Eyes Wide Open
Because merger challenges and investigations have increased since the Bush administration, lawyers advise companies to go into deals expecting more antitrust…
March 26, 2013 at 07:25 AM
2 minute read
Because merger challenges and investigations have increased since the Bush administration, lawyers advise companies to go into deals expecting more antitrust scrutiny and planning for it from the start.
“The agencies are always looking for the good case, so you have to be ready with good arguments to counter what they consider to be the good case,” says Claudia Higgins, a partner at Kaye Scholer and former FTC staff member.
Additionally, companies should anticipate and structure deals to allow for longer periods of government review and negotiations.
They also might want to negotiate deal protection that allows for remedies. The buyer may enter into agreements with the government that limits its conduct, such as restricting price increases. Commonly, remedies involve a divestiture of assets to pass regulatory muster. Onlookers speculate that Anheuser-Busch (AB) InBev and Grupo Modelo, well aware that the proposed acquisition would face antitrust scrutiny, agreed ahead of time that AB InBev would make divestitures if necessary to complete the deal.
Companies also should consider increased scrutiny while negotiating breakup fees. AT&T famously had to pay T-Mobile USA $4 billion when their proposed merger fell apart.
“It's just one more way for the parties to allocate that antitrust risk back and forth,” Higgins says. “Breakup fees have been applied in lots of different circumstances when companies felt they had the leverage to shift the risk back to the buyer.”
Finally, because bad documents make easy cases for the government, lawyers advise acquisitive companies to draft business documents carefully.
“We counsel our clients to [act] as if someday a government lawyer is going to read them and draw their own conclusions and try to portray them as trying to take out a competitor,” says Michael Keeley, a partner at Axinn, Veltrop & Harkrider.
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