On January 21, 2016, the Federal Trade Commission (FTC) announced its annual adjustments to the filing thresholds under the Hart-Scott-Rodino (HSR) Act. The new, higher, thresholds will apply to all transactions that close on or after February 25, 2016.
Due to this year's adjustments, transactions valued at more than $78.2 million and closing on or after February 25, 2016 may trigger an HSR filing. Parties entering transactions that would satisfy the 2015 HSR thresholds (see below) but not trigger a filing based on the adjusted thresholds should keep in mind that it is theclosing date—not the date of the agreement—that governs which set of thresholds will apply. Failure to file an HSR Notification and Report Form remains subject to a statutory penalty of up to $16,000 per day of noncompliance.
The HSR Act requires parties to file notifications with the FTC and Department of Justice when a proposed transaction—such as a merger, joint venture, stock or asset acquisition, or exclusive license—meets specified thresholds and no exemptions apply. If a notification is required, the transaction cannot close while the statutory waiting period runs (generally 30 days) and the agencies review the transaction. Most commonly, a filing is required if the parties meet both the "size-of-person" and "size-of-transaction" tests, which will be modified by the adjusted thresholds as follows:
Size-of-Transaction Test: met if, as a result of the transaction, the buyer will acquire or hold voting securities or assets of the seller, valued in excess of $78.2 million. In addition, if the value reaches a significantly higher level—now set at $312.6 million—a filing may be required even if the size-of-person test is not satisfied.
Size-of-Person Test: met if one party to the transaction has $156.3 million or more in annual sales or total assets and the other has $15.6 million or more in annual sales or total assets. If the seller is not "engaged in manufacturing"—and is not controlled by an entity that is—the test applied to the acquired side is annual sales of $156.3 million or total assets of $15.6 million.
The thresholds for HSR filing fees have also increased, although the filing fees themselves remain the same (see below).
The key threshold changes are summarized in the table below:
Click here to view table.
The HSR thresholds are only one part of the analysis to determine whether an HSR filing will be required. Even though they meet the thresholds, certain types of transactions may be exempt from the HSR notification requirements. Exemptions must be analyzed on a case-by-case basis, but some common categories include:
- Ordinary course of business acquisitions;
- Certain acquisitions of real property;
- Acquisitions solely for investment purposes;
- Intraperson transfers, restructuring;
- Foreign assets, if U.S. sales below threshold;
- Voting securities of foreign issuer without U.S. nexus; and
- Acquisitions subject to U.S. agency approval;
The HSR rules and procedures are highly technical, so Venable suggests consulting with an HSR expert when contemplating any transaction that may be subject to HSR notification requirements.