Virus-Related Regulatory Review Changes Not Seen Having Big Impact on M&A
Regulatory reviews of mergers and acquisitions aren't expected to face major COVID-19-related slowdowns despite FTC suspension of early terminations (see 2003130075) or DOJ Antitrust Division announcing it will seek extra time to complete its review work and leaving the door open to extending that timeline further, experts told us. Few deals necessitate second information requests by DOJ and that extra time won't materially change how transactions play out, said Holland & Knight antitrust lawyer David Kully, former chief of the DOJ radio and TV M&A section.
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Early terminations have sometimes been slowed by government shutdowns, though never turned off altogether, said Arnold & Porter antitrust lawyer Debbie Feinstein, formerly FTC Competition Bureau director. She said the lack of early terminations shouldn't translate into higher legal or other costs for combining companies, but the deals could run afoul of changing market conditions.
Most if not all FTC staff is set up to telework, a spokesperson emailed. The agency said it's "not unique in making adjustments to business as usual" given the pandemic. It said its investigations involve production of documents from the combining parties, plus documents from and interviews with third parties, and "companies right now are focused on taking care of their employees and maintaining business operations; their priorities right now often do not include producing documents and making personnel available for interviews." The agency said its staff "is fully operational but the Commission will not sacrifice the scope and thoroughness of its investigations due to current limitations and timing concerns. We are looking at each case individually and will seek to adjust timing as needed."
The FTC posted a series of early terminations this week before suspending further postings. They included FaceBank Group's buy of vMVPD fuboTV, Altice founder Patrick Drahi's buy of the Edward Walson 2011 Revocable Trust including Service Electric Cable TV of New Jersey, and Newhouse's purchase of mobile game developer Scopely.
Aside from seeking an extra 30 days in timing agreements to complete its transaction review, DOJ said it will do all meetings by phone or videoconference where possible, and all scheduled depositions will be rescheduled and done via videoconferencing. Antitrust Chief Makan Delrahim said the actions were to "protect the health and safety of its work force and the parties that appear before it" and should allow it to "continue to review transactions efficiently and effectively."
The pre-transaction regulatory notifications required under the Hart-Scott-Rodino Act start a 30-day clock ticking. Parties in noncontroversial M&As probably have an expectation the FTC and DOJ will do a review quickly and grant an early termination of that 30-day wait, meaning the deal can close within a couple of weeks, Kully said. Without early terminations, those noncontroversial deals will have to wait out the 30 days, he said. He said parties expecting a deal to sail through will need to account for that couple of extra weeks of wait time in their planning.
Kully said second information requests usually enter into timing agreements that give the DOJ and FTC more time to decide how to proceed, with the combining parties using that time to advocate against being sued and looking for ways to settle. He said parties likely would have given the extra 30 days DOJ says it will request regardless for more advocacy. He said the timing agreements in big deals often become fluid anyway.
Seth Bloom, former general counsel of the Senate Antitrust Subcommittee, said COVID-19 issues could slow the regulatory review process because going through thick stacks of documents can become more unwieldy when working remotely. COVID-19 issues also could be a problem for the combining parties having to produce the documents because that involves going into the office and poring through paperwork.