Category 'EU Mergers'

April 29, 2019

Antitrust Reverse Termination Fees--2019 Q1 Update

This post updates the public deal antitrust reverse termination fee database through March 31, 2019.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1260 strategic negotiated transactions announced between January 1, 2005, and March 31, 2019. Of these, 156 transactions, or 12.0% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.3% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.4% of the transaction value.

We thought it might be helpful to give some statistics for various subsamples covering different periods so that you could get an idea of how, if at all, antitrust reverse terminations fees are varying over time.

    Subsample statistics

The most recent subsample covers the four-year period from January 1, 2015, through March 31, 2019. This subsample covered 433 transactions, of which 68, or about 15.7%, had antitrust reverse termination fees. The fees in this sample had a mean of 4.7%, 0.6 percentage points less than the 5.3% of the full sample, and a median of 4.3%, just about the same as the full sample. The relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 12.5%.

The charts below gives the frequency of antitrust reverse breakup fees across the four-year-plus subsample set.
 

Frequency of Antitrust Reverse Termination Fees

ARTFs over Time

Of the 63 transactions signed since January 1, 2015, with an antitrust reverse termination fee for which the antitrust reviews have been completed, 48, or about 76%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, nine transactions closed subject to a DOJ or FTC consent order, one subject to a Public Utilities Commission order, and one transaction (AT&T/Time Warner) defeated an Antitrust Division preliminary injunction challenge and closed (the DOJ has appealed).


Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2005, through March  31, 2019)

Categories: EU Mergers, US Mergers

0 Comments

January 8, 2019

Antitrust Reverse Termination Fees--2018 Q4 Update

This post updates the public deal antitrust reverse termination fee database through December 31, 2018.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1239 strategic negotiated transactions announced between January 1, 2005, and December 31, 2018. Of these, 155 transactions, or 12.5% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.3% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.4% of the transaction value.

We thought it might be helpful to give some statistics for various subsamples covering different periods so that you could get an idea of how, if at all, antitrust reverse terminations fees are varying over time.

    Subsample Statistics

The most recent subsample covers the four-year period from January 1, 2015, through December 31, 2018. This subsample covered 417 transactions, of which 66, or about 15.8%, had antitrust reverse termination fees. The fees in this sample had a mean of 4.7%, one-half of a percentage point less than the 5.2% of the full sample, and a median of 4.4%, the same as the full sample. The relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 12.5%.

The chart below gives the frequency of antitrust reverse breakup fees across the four-year subsample set.


  Frequency of Antitrust Reverse Breakup Fees

Of the 62 transactions signed since January 1, 2015, with an antitrust reverse termination fee for which the antitrust reviews have been completed, 49, or about 79%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, seven transactions closed subject to a DOJ or FTC consent order, one subject to a Public Utilities Commission order, and one transaction (AT&T/Time Warner) defeated an Antitrust Division preliminary injunction challenge and closed (the DOJ has appealed).


Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2005, through December 31, 2018)

Categories: EU Mergers, US Mergers

0 Comments

November 5, 2017

Antitrust Reverse Termination Fees--2018 Q3 Update

This post updates the public deal antitrust reverse termination fee database through September 30, 2018.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1217 strategic negotiated transactions announced between January 1, 2005, and September 30, 2018. Of these, 154 transactions, or 12.7% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.2% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.4% of the transaction value.

We thought it might be helpful to give some statistics for various subsamples covering different periods so that you could get an idea of how, if at all, antitrust reverse terminations fees are varying over time.

    Subsample Statistics

The most recent subsample covers the three-year-plus period from January 1, 2015, through September 30, 2018. This subsample covered 395 transactions, of which 65, or about 16.5%, had antitrust reverse termination fees. The fees in this sample had a mean of 4.67%, a little more than one-half of a percentage point less than the 5.2% of the full sample, and a median of 4.4%, the same as the full sample. The relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 8.8%.

The chart below gives the frequency of antitrust reverse breakup fees across the three-year-plus subsample set.

  Frequency of Antitrust Reverse Breakup Fees

Of the 55 transactions signed since January 1, 2015, with an antitrust reverse termination fee for which the antitrust reviews have been completed, 43, or about 78%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, six transactions closed subject to a DOJ or FTC consent order, and one transaction (AT&T/Time Warner) is in litigation.


Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2005, through September 30, 2018)

Categories: EU Mergers, US Mergers

0 Comments

July 3, 2018

Sample Antitrust Risk-Shifting Provisions in M&A Transactions--2018 Edition

This note updates and expands the sample of antitrust-related provisions in M&A agreements over the one we posted in November 2014. As in the earlier edition, the sample provisions have been taken (sometimes with a little modification) from actual M&A agreements. 

This sample will give you with a good idea of the wide variety of provisions parties have used, including:

  • the jurisdictions and the timing where merger control filings are to be made;
  • the level of cooperation the parties owe each other in defending the transaction;
  • who controls the defense strategy
  • the antitrust-related conditions precedent
  • whether the parties are obligated to litigate an adverse agency decision and, if so, who controls the litigation strategy and how long will the parties have to litigate before the drop-dead date;
  • whether the buyer is obligated to "fix" any antitrust concerns through consent decree relief and how far this obligations goes;
  • whether an antitrust reverse termination fee is to be paid in the event of a failure of the antitrust conditions; and
  • the conditions under which the agreement may be terminated or the drop-dead date extended

Of course, every deal stands on its own. The language that has been used in one deal may not be appropriate for another deal, and inclusion of a provision in this sample does not constitute an endorsement of the language. Still, I find the collection helpful in drafting and negotiating the antitrust provisions in M&A agreements.
 

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Categories: EU Mergers, US Mergers

0 Comments

June 9, 2018

Antitrust Reverse Termination Fees--2018 Q1+ Update

This post updates the public deal antitrust reverse termination fee database through May 31, 2018.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1190 strategic negotiated transactions announced between January 1, 2005, and May 31, 2018. Of these, 153 transactions, or 12.9% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.3% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.4% of the transaction value.

We thought it might be helpful to give some statistics for various subsamples covering different periods so that you could get an idea of how, if at all, antitrust reverse terminations fees are varying over time.

    Frequency of Antitrust Reverse Breakup Fees

The most recent subsample covers the three-year-plus period from January 1, 2015, through May 31, 2018. This subsample covered 367 transactions, of which 64, or about 17%, had antitrust reverse termination fees. The fees had a mean of 4.7%, a little more than one-half of a percentage point less than the 5.3% of the full sample, and a median of 4.4%, the same as the full sample. the relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 8.8%.

The chart below gives the frequency of antitrust reverse breakup fees across the three-year subsample set.

  Frequency of Antitrust Reverse Breakup Fees

Of the 52 transactions signed since January 1, 2015, with an antitrust reverse termination fee for which the antitrust reviews have been completed, 41, or about 79%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, six transactions closed subject to a DOJ or FTC consent order, and one transaction (AT&T/Time Warner) is in litigation.


Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2012, through May 31, 2018)

Categories: EU Mergers, US Mergers

0 Comments

April 9, 2018

2018 S&S Annual Antitrust Report

Shearman & Sterling publishes its sixth annual Antitrust Annual Report today. The 2018 Report discerns two key trends – a global resurgence of controls on foreign direct investment and the focus on ‘fairness’ developing in the European Union (EU). The report also discusses various other important developments in international competition law enforcement.

Categories: EU Antitrust Basics, EU Cartels, EU Distribution, EU Enforcement, EU Mergers, US Antitrust Basics, US Cartels, US Distribution, US Enforcement, US Mergers

0 Comments

1/10/2018

Antitrust Reverse Termination Fees--2017 Q4 Update

This post updates the public deal antitrust reverse termination fee database through December 31, 2017.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1140 strategic negotiated transactions announced between January 1, 2005, and December 31, 2017. Of these, 142 transactions, or 12.5% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.3% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.6% of the transaction value.

We thought it might be helpful to give some statistics for the more recent subsample covering the three-year period from January 1, 2015, through December 31, 2017. This subsample covered 214 transactions, of which 53, or about 25%, had antitrust reverse termination fees. This suggests that antitrust reverse breakup fees are becoming more common in transactions satisfying our sample criteria. These fees had a mean of 4.8%, one-half of a percentage point less than the 5.3% of the full sample, and a median of 4.6%, the same as the full sample. This is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 8.8%.

The chart below gives the frequency of antitrust reverse breakup fees across the three-year subsample set.

  Frequency of Antitrust Reverse Breakup Fees

Of the 46 transactions signed since January 1, 2015, with an antitrust reverse termination fee for which the antitrust reviews have been completed, 35, or about 76%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, six transactions closed subject to a DOJ or FTC consent order, and one transaction (AT&T/Time Warner) is in litigation.


Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2012, through December 31, 2017)

Categories: EU Mergers, US Mergers

0 Comments

July 10, 2017

Antitrust Reverse Termination Fees--2017 Q2 Update

This post updates the public deal antitrust reverse termination fee database through June 30, 2017.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1099 strategic negotiated transactions announced between January 1, 2005, and June 30, 2017. Of these, 133 transactions, or 12.1% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.4% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.6% of the transaction value.

We thought it might be helpful to give some statistics for the more recent subsample covering the five-year-plus period from January 1, 2012, through June 30, 2017. This subsample covered 422 transactions, of which 73, or about 17%, had antitrust reverse termination fees. This suggests that antitrust reverse breakup fees are becoming more common in transactions that meet our sample criteria. These fees had a mean of 5.3%, not much different than the full sample, but a median of 5.0%, indicating that the fees were shifting in their distribution to a slightly higher percentage value. This is consistent with a tighter distribution of the fees, which ranged from a low of 1.5% to a high of 10.4%.

The chart below gives the frequency of antitrust reverse breakup fees across the five-year subsample set.

 

NB: The percentage intervals on the horizontal axis are not of equal size.

Of the 65 transaction signed since January 1, 2012, with an antitrust reverse termination fee for which the antitrust reviews have been completed, 47, or about 72%, were cleared without any antitrust challenge. One transaction (Halliburton/Baker Hughes) was terminated in the course of litigation with the U.S. antitrust enforcement agencies, four transactions (Sysco/US Foods, Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court,* and 13 transactions closed subject to a DOJ or FTC consent order.

* Anthem has challenged Cigna's termination of the merger agreement in Delaware Chancery Court.

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2012, through June 30, 2017)

Categories: EU Mergers, US Mergers

0 Comments

April 15, 2017

Antitrust Reverse Termination Fees--2017 Q1 Update

This post updates the public deal antitrust reverse termination fee database through March 31, 2017.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1072 strategic negotiated transactions announced between January 1, 2005, and March 31, 2017. Of these, 131 transactions, or 12.2% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the sample was 5.5% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.6% of the transaction value.

We thought it might be helpful to give some statistics for the more recent subsample covering the five-year-plus period from January 1, 2012, through March 31, 2017. This subsample covered 395 transactions, of which 71, or about 18%, had antitrust reverse termination fees. This suggests that antitrust reverse breakup fees are becoming more common in transactions that meet our sample criteria. These fees had a mean of 5.3%, not much different than the full sample, but a median of 5.0%, indicating that the fees were shifting in their distribution to a slightly higher percentage value. This is consistent with a tighter distribution of the fees, which ranged from a low of 1.5% to a high of 10.4%.

The chart below gives the frequency of antitrust reverse breakup fees across the five-year subsample set.

 

NB: The percentage intervals on the horizontal axis are not of equal size.

Since January 1, 2012, of the 57 transactions with an antitrust reverse termination fee for which the antitrust reviews have been completed, 40, or about 70%, were cleared without any antitrust challenge. One transaction (Halliburton/Baker Hughes) was terminated in the course of litigation with the U.S. antitrust enforcement agencies, four transactions (Sysco/US Foods, Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court,* and 12 transactions closed subject to a DOJ or FTC consent order.

* Anthem has challenged Cigna's termination of the merger agreement in Delaware Chancery Court.

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2012, through March 31, 2017)

Categories: EU Mergers, US Mergers

0 Comments

May 26, 2016

Antitrust Annual Report Surveys Recent Antitrust Developments

In its 2016 Annual Report, Shearman & Sterling's Antitrust Group discusses 19 major trends in antitrust law worldwide in merger control, cartels, compliance, unilateral conduct, antitrust litigation, and state aid.

Categories: EU Antitrust Basics, EU Cartels, EU Distribution, EU Enforcement, EU Mergers, US Antitrust Basics, US Cartels, US Distribution, US Enforcement, US Mergers

0 Comments

February 4, 2015

Antitrust Reverse Termination Fees--2015 Update

This post updates one we did last May analyzing antitrust reverse breakup fees in public deals since January 1, 2005.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 822 strategic negotiated transactions announced between January 1, 2005, and December 31, 2014. Of these, 88 transactions, or about 10.7% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the sample was 5.7% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.3% of the transaction value.

Frequency of Antitrust Reverse Breakup Fees

NB: The percentage intervals on the horizontal axis are not of equal size.

Significantly, of the 79 transactions with an antitrust reverse termination fee for which the antitrust reviews have been completed, 55, or about 70%, were cleared without any antitrust challenge. One transaction (AT&T/T-Mobile) was terminated in the course of litigation with the Antitrust Division, 20 were subject to only a DOJ or FTC consent order, two (Boston Scientific/Guidant and Hexion/Huntsman) were subject to both an FTC consent order and EC undertakings, and one (Federated/May) was subject to an assurance agreement with a group of state attorneys general. Several deals did not close for nonantitrust reasons.

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2005 through December 31, 2014)

Categories: EU Mergers, US Mergers

0 Comments

November 6, 2014

Sample Antitrust-Related Provisions in M&A Agreements--2014 Edition

This note provides a much expanded sample of antitrust-related provisions in M&A agreements over the one we posted in April 2013. As before, the sample provisions have been taken (sometimes with a little modification) from actual M&A agreements. 

This sample will give you with a good idea of the wide variety of provisions parties have used in dealing with 

  • the jurisdictions and the timing where merger control filings are to be made;
  • the level of cooperation the parties owe each other in defending the transaction;
  • who controls the defense strategy
  • the antitrust-related conditions precedent
  • whether the parties are obligated to litigate an adverse agency decision and, if so, who controls the litigation strategy and how long will the parties have to litigate before the drop-dead date;
  • whether the buyer is obligated to "fix" any antitrust concerns through consent decree relief and how far this obligations goes;
  • whether an antitrust reverse termination fee is to be paid in the event of a failure of the antitrust conditions; and
  • the conditions under which the agreement may be terminated or the drop-dead date extended

Of course, every deal stands on its own. The language that has been used in one deal may not be appropriate for another deal, and inclusion of a provision in this sample does not constitute an endorsement of the language. Still, I find the collection helpful in drafting and negotiating the antitrust provisions in M&A agreements.
 

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Categories: EU Mergers, US Mergers

0 Comments

May 14, 2014

Antitrust Reverse Termination Fees--2014 Update

This post updates one we did over a year ago analyzing antitrust reverse breakup fees in public deals since January 1, 2005.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 760 strategic negotiated transactions announced between January 1, 2005, and May 1, 2014. Of these, 79 transactions, or about 9.8% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the sample was 5.8% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.3% of the transaction value.

Significantly, of the 72 completed transactions with an antitrust reverse termination fee, 50 were cleared without any antitrust challenge. One transaction (AT&T/T-Mobile) was terminated in the course of litigation with the Antitrust Division, 19 were subject to only a DOJ or FTC consent order, one (Boston Scientific/Guidant) was subject to both an FTC consent order and EC undertakings, and one (Federated/May) was subject to an assurance agreement with a group of state attorneys general.

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2005 through May 1, 2014)

Categories: EU Mergers, US Mergers

1 Comments

March 6, 2014

Reasonable Best Efforts: Cold Comfort to Sellers

New York M&A partner Peter Lyons, antitrust partner Beau Buffier and M&A associate Tammara Fort, along with J. Reuben Clark Law School (Brigham Young University) associate professor Matthew Jennejohn, published an article, "Reasonable Best Efforts: Cold Comfort to Sellers,” in the January 2014 issue of The M&A Lawyer.

The article examines a preliminary bench ruling from the Delaware Chancery Court in the matter of Cooper Tire & Rubber Company v. Apollo (Mauritius) Holdings Pvt. Ltd., et al, which refused Cooper Tire’s assertion that Apollo has failed to use its reasonable best efforts to complete negotiations with Cooper Tire’s labor union and close their then-pending merger. According to the authors, the case “provides a rare Delaware court interpretation of the actions required to satisfy the “reasonable best efforts” standard that has become commonplace in antitrust covenants in merger agreements.” They add that, based on Cooper, “a reasonable best efforts standard alone provides cold comfort to sellers seeking deal certainty in circumstances where there is a meaningful likelihood that the antitrust authorities will require economic concessions in order to approve a transaction.” In the end, according to the authors, the lesson of Cooper is clear: “if a strategic buyer comes offering assurances of reasonable best efforts without any specifics, let the seller beware.”

Categories: EU Mergers, US Mergers

0 Comments

April 27, 2013

Sample Antitrust-Related Provisions in M&A Agreements--2013 Edition

This note provides a much expanded sample of antitrust-related provisons in M&A agreements over the one we posted in August 2012. As before, the sample provisions have been taken (sometimes with a little modification) from actual M&A agreements. 

This sample will give you with a good idea of the wide variety of provisions parties have used in dealing with 

  • the jurisdictions and the timing where merger control filings are to be made;
  • the level of cooperation the parties owe each other in defending the transaction;
  • who controls the defense strategy
  • the antitrust-related conditions precedent
  • whether the parties are obligated to litigate an adverse agency decision and, if so, who controls the litigation strategy and how long will the parties have to litigate before the drop-dead date;
  • whether the buyer is obligated to "fix" any antitrust concerns through consent decree relief and how far this obligations goes;
  • whether an antitrust reverse termination fee is to be paid in the event of a failure of the antitrust conditions; and
  • the conditions under which the agreement may be terminated or the drop-dead date extended

Of course, every deal stands on its own. The language that has been used in one deal may not be appropriate for another deal, and inclusion of a provision in this sample does not constitute an endorsement of the language. Still, I find the collection helpful in drafting and negotiating the antitrust provisions in M&A agreements.
 

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Categories: EU Mergers, US Mergers

0 Comments

August 28, 2012

Sample Antitrust-Related Provisions in M&A Agreements--2012 Expanded Edition

This note provides a much expanded sample of antitrust-related provisions in M&A agreements over the one we posted last year. As before, the sample provisions have been taken (sometimes with a little modification) from actual M&A agreements. 

This sample will give you with a good idea of the wide variety of provisions parties have used in dealing with 

  • the jurisdictions and the timing where merger control filings are to be made;
  • the level of cooperation the parties owe each other in defending the transaction;
  • who controls the defense strategy
  • the antitrust-related conditions precedent
  • whether the parties are obligated to litigate an adverse agency decision and, if so, who controls the litigation strategy and how long will the parties have to litigate before the drop-dead date;
  • whether the buyer is obligated to "fix" any antitrust concerns through consent decree relief and how far this obligations goes;
  • whether an antitrust reverse termination fee is to be paid in the event of a failure of the antitrust conditions; and
  • the conditions under which the agreement may be terminated or the drop-dead date extended

Of course, every deal stands on its own. The language that has been used in one deal may not be appropriate for another deal, and inclusion of a provision in this sample does not constitute an endorsement of the language. Still, I find the collection helpful in drafting and negotiating the antitrust provisions in M&A agreements.
 

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Categories: EU Mergers, US Mergers

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07/20/2012

Antitrust Reverse Termination Fees--2012 Mid-Year Update

This post updates one we did a year ago analyzing antitrust reverse breakup fees in public deals since January 1, 2005. In two related notes, we discussed various means of allocating antitrust risk in an acquisition agreement and provided some sample risk-shifting provisions that have been used in actual deals. We will be updating those posts shortly.

This post examines a particular means of allocating antitrust risk: the antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee. An antitrust reverse termination fee is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

In a sample of 633 strategic negotiated transactions announced between January 1, 2005, and June 30, 2012, 58 transactions, or about 9.2% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the sample was 5.8% of the transaction value, although since several high percentage fees skewed the distribution to the high end, a better indicator may be the median, which was 3.9% of the transaction value.

Significantly, there was an antitrust intervention in only only 16 of the 58 transactions since January 1, 2005, with antitrust reverse termination fees. One transaction (AT&T/T-Mobile) was terminated in the course of litigation with the Antitrust Division, 13 were subject to only a DOJ or FTC consent order, one (Boston Scientific/Guidant) was subject to both an FTC consent order and EC undertakings, and one (Federated/May) was subject to an assurance agreement with a group of state attorneys general.

The note begins with an example of an antitrust reverse termination fee provision found in the recent Cardinal Health/Kinray stock purchase agreement. This is a fairly typical provision, although, not surprisingly, the ARTF provisions vary considerably from deal to deal. The middle sections explain how we created our sample set, analyze the occurrence and the magnitudes of antitrust reverse termination fees in the sample, and look at a few sample outliers. Finally, we look at the few deals in which the antitrust conditions failed and the antitrust reverse termination fee was paid.

For the full pdf version of the full note, click here. For the data spreadsheet, click here.

NB:  Surprisingly, there were no deals with antitrust reverse termination fees that satisfied our screening criteria from November 12, 2011, to June 30, 2012. There have been several since then, and we have updated the spreadsheet below through November 30, 2012.

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
Antitrust Reverse Termination Fees--2012 Mid-Year Update
Antitrust Reverse Termination Fees--Data Set (January 1, 2005 through November 30, 2012)

Categories: EU Mergers, US Mergers

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July 15, 2011

Antitrust Reverse Termination Fees

NOTE: An updated version of this post was published on July 20, 2012, and may be found here.

 

Categories: EU Mergers, US Mergers

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February 24, 2011

Sample Antitrust Risk-Shifting Provisions in M&A Transactions

NOTE: An updated version of this post was published on August 28, 2012, and may be found here.

 

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Categories: EU Mergers, US Mergers

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February 14, 2011

Antitrust Risks in M&A Transactions

Earlier this month, Steve Camahort, Lisl Dunlop, Mike Kennedy and I gave a CLE presentation in the Bay Area addressing the three aspects of dealing with M&A antitrust risks at the beginning of a deal:

  • Assessing the substantive risk
  • Predicting the possible reviewing agency demands for remedies
  • Allocating the antitrust risks in the purchase agreement
     

The deck we used is self-contained and may be viewed here.

Dale Collins
+1.212.848.412
dale.collins@shearman.com

 

Resources:
DOJ/FTC Horizontal Merger Guidelines (rev. Aug. 19, 2010)
DOJ/FTC Commentary on the Merger Guidelines (2006)
FTC Competition Enforcement Database
FTC Horizontal Merger Investigation Data, Fiscal Years 1996-2007
FTC Staff Statement on Negotiating Merger Remedies
FTC FAQs about Merger Consent Order Provisions
Strategic Deals Require Strategic Thinking: Antitrust Provisions to Consider in Negotiated Transactions
Examples of M&A antitrust risk-shifting provisions

Categories: EU Mergers, US Mergers

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