How are mergers and acquisitions reviewed?

On Behalf of Dunlap Fiore, LLC |

Mergers and acquisitions are normal yet complex business transactions that often take place in a healthy and thriving economy. However, certain mergers may create a monopoly with the potential to stem business competition in a free market. In order to prevent this from happening, Congress passed the Hart-Scott-Rodino Act which gave the Federal Trade Commission and the Department of Justice the right to review and oversee most business transactions that surpass a certain size.

The act also gives the FTC and DOJ the authority to block any deal which, in the agencies’ estimation, would prove to be detrimental to allowing a healthy business environment where other companies can fairly and equitably compete. While there are exceptions, in general business law requires all companies, including those in Louisiana, to report any business transactions or deals that are valued over $76.3 million for review by either agency.

Once a deal is reported, either agency will launch a preliminary review to ascertain whether the proposed deal needs to be scrutinized more closely due to antitrust issues. The nature of the transaction dictates which agency will be tasked with reviewing the transaction because each agency has more expertise than the other in certain industries.

When a preliminary review is launched the transaction is put on hold, usually for 30 days. After the agency that is assigned the deal reviews it, if the hold period is still rolling and the agency does not see any potential issues with the transaction, the remainder of the waiting period can be waived and the deal may be commenced.

Sometimes the agency will let the clock run out on the 30-day waiting period and if no other action is taken by the agency, the deal is then allowed to take place. If, however, the preliminary investigation raises red flags that there could be potential competition issues, then the agency can extend the review and instruct all parties involved to provide detailed information about the deal in question so that the transaction can be scrutinized more closely. The agency then typically has an additional 30 days to examine the information provided.

After the secondary review, the agency can close the investigation and allow the deal to go through, or it can enter into a settlement with the parties taking part in the deal or initiate legal action to block the deal from taking place.

Source: Federal Trade Commission, “Merger Review,” Accessed April 27, 2015