Mergers and Acquisitions


If a client wants to acquire another company or be sold to another company, the first step in the process is to understand the position of the companies and the kind of market they are in. The standard antitrust questions about market share, barriers to entry, and relationships between buyers and sellers must be addressed. This will involve interviews with many knowledgeable personnel and review of the documents that have been created by the client to describe the market, including strategic plans, and also documents describing the merger. These documents potentially can be very helpful to your case or a smoking gun against your case. This process is often complicated by the fact that at the early stage when you are starting to evaluate a transaction, usually the transaction is extremely confidential even within the company, and there may be a limit to the people you can talk to and documents you can see without compromising confidentiality.

The next step is advising the client what the likelihood is that the transaction will go through. What is the likelihood that there will be a serious investigation? How will that impact the timing of the transaction and its costs? Antitrust investigations of mergers can result in what are called second requests and can go on for many months. That can have a serious impact, for example, on a company that is being sold if it is known in the marketplace . Customers may not want to deal with a company being sold, and key employees may start to leave. And if the transaction ultimately fails, the selling company can be in serious trouble. The failure can hurt it far more than the purchaser. The client needs to understand these business risks in deciding whether a transaction should be attempted.

The rest of the process occurs after the transaction is announced. A filing is made with the government if the transaction and the parties are of the requisite size . There are then two kinds of issues which must be addressed. The first involves responding to the governments request for information and documents; that can be quite massive. Often hundreds of boxes of documents need to be gathered and produced, sometimes from all around the world. The second involves making your case to the government as to why the transaction is not anticompetitive and why they ought not to challenge it and why if they did they would be beat in court . Both of those activities are going on with the clock running very fast, and it is a very intense process.

The process of opposing a merger is different. One can sometimes sue to prevent a merger. That is both very expensive and often faces legal obstacles. A competitor has to tell a fairly specific kind of story in order to have standing and be able to claim antitrust injury to oppose a merger. The antitrust laws suggest that under many circumstances, though not all, mergers that are anticompetitive will help other competitors in the market, because they will result in higher prices and that will benefit all the competitors . The people who are typically more frequently harmed by an anticompetitive merger are customers. While customers in theory could sue to stop a merger of their suppliers, it does not happen very often. Customers can be understandably reluctant to go to war with their suppliers. They may also not have enough at stake to justify the kind of expense that is involved.

What is more typical when a party wants to oppose a merger is to simply go to the federal agency or state agency that is looking at the merger and try to convince them that they ought to stop it. You can also provide them with information that they can use to stop the merger and provide people who can testify in court.

In the merger context, an antitrust lawyer needs to think about not merely what the judge would want to hear, but first what the regulators are interested in, which is often more technical and more sophisticated. You also may need to address confidentiality issues, because your client may be very concerned that the news will leak that it is opposing the transaction, and that can cause it problems in the marketplace later. I have had cases in which clients had some interest in opposing a merger but decided that the risk to them in the marketplace if someone figured out that they were opposing it was too great and they decided not to go forward.




Inside the Minds Stuff - Inside the Minds. Winning Antitrust Strategies
Inside the Minds Stuff - Inside the Minds. Winning Antitrust Strategies
ISBN: N/A
EAN: N/A
Year: 2004
Pages: 102

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