 million to US$1 billion range; and only 11 percent were over US$1 billion. This represents a very slight decrease in the number of transactions over US$1 billion (142, down from 2012’s 156). Of these, 54 percent involved buyers with sales over US$1 billion, and in 19.7 percent of the deals, the targets had sales over US$1 billion.
For the second year in a row, the FTC led the DOJ in the number of transactions it reviewed that were sized over US$300 million. (In 2012, the FTC reviewed 68 transactions over US$300 million, compared to the DOJ’s 43; in 2013, these were 80 for the FTC and 48 for the DOJ.)
Of the 1,326 filings in 2013, 990 asked for early termination. (“Early termination” means that the agencies cleared the transaction before the end of the waiting period.) Early termination is an option on the HSR form, but if the parties check it, then the clearance is announced publicly on the FTC website. If the parties don’t ask for early termination, then the fact of the filing and the clearance remain confidential. Of the 990 requests, slightly less than 80 percent were granted.
INDUSTRIES INVOLVED WERE MIXED – BUT PHARMA AND HEALTH LED IN ENFORCEMENT ACTIONS
A broad range of industries filed with the agencies.
Percentage of Transactions by Industry group of Acquired Entity Fiscal year 2013
Click here to view pie chart.
“Consumer Goods and Services” and “Manufacturing” were the two largest industries represented by the filings. Combined, they made up almost 45 percent of the total. Surprisingly, mergers in the “Chemicals and Pharmaceuticals” and “Health” areas, which received a tremendous amount of attention in the press this year, represented less than 11 percent of total filings.
But in terms of enforcement proceedings, pharma and healthcare each had three, matched by another three in a broadly defined advertising market. The rest of the enforcement proceedings involved widely varied industries, among them waste, scan engines, beverages, chemicals, movie theaters, airlines, electronics, casinos, glass, photoengraving, automobile a/c system recharging equipment, oil pipelines, bleach, cast iron pipes, aviation and recycling yard management systems.
The broad message one can draw from this is that the agencies’ eyes are roving. Relying on a combination of internal research and reliable industry gossip, they can clearly find the data on transactions that have the potential to raise competition problems.
Of the 1,326 transactions, the agencies brought 38 enforcement actions. The FTC challenged 23, of which 16 resulted in consent decrees; two resulted in the abandonment or significant change in the transaction; in four, the FTC began an administrative action; and in one, the FTC filed a complaint in court.
The DOJ challenged 15. It won one at trial; has a trial pending in another; obtained five settlements with filed complaints; and, in the other eight cases, the parties either abandoned or restructured the deal to avoid problems.
It is worth noting that, last year, the DOJ filed an aggressive complaint against the U.S. Airways/American Airlines merger. But the two companies responded with an equally aggressive defense, including heavy lobbying with state and federal governments. The DOJ eventually settled. The Merger Report described the relief it obtained in this way: “The settlement, which was entered by the court on April 25, 2014, requires the parties to divest key assets at capacity-constrained airports across the county.” Yet the DOJ complaint had originally implied that the transaction could not be fixed. Many people felt the agency either overstated its case or miscalculated its support.
“SECOND REQUESTS” WERE UP
Combined, the two antitrust agencies issued 47 “second requests.” (“Second requests” are very extensive information requests made when the agencies believe there is a serious question about the competitive impact of a deal. They typically take several months for the parties to answer.)
The raw number of second requests went down 4.1 percent from 2012. But, measured as a percent of filings, second requests actually went up to 3.7 percent in 2013 (from 3.5 percent in 2012).