New M&A rules likely to delay deals by months, add significant costs
Parradee Kietsirikul
New U.S. guidelines proposed for regulators to review mergers and acquisitions have the potential to add months to a deal review, and companies and private equity firms may incur significant new costs.
Last month, the Federal Trade Commission and the Department of Justice released a proposed revised Hart-Scott-Rodino filing process, that would require companies and investment firms to submit additional information that the agencies hadn't previously requested, according to the proposed rules released on June 27. This would mark the first change to the HSR filing process since it started 45 years ago.
It generally takes about one to two weeks to prepare an HSR filing, according to Kara Kuritz, an antitrust attorney with Vinson & Elkins. The new proposed rules could add a few months to the process, and the filing party may not have access to all the information being requested.
"The proposed rules would make it particularly difficult for large investment funds to comply," Kuritz, who previously served as the HSR Act specialist at the DOJ's antitrust division, told Seeking Alpha. "I expect most of the additional time will be on the front end, before the filing ever can be submitted to the agencies."
The agencies will ask for details about the transaction rationale and details surrounding investment vehicles or corporate relationships. The antitrust regulators will also ask for information related to products or services, both horizontal products and services, and non-horizontal business relationships such as supply agreements.
"Now the agencies are proposing that such information be provided in all reportable deals, so it imposes a significant burden for deals that are unlikely to raise any competition concerns," Kuritz explained. "
The agencies will take public comments on the proposed rule changes for 60 days.
"The Agencies acknowledge that the proposed changes require a significant amount of additional information," the agencies said in a statement last month. 
Kuritz expects that the new rules may add significant additional legal fees for companies and investment firms. 
"Because the proposed rules require narrative responses to be created, companies will incur tens of thousands of dollars in additional legal fees for attorneys drafting those responses," according to Kuritz.
It's possible that "on the margins," the proposed rules could potentially curtail M&A, which has already seen a decline due to volatility in the markets with interest rate increases and a Biden administration that has been aggressive in its antitrust efforts, suing in an attempt to block several high profile transactions, including Microsoft's (MSFT) planned $69 billion purchase of Activision (ATVI) and Amgen's (AMGN) $28 billion purchase of Horizon Therapeutics (HZNP).
"Any time the transaction costs of doing a deal increase, that cost increase has a chilling effect on M&A," Kuritz said.
Kuritz appeared to question why there was any reason for the new proposed HSR filing process.
"I generally think the agencies are already choosing to investigate the transactions that are most likely to raise competition concerns," Kuritz said. "In other words, it's not clear to me that the agencies are missing any key information that would lead them to investigate more of different deals than they do today."
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