M&A in 2024: How to Prepare for HSR Filings in a Year of Antitrust Uncertainty

Mergers & Acquisitions

In June 2023, the Federal Trade Commission (“FTC”) issued a proposed rule that would dramatically change, and increase the burden of, Hart-Scott-Rodino Act (the “HSR Act”) pre-merger antitrust filings.  Many observers expect these rules to become effective by summer of 2024.  However, the exact nature of the final rules, and when they will become effective, remain uncertain.  Despite this unpredictability, there are steps dealmakers can take now to best position themselves for filing under the HSR Act in the second half of 2024.

1. Evaluate HSR Notice requirements.

Under the HSR Act, the parties to a sale of securities, assets, or noncorporate interests (such as LLC or partnership interests) (a “transaction”), must file notice (“HSR Notice”) with the FTC’s Premerger Notification Office (“PNO”) prior to the closing of the transaction only if the value of the transaction exceeds specified thresholds.  These thresholds, commonly known as “size of transaction” and “size of parties” tests, are not expected to change, except for standard adjustments for inflation, and are measured by the total value of Seller’s assets, securities, or noncorporate interests that Buyer will hold after the transaction. 

HSR Notice2023 Transaction Size2024 Transaction Size
(Effective March 6, 2024)
No HSR Notice RequiredLess than $111.4 millionLess than $119.5 million
Filing Required Only If Parties Meet Size of Parties Test$111.4 million – $445.5 million$119.5 million – $478 million
HSR Notice Required Regardless of the Size of PartiesAt least $445.5 millionAt least $478 million

For medium-sized transactions, HSR Notice is only required if the parties’ net assets or annual revenue meet or exceed the “size of parties” thresholds.

2023 Size of Parties Threshold2024 Size of Parties Threshold (effective March 6, 2024)
Smaller party$22.3 million$23.9 million
Larger party$222.7 million$239 million

2. Plan for longer HSR Notice timelines under any new rules. 

Under the HSR Act, if the PNO does not object to the transaction within 30 days after filing the HSR Notice, the parties may close the transaction.  While this 30-day waiting period will not change under the proposed rules, antitrust practitioners anticipate a temporary increase in initial filings being rejected by the PNO due to differing interpretations of the newly implemented rules.  This could result in delays in the start of the waiting period as parties revise their filings to meet PNO expectations.

Even more significantly, the FTC has estimated that the time necessary to draft an HSR Notice will quadruple, on average, under the proposed rules.  Currently, it takes the parties and counsel approximately one to two weeks to prepare the materials for a standard HSR Notice.  Even if some of the more burdensome requirements are removed from the proposed rules before they are finalized, parties can expect the pre-filing process to take much longer and, to the extent possible, should prepare the HSR Notice concurrently with transaction negotiations and due diligence.    

3. Conduct due diligence and negotiations with antitrust principles in mind.

The proposed rules, together with the revised Merger Guidelines issued by the FTC and Department of Justice in December 2023, suggest enhanced antitrust enforcement focus on merger-related activity in 2024.  Parties should keep antitrust principles in mind throughout the transaction process, including: 

  • Do not share competitively sensitive information in due diligence without first consulting antitrust counsel on risk management methods, such as redaction, aggregation, or creation of a clean room that restricts access to competitively sensitive information.
  • Establish and follow data room procedures and document the distribution of and access to relevant materials.  Do not send documents or communications through unapproved channels.
  • Treat any information about competition, markets, or synergies with seriousness and care – avoid flippant or exaggerated communications such as “we’ll dominate the market” or “our competitors won’t stand a chance.”
  • Avoid “gun-jumping,” in which Buyer directs or makes business decisions with or for Seller prior to the closing of the transaction. 

4. Implement a strategy for competition- and synergy-related documents. 

HSR Notice currently requires submission, including author and date, of certain documents prepared for the purpose of evaluating or analyzing the transaction with respect to competitive factors (such as market shares, synergies between the parties, competition or competitors, financial models, and growth or expansion plans).  Under the proposed rules, this requirement is expected to expand, and could require submission of drafts, documents prepared by or for a wider range of individuals, and certain ordinary course business plans or other reports.  Parties to an M&A transaction should develop a strategy for managing and tracking authorship, version control, and distribution of these documents to ensure accurate, efficient, and appropriate submission in the HSR Notice.

5. Limit communications systems and establish a document retention plan. 

Destruction of documentation or information relevant to the antitrust review process is illegal in certain circumstances.  To emphasize this point, the proposed rules require each party to identify and list all communications systems or messaging applications on any device used by the party that could be used to store or transmit information or documents related to its business operations (including email, Teams, Slack, text messages, What’s App, etc.)  They also require that an officer or director of each party certify that they have taken steps to prevent destruction of documents and information related to the proposed transaction.  Parties should use only appropriate business systems for transaction-related communications throughout the deal process.  The parties should also evaluate their standard document destruction policies to determine whether any exceptions are necessary for transaction-related documents.

6. Prepare for detailed business disclosures. 

The proposed rules require significantly more detail about the parties and their affiliates, their respective businesses, prior acquisitions, the rationales for the transaction, and the transaction itself.  They also require more extensive information about the parties’ respective markets for customers, suppliers, and employees.  While the exact nature of these disclosures may differ in the final rules, the parties should prepare appropriate resources to provide detailed factual information, including business operation and competition narratives, organizational and management charts, transaction timelines, industry and geographic market details, employee classification data, supplier information, prior acquisition agreements, and government contracts or subsidies. 

7. Communicate with officers, directors, stockholders, and interest holders. 

The proposed rules require increased disclosure of and about corporate decision-makers and interest holders.  For example, the parties must identify their officers, directors and board observers (or equivalent) and report any other companies for which those individuals serve or have served in similar positions during the prior two years.  The proposed rules also require additional disclosures regarding indirect minority owners of the parties (including LPs), and identification of other types of interest holders that may exert influence on the parties, such as significant creditors or holders of non-voting securities.  Parties should develop a strategy for communicating with stakeholders to avoid delays, protect confidentiality, and preserve key business relationships.

For questions or additional guidance on how to manage antitrust risk in the M&A process, please contact Cassy Creekman, Scott Hazelgrove, or Jonathan Greene.