This post updates the public deal antitrust reverse termination fee database through September 30, 2019.
An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.
Our sample now covers 1305 strategic negotiated transactions announced between January 1, 2005, and September 30, 2019. Of these, 158 transactions, or 12.1% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.2% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.4% of the transaction value.
We thought it might be helpful to give some statistics for various subsamples covering different periods so that you could get an idea of how, if at all, antitrust reverse terminations fees are varying over time.
The most recent subsample covers the roughly four-year period from January 1, 2015, through September 30, 2019. This subsample covered 483 transactions, of which 75, or about 15.5%, had antitrust reverse termination fees. The fees in this sample had a mean of 4.7%, 0.5 percentage points less than the 5.2% of the full sample, and a median of 4.4%, the same as the full sample. The relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 12.5%.
The charts below gives the frequency of antitrust reverse breakup fees across the four-year-plus subsample set.
Of the 75 transactions signed since January 1, 2015, with an antitrust reverse termination fee, the antitrust reviews have been completed for 68 transactions. Of the transactions for which reviews have been completed, 52, or about 76.5%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, nine transactions closed subject to a DOJ or FTC consent order, one subject to a Public Utilities Commission order, and one transaction (AT&T/Time Warner) defeated an Antitrust Division preliminary injunction challenge and closed (the DOJ has appealed).
Dale Collins
dale.collins@shearman.com
Antitrust Reverse Termination Fees--Data Set (January 1, 2005, through September 30, 2019)
Categories: EU Mergers, US Mergers
This post updates the public deal antitrust reverse termination fee database through June 30, 2019.
Our sample now covers 1282 strategic negotiated transactions announced between January 1, 2005, and June 30, 2019. Of these, 157 transactions, or 12.2% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.2% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.4% of the transaction value.
The most recent subsample covers the four-year period from January 1, 2015, through June 30, 2019. This subsample covered 356 transactions, of which 74, or about 20.8%, had antitrust reverse termination fees. The fees in this sample had a mean of 4.7%, 0.5 percentage points less than the 5.2% of the full sample, and a median of 4.4%, the same as the full sample. The relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 12.5%.
Of the 74 transactions signed since January 1, 2015, with an antitrust reverse termination fee, the antitrust reviews have been completed for 65 transactions. Of the transactions for which reviews have been completed, 50, or about 77%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, nine transactions closed subject to a DOJ or FTC consent order, one subject to a Public Utilities Commission order, and one transaction (AT&T/Time Warner) defeated an Antitrust Division preliminary injunction challenge and closed (the DOJ has appealed).
Antitrust Reverse Termination Fees--Data Set (January 1, 2005, through June 30, 2019)
This post updates the public deal antitrust reverse termination fee database through March 31, 2019.
Our sample now covers 1260 strategic negotiated transactions announced between January 1, 2005, and March 31, 2019. Of these, 156 transactions, or 12.0% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.3% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.4% of the transaction value.
The most recent subsample covers the four-year period from January 1, 2015, through March 31, 2019. This subsample covered 433 transactions, of which 68, or about 15.7%, had antitrust reverse termination fees. The fees in this sample had a mean of 4.7%, 0.6 percentage points less than the 5.3% of the full sample, and a median of 4.3%, just about the same as the full sample. The relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 12.5%.
Of the 63 transactions signed since January 1, 2015, with an antitrust reverse termination fee for which the antitrust reviews have been completed, 48, or about 76%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, nine transactions closed subject to a DOJ or FTC consent order, one subject to a Public Utilities Commission order, and one transaction (AT&T/Time Warner) defeated an Antitrust Division preliminary injunction challenge and closed (the DOJ has appealed).
Antitrust Reverse Termination Fees--Data Set (January 1, 2005, through March 31, 2019)
This post updates the public deal antitrust reverse termination fee database through December 31, 2018.
Our sample now covers 1239 strategic negotiated transactions announced between January 1, 2005, and December 31, 2018. Of these, 155 transactions, or 12.5% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.3% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.4% of the transaction value.
The most recent subsample covers the four-year period from January 1, 2015, through December 31, 2018. This subsample covered 417 transactions, of which 66, or about 15.8%, had antitrust reverse termination fees. The fees in this sample had a mean of 4.7%, one-half of a percentage point less than the 5.2% of the full sample, and a median of 4.4%, the same as the full sample. The relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 12.5%.
The chart below gives the frequency of antitrust reverse breakup fees across the four-year subsample set.
Of the 62 transactions signed since January 1, 2015, with an antitrust reverse termination fee for which the antitrust reviews have been completed, 49, or about 79%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, seven transactions closed subject to a DOJ or FTC consent order, one subject to a Public Utilities Commission order, and one transaction (AT&T/Time Warner) defeated an Antitrust Division preliminary injunction challenge and closed (the DOJ has appealed).
Antitrust Reverse Termination Fees--Data Set (January 1, 2005, through December 31, 2018)
The most recent subsample covers the three-year-plus period from January 1, 2015, through September 30, 2018. This subsample covered 395 transactions, of which 65, or about 16.5%, had antitrust reverse termination fees. The fees in this sample had a mean of 4.67%, a little more than one-half of a percentage point less than the 5.2% of the full sample, and a median of 4.4%, the same as the full sample. The relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 8.8%.
The chart below gives the frequency of antitrust reverse breakup fees across the three-year-plus subsample set.
Of the 55 transactions signed since January 1, 2015, with an antitrust reverse termination fee for which the antitrust reviews have been completed, 43, or about 78%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, six transactions closed subject to a DOJ or FTC consent order, and one transaction (AT&T/Time Warner) is in litigation.
Sample Antitrust Risk-Shifting Provisions in M&A Transactions--2018 Edition
This note updates and expands the sample of antitrust-related provisions in M&A agreements over the one we posted in November 2014. As in the earlier edition, the sample provisions have been taken (sometimes with a little modification) from actual M&A agreements.
This sample will give you with a good idea of the wide variety of provisions parties have used, including:
the jurisdictions and the timing where merger control filings are to be made;
the level of cooperation the parties owe each other in defending the transaction;
who controls the defense strategy
the antitrust-related conditions precedent
whether the parties are obligated to litigate an adverse agency decision and, if so, who controls the litigation strategy and how long will the parties have to litigate before the drop-dead date;
whether the buyer is obligated to "fix" any antitrust concerns through consent decree relief and how far this obligations goes;
whether an antitrust reverse termination fee is to be paid in the event of a failure of the antitrust conditions; and
the conditions under which the agreement may be terminated or the drop-dead date extended
Of course, every deal stands on its own. The language that has been used in one deal may not be appropriate for another deal, and inclusion of a provision in this sample does not constitute an endorsement of the language. Still, I find the collection helpful in drafting and negotiating the antitrust provisions in M&A agreements.
Antitrust Reverse Termination Fees--2018 Q1+ Update
This post updates the public deal antitrust reverse termination fee database through May 31, 2018.
Our sample now covers 1190 strategic negotiated transactions announced between January 1, 2005, and May 31, 2018. Of these, 153 transactions, or 12.9% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.3% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.4% of the transaction value.
The most recent subsample covers the three-year-plus period from January 1, 2015, through May 31, 2018. This subsample covered 367 transactions, of which 64, or about 17%, had antitrust reverse termination fees. The fees had a mean of 4.7%, a little more than one-half of a percentage point less than the 5.3% of the full sample, and a median of 4.4%, the same as the full sample. the relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 8.8%.
The chart below gives the frequency of antitrust reverse breakup fees across the three-year subsample set.
Antitrust Reverse Termination Fees--Data Set (January 1, 2012, through May 31, 2018)
2018 S&S Annual Antitrust Report
Shearman & Sterling publishes its sixth annual Antitrust Annual Report today. The 2018 Report discerns two key trends – a global resurgence of controls on foreign direct investment and the focus on 'fairness' developing in the European Union (EU). The report also discusses various other important developments in international competition law enforcement.
Categories: EU Antitrust Basics, EU Cartels, EU Distribution, EU Enforcement, EU Mergers, US Antitrust Basics, US Cartels, US Distribution, US Enforcement, US Mergers
We thought it might be helpful to give some statistics for the more recent subsample covering the three-year period from January 1, 2015, through December 31, 2017. This subsample covered 214 transactions, of which 53, or about 25%, had antitrust reverse termination fees. This suggests that antitrust reverse breakup fees are becoming more common in transactions satisfying our sample criteria. These fees had a mean of 4.8%, one-half of a percentage point less than the 5.3% of the full sample, and a median of 4.6%, the same as the full sample. This is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 8.8%.
We thought it might be helpful to give some statistics for the more recent subsample covering the five-year-plus period from January 1, 2012, through June 30, 2017. This subsample covered 422 transactions, of which 73, or about 17%, had antitrust reverse termination fees. This suggests that antitrust reverse breakup fees are becoming more common in transactions that meet our sample criteria. These fees had a mean of 5.3%, not much different than the full sample, but a median of 5.0%, indicating that the fees were shifting in their distribution to a slightly higher percentage value. This is consistent with a tighter distribution of the fees, which ranged from a low of 1.5% to a high of 10.4%.
The chart below gives the frequency of antitrust reverse breakup fees across the five-year subsample set.
NB: The percentage intervals on the horizontal axis are not of equal size.
Of the 65 transaction signed since January 1, 2012, with an antitrust reverse termination fee for which the antitrust reviews have been completed, 47, or about 72%, were cleared without any antitrust challenge. One transaction (Halliburton/Baker Hughes) was terminated in the course of litigation with the U.S. antitrust enforcement agencies, four transactions (Sysco/US Foods, Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court,* and 13 transactions closed subject to a DOJ or FTC consent order.
* Anthem has challenged Cigna's termination of the merger agreement in Delaware Chancery Court.
Our sample now covers 1072 strategic negotiated transactions announced between January 1, 2005, and March 31, 2017. Of these, 131 transactions, or 12.2% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the sample was 5.5% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.6% of the transaction value.
We thought it might be helpful to give some statistics for the more recent subsample covering the five-year-plus period from January 1, 2012, through March 31, 2017. This subsample covered 395 transactions, of which 71, or about 18%, had antitrust reverse termination fees. This suggests that antitrust reverse breakup fees are becoming more common in transactions that meet our sample criteria. These fees had a mean of 5.3%, not much different than the full sample, but a median of 5.0%, indicating that the fees were shifting in their distribution to a slightly higher percentage value. This is consistent with a tighter distribution of the fees, which ranged from a low of 1.5% to a high of 10.4%.
Since January 1, 2012, of the 57 transactions with an antitrust reverse termination fee for which the antitrust reviews have been completed, 40, or about 70%, were cleared without any antitrust challenge. One transaction (Halliburton/Baker Hughes) was terminated in the course of litigation with the U.S. antitrust enforcement agencies, four transactions (Sysco/US Foods, Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court,* and 12 transactions closed subject to a DOJ or FTC consent order.
Our sample now covers 978 strategic negotiated transactions announced between January 1, 2005, and June 30, 2016. Of these, 114 transactions, or 11.7% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the sample was 5.5% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.6% of the transaction value.
If we just look at the deals announced since January 1, 2011, the mean was 5.7% and the median was 5.1%, suggesting a slightly higher fee over the last five years. Since January 1, 2011, the fees ranged from a low of 2.3% to a high of 21.0%. The chart below gives the frequency of antitrust reverse breakup fees since January 1, 2011.
Since January 1, 2011, of the 48 transactions with an antitrust reverse termination fee for which the antitrust reviews have been completed, 34, or about 71%, were cleared without any antitrust challenge. Two transactions (AT&T/T-Mobile and Halliburton/Baker Hughes) were terminated in the course of litigation with the U.S. antitrust enforcement agencies, two (Sysco/US Foods and Staples/Office Depot) were terminated after the FTC obtained a preliminary injunction in federal district court, and ten were subject to a DOJ or FTC consent order.
Antitrust Reverse Termination Fees--Data Set (January 1, 2005 through June 30, 2016)
Categories: US Mergers
ValueAct Settles for Record HSR Fine
Activist investor ValueAct Capital agreed to pay an $11 million fine and also agreed to injunctive relief to settle the DOJ's allegations that it violated the HSR Act in connection with its acquisition of over $2.5 billion of voting securities of Halliburton and Baker Hughes after the two companies announced their (now abandoned) merger in 2014. ValueAct initially contested the DOJ's claim, arguing that its actions were exempt under the HSR Investment-Only exemption. With this record settlement, the DOJ and FTC once again affirmed that they will read this HSR exemption very narrowly. Investors must tread carefully when relying on the exemption as it applies only when the investor's sole intent in acquiring the shares is passive.
Antitrust Annual Report Surveys Recent Antitrust Developments
In its 2016 Annual Report, Shearman & Sterling's Antitrust Group discusses 19 major trends in antitrust law worldwide in merger control, cartels, compliance, unilateral conduct, antitrust litigation, and state aid.
FTC Records Two Wins as Staples-Office Depot Merger Abandoned for a Second Time
On May 10, Staples and Office Depot announced that they would be terminating their $6.3 billion merger in the wake of a federal judge's decision to issue a preliminary injunction blocking the deal. This represents the second time in less than two decades that the companies abandoned their plans after the FTC raised antitrust concerns, successfully halting their attempt to consolidate.
Activism (Re)Defined: DOJ Files Complaint Against ValueAct for Alleged HSR Act Violation
On April 4, 2016, the US Department of Justice ("DOJ") filed a civil antitrust suit against activist investor ValueAct Capital seeking at least $19 million of civil penalties for ValueAct's alleged violation of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. § 18a ("the HSR Act").
Categories: US Enforcement, US Mergers
FTC Increases HSR Notification Thresholds for 2016
Every year, the dollar thresholds under the HSR Act are adjusted for changes in the gross national product. The new thresholds were published in the Federal Register on January 26, 2016, and will go into effect on February 25, 2016.
Most importantly, the size-of-transaction threshold will increase from the current $76.3 million to $78.2 million, so that once effective acquisitions of voting stock or assets valued at more than $78.2 million may be reportable.
For more information on the revised thresholds, click here.
For the text of the FTC's Federal Register notice, click here.
Kelly Karapetyan
kelly.karapetyan@shearman.com
The Hart-Scott-Rodino Act
The HSR Act form and instructions
FTC HSR web page
No X-Ray Vision at the FTC: Court Hands Agency a Rare Defeat in the Steris/Synergy Merger
In FTC v. Steris, the FTC was handed a rare litigation defeat. The case was notable because it involved a merger between companies who were not current competitors. The FTC alleged that without the merger, Synergy would have entered the US sterilization market with a disruptive new technology that would have undermined the current duopoly and benefited customers. The court found little in the evidence to support the FTC's theory. To be sure, there will be some soul-searching at the FTC as to how the Court could find the weight of the evidence so strongly on the side of the merging parties. However, because the case was decided on the single factual question of whether Synergy would have entered the U.S. market independently, the case has little precedential value and is unlikely to significantly alter the FTC's general approach to mergers involving potential competitors. See here for our analysis of the case.
FTC Clears Zillow-Trulia Merger Without Conditions
In a decision taken on February 13, the FTC unconditionally approved the Zillow-Trulia merger after an intensive six-month antitrust review. Despite reported concerns "that the merger might concentrate too much power in one company," the FTC ultimately concluded that the transaction did not threatend to lessen competition in any market. This note examines the transaction and the economic analysis that supported the Commission's conclusion.
Antitrust Reverse Termination Fees--2015 Update
This post updates one we did last May analyzing antitrust reverse breakup fees in public deals since January 1, 2005.
Our sample now covers 822 strategic negotiated transactions announced between January 1, 2005, and December 31, 2014. Of these, 88 transactions, or about 10.7% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the sample was 5.7% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.3% of the transaction value.
Significantly, of the 79 transactions with an antitrust reverse termination fee for which the antitrust reviews have been completed, 55, or about 70%, were cleared without any antitrust challenge. One transaction (AT&T/T-Mobile) was terminated in the course of litigation with the Antitrust Division, 20 were subject to only a DOJ or FTC consent order, two (Boston Scientific/Guidant and Hexion/Huntsman) were subject to both an FTC consent order and EC undertakings, and one (Federated/May) was subject to an assurance agreement with a group of state attorneys general. Several deals did not close for nonantitrust reasons.
Antitrust Reverse Termination Fees--Data Set (January 1, 2005 through December 31, 2014)
FTC Announces 2015 HSR Act Reporting Thresholds
Every year, the dollar thresholds under the HSR Act are adjusted for changes in the gross national product. The new thresholds will take effect 30 days after they are published in the Federal Register. At that time, we will revise this post to give the effective date.
Most importantly, the size-of-transaction threshold will increase from the current $75.9 million to $76.3 million, so that once effective, acquisitions of voting stock or assets valued at more than $76.3 million may be reportable.
Sample Antitrust-Related Provisions in M&A Agreements--2014 Edition
This note provides a much expanded sample of antitrust-related provisions in M&A agreements over the one we posted in April 2013. As before, the sample provisions have been taken (sometimes with a little modification) from actual M&A agreements.
This sample will give you with a good idea of the wide variety of provisions parties have used in dealing with
This post updates one we did over a year ago analyzing antitrust reverse breakup fees in public deals since January 1, 2005.
Our sample now covers 760 strategic negotiated transactions announced between January 1, 2005, and May 1, 2014. Of these, 79 transactions, or about 9.8% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the sample was 5.8% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.3% of the transaction value.
Significantly, of the 72 completed transactions with an antitrust reverse termination fee, 50 were cleared without any antitrust challenge. One transaction (AT&T/T-Mobile) was terminated in the course of litigation with the Antitrust Division, 19 were subject to only a DOJ or FTC consent order, one (Boston Scientific/Guidant) was subject to both an FTC consent order and EC undertakings, and one (Federated/May) was subject to an assurance agreement with a group of state attorneys general.
Antitrust Reverse Termination Fees--Data Set (January 1, 2005 through May 1, 2014)
Reasonable Best Efforts: Cold Comfort to Sellers
New York M&A partner Peter Lyons, antitrust partner Beau Buffier and M&A associate Tammara Fort, along with J. Reuben Clark Law School (Brigham Young University) associate professor Matthew Jennejohn, published an article, "Reasonable Best Efforts: Cold Comfort to Sellers," in the January 2014 issue of The M&A Lawyer.
The article examines a preliminary bench ruling from the Delaware Chancery Court in the matter of Cooper Tire & Rubber Company v. Apollo (Mauritius) Holdings Pvt. Ltd., et al, which refused Cooper Tire's assertion that Apollo has failed to use its reasonable best efforts to complete negotiations with Cooper Tire's labor union and close their then-pending merger. According to the authors, the case "provides a rare Delaware court interpretation of the actions required to satisfy the "reasonable best efforts" standard that has become commonplace in antitrust covenants in merger agreements." They add that, based on Cooper, "a reasonable best efforts standard alone provides cold comfort to sellers seeking deal certainty in circumstances where there is a meaningful likelihood that the antitrust authorities will require economic concessions in order to approve a transaction." In the end, according to the authors, the lesson of Cooper is clear: "if a strategic buyer comes offering assurances of reasonable best efforts without any specifics, let the seller beware."
Every year, the dollar thresholds under the HSR Act are adjusted for changes in the gross national product. The new thresholds will take effect on February 24, 2014.
Bazaarvoice Shows Courts' and Agencies' Orthodox Approach to Mergers in High-Tech Markets
On January 12, 2014, the District Court for the Northern District of California found that Bazaarvoice's June 12, 2012 acquisition of PowerReviews violated Section 7 of the Clayton Act, which prohibits any merger that may substantially lessen competition. The decision demonstrates that agencies and courts will continue to apply traditional methods of merger analysis based on market definition and market concentration even when customers have not opposed the transaction and the overlapping revenues involved appear to be small. The Court rejected claims that Google, Amazon, Facebook and other e-Commerce giants were competitive constraints and placed particular weight on the parties' internal documents, once again showing how difficult it can be for merging parties to impeach their own unhelpful documents.
Click here for an S&S client memorandum analyzing the case.
United States v. Bazaarvoice, Inc., Memorandum Op., No. 13-cv-00133 (N.D. Cal. Jan. 8, 2014)
This note provides a much expanded sample of antitrust-related provisons in M&A agreements over the one we posted in August 2012. As before, the sample provisions have been taken (sometimes with a little modification) from actual M&A agreements.
New 2013 HSR Reporting Thresholds
Antitrust Reverse Termination Fees--November Update
In July, we posted our mid-year study and data spreadsheet on antitrust reverse termination fees in public deals announced from January 1, 2005, through June 30, 2012. Surprisingly, there were no deals with antitrust reverse termination fees that satisfied our screening criteria in the last seven months of that period.
Since that time, however, we have added four new deals to the spreadsheet:
Thomson Reuters/FX Alliance ($622.9 million, with a 2.3% termination fee of $14.5 million)
DigitalGlobe/Geoeye ($466.6 million, with a 4.3% termination fee of $20.0 million)
Aetna/Coventry Health Care ($5.63 billion, with a 3.0% termination fee of $167.5 million)
McKesson/PSS World Medical ($1.46 billion, with a 3.4% termination fee of $50 million)
With the new additions, there were 62 deals with antitrust reverse termination fees over the period January 1, 2005, through November 30, 2012. These fees have a median of 3.9% and a mean of 5.6%. The higher mean is due to some large outliers, including:
Google/Motorola Mobility ($11.9 billion, with a 21% termination fee of $2.5 billion)
Smithfield Foods/Premium Standard Farms ($674 million, with a 14.8% termination fee of $100 million)
Monsanto/Delta and Pine ($1.5 billion, with a 39.8% termination fee of $600 million)
Seagate/Maxtor ($1.9 billion, with a 15.8% termination fee of $300 million)
With the disclosure by AT&T that the total outlay of the antitrust reverse termination fee it paid in its deal with T-Mobile was $4.2 billion (and not the $6.0 billion often reported), the termination fee as a percentage of the $39 billion deal was 10.8%. This is the sixth highest percentage fee in our sample.
Since January 1, 2005, only one reverse antitrust termination fee has been triggered (AT&T/T-Mobile), although consent decrees were entered in 15 of the 59 nonpending transactions.
For the updated data spreadsheet, click here.
Antitrust Reverse Termination Fees--Data Set (January 1, 2005 through November 30, 2012)
Sample Antitrust-Related Provisions in M&A Agreements--2012 Expanded Edition
This note provides a much expanded sample of antitrust-related provisions in M&A agreements over the one we posted last year. As before, the sample provisions have been taken (sometimes with a little modification) from actual M&A agreements.
Antitrust Reverse Termination Fees--2012 Mid-Year Update
This post updates one we did a year ago analyzing antitrust reverse breakup fees in public deals since January 1, 2005. In two related notes, we discussed various means of allocating antitrust risk in an acquisition agreement and provided some sample risk-shifting provisions that have been used in actual deals. We will be updating those posts shortly.
This post examines a particular means of allocating antitrust risk: the antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee. An antitrust reverse termination fee is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.
In a sample of 633 strategic negotiated transactions announced between January 1, 2005, and June 30, 2012, 58 transactions, or about 9.2% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the sample was 5.8% of the transaction value, although since several high percentage fees skewed the distribution to the high end, a better indicator may be the median, which was 3.9% of the transaction value.
Significantly, there was an antitrust intervention in only only 16 of the 58 transactions since January 1, 2005, with antitrust reverse termination fees. One transaction (AT&T/T-Mobile) was terminated in the course of litigation with the Antitrust Division, 13 were subject to only a DOJ or FTC consent order, one (Boston Scientific/Guidant) was subject to both an FTC consent order and EC undertakings, and one (Federated/May) was subject to an assurance agreement with a group of state attorneys general.
The note begins with an example of an antitrust reverse termination fee provision found in the recent Cardinal Health/Kinray stock purchase agreement. This is a fairly typical provision, although, not surprisingly, the ARTF provisions vary considerably from deal to deal. The middle sections explain how we created our sample set, analyze the occurrence and the magnitudes of antitrust reverse termination fees in the sample, and look at a few sample outliers. Finally, we look at the few deals in which the antitrust conditions failed and the antitrust reverse termination fee was paid.
For the full pdf version of the full note, click here. For the data spreadsheet, click here.
NB: Surprisingly, there were no deals with antitrust reverse termination fees that satisfied our screening criteria from November 12, 2011, to June 30, 2012. There have been several since then, and we have updated the spreadsheet below through November 30, 2012.
Every year, the dollar thresholds under the HSR Act are adjusted for changes in the gross national product. The new thresholds were published in the Federal Register on January 27, 2012 and will go into effect on February 27, 2012.
Antitrust Reverse Termination Fees: 3Q Update
NOTE: An updated version of this post was published on July 20, 2012, and may be found here.
In July, we posted a study and a data spreadsheet on antitrust reverse termination fees in public deals announced from January 1, 2005, through May 31, 2011. Since that time through the end of September, we have added two new deals to the spreadsheet:
Honeywell/EMS Technologies ($510 million, with a 3.8% termination fee of $19.6 million)
With the new additions, there were 57 deals with antitrust reverse termination fees over the period January 1, 2005, through September 30, 2011. These fees have a median of 3.9% and a mean of 5.8%. The higher mean is due to some large outliers, including:
AT&T/T-Mobile ($39 billion, with a 15.4% breakup fee valued at $6 billion)
Since January 1, 2005, no reverse antitrust termination fee has been triggered, although consent decrees were entered in 14 of the 52 nonpending transactions.
Antitrust Reverse Termination Fees--Data Set (January 1, 2005 through September 30, 2011)
Antitrust Standing Rules for Hostile Takeover Targets
In hostile tender offers, the target company may assert that its acquisition by an unwanted suitor would violate Section 7 of the Clayton Act and seek protection from a federal district court in the form of a preliminary and permanent injunction blocking the suitor from continuing with its offer. The putative antitrust violation may arise from a long-standing relationship in the marketplace of the suitor and the target, or the target may attempt to create an antitrust problem where none before existed by quickly acquiring new lines of business or new business locations that would be problematic for the offeror to acquire.
Serious antitrust problems that cannot be cured by divestiture or other means, while relatively rare, can end a hostile takeover. But the prospect of being successful is not the only reason to commence an antitrust challenge. Even a target that has little hope of prevailing may have a strong incentive to bring an antitrust action against it suitor, since the prosecution of a merger antitrust action can provide the target with considerable time to pursue its other takeover defenses or to find a "white knight."
Courts have addressed these questions under the rubric of antitrust standing. The full note provides some background and summarizes the results by circuit, a mixed lot at best.
For the full pdf version of the full note, click here.
Agency Challenges to Non-HSR Reportable Transactions
We often hear that some deals are too small to be of interest to the Antitrust Division or the Federal Trade Commission, even if the deal is anticompetitive. More generally, there is a view that if a transaction is not reported to the antitrust agencies pursuant to the Hart-Scott-Rodino Act, the transaction is safe from challenge. Both views are mistaken.
Since January 1, 2001, the DOJ and FTC have challenged 24 non-HSR reportable transactions. Nineteen of these transactions fell below the minimum reporting threshold in effect at the time of the acquisition. The smallest of these transactions was $4.4 million. Of the five remaining transactions, three were covered by an HSR exemption, one did not involve the acquisition of voting securities or assets, and one had no public explanation. Twenty of the transactions were already consummated at the time of the challenge, and four of the transactions were pending.
The FTC brought 15 challenges and the DOJ brought nine. The number of challenges has increased during the Obama administration, but not significantly so. Nineteen of the challenges ultimately settled, two were adjudicated on the merits in favor of the defendants, one was mooted (a bankruptcy bid failed), and two are still in litigation. Eight of the challenges settled simultaneously with the filing of the challenge. Fifteen of the challenges involved active litigation, ranging from about one month to 41 months.
The full note contains a summary of each of the 24 challenges, including the products and services in issue, a brief description of the acquisition and the gravamen of the agency's complaint, the reason (if known) why the transaction was not HSR reportable, and the ultimate disposition of the challenge. The note also contains links to the agency's web page on the case, the complaint, and the proposed and final consent orders.
Antitrust Reverse Termination Fees
Sample Antitrust Risk-Shifting Provisions in M&A Transactions
NOTE: An updated version of this post was published on August 28, 2012, and may be found here.
Earlier this month, Steve Camahort, Lisl Dunlop, Mike Kennedy and I gave a CLE presentation in the Bay Area addressing the three aspects of dealing with M&A antitrust risks at the beginning of a deal:
Assessing the substantive risk
Predicting the possible reviewing agency demands for remedies
Allocating the antitrust risks in the purchase agreement
The deck we used is self-contained and may be viewed here.
+1.212.848.412
DOJ/FTC Horizontal Merger Guidelines (rev. Aug. 19, 2010)
DOJ/FTC Commentary on the Merger Guidelines (2006)
FTC Competition Enforcement Database
FTC Horizontal Merger Investigation Data, Fiscal Years 1996-2007
FTC Staff Statement on Negotiating Merger Remedies
FTC FAQs about Merger Consent Order Provisions
Strategic Deals Require Strategic Thinking: Antitrust Provisions to Consider in Negotiated Transactions
Examples of M&A antitrust risk-shifting provisions
Every year, the dollar thresholds under the HSR Act are adjusted for changes in the gross national product. Earlier today, the FTC announced that the new thresholds for 2011, which will become effective in late February or early March.
UPDATE: The new thresholds were published in the Federal Register on January 25, 2011 and will go into effect on February 24, 2011.
Proposed changes to the HSR Act form
www.antitrustunpacked.com