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Wednesday, June 10, 2015


Original Story: morningstar.com

Mergers and acquisitions have accelerated sharply since the financial crisis faded, but the government's pace for reviewing proposed deals is slowing.

The Justice Department and the Federal Trade Commission are taking more time to investigate their most intensely scrutinized mergers, according to data compiled by antitrust lawyer Paul Denis of Dechert LLP. A Kansas City antitrust lawyer is following this story closely.

In such deal reviews concluded this year, more than 10 months elapsed, on average, between the transaction's announcement and a yes-or-no decision by the government. That's an increase from an average of seven months in recent years.

As time passes, merging firms can become increasingly worried about completing a deal. They have to ensure financing remains in place, and that can cost money. They can begin to lose employees nervous about the future, as well as customers. A Richmond mergers and acquisitions lawyer is knowledgeable in all areas of M&A and general acquisitions law, including but not limited to leveraged buyouts and company reorganizations.

"When you go from seven months of that to 10 months, it's different," Mr. Denis said. "No one wants their deals to hang out there very long. You're taking market risk. All kinds of things can happen."

Companies in a number of recent mergers have been waiting upward of a year -- or longer -- for a final verdict, and some deals have fallen apart because of government concerns.

Comcast Corp.'s bid for Time Warner Cable Inc. was pending for 14 months before it was dropped in April in the face of opposition from the Justice Department and the Federal Communications Commission.

Days later, Applied Materials Inc. walked away from its deal to acquire Tokyo Electron Ltd. 19 months after it was announced, citing Justice Department objections. The FTC spent more than a year examining Sysco Corp.'s planned acquisition of rival food distributor US Foods Inc. before bringing a lawsuit in February challenging the deal.

Other reviews still pending after more than a year include the merger of medical-device makers Zimmer Holdings Inc. and Biomet Inc., and AT&T Inc.'s deal to acquire DirecTV.

Government officials say companies play a significant role in determining the duration of antitrust reviews. A Boston M&A lawyer represents clients in business divestitures, leveraged buyouts, and company reorganizations.

"There are ways the parties can help themselves in the process," said Deborah Feinstein, head of the FTC's Bureau of Competition. It matters how long companies take to provide data and documents, to offer divestitures when appropriate, and to find buyers for assets that need to be sold off to get approval.

Ms. Feinstein also said companies can choose to come to the agency early after a deal is announced to walk through the transaction and highlight areas of business overlap between the merger partners. "Sometimes that can significantly speed things up," she said.

Bill Baer, the Justice Department's antitrust chief, said the average review is taking longer this year due to a couple of particularly lengthy ones. "In those cases, the parties weren't pushing for a decision, either because they wanted more time to convince us or because they wanted to align the process with a sister agency," he said.

Mr. Denis's statistics focus on merger deals that resulted in a government lawsuit, a settlement, abandonment by the firms, or a closing statement from antitrust officials explaining why the transaction should be allowed.

Not all significant recent merger reviews have taken so long. The FTC cleared the merger of medical-supply companies Medtronic Inc. and Covidien PLC, with conditions, about five months after the deal was announced in June 2014.

External factors explain the length of some antitrust probes. Telecom mergers, such as the Comcast and AT&T deals, require an added layer of FCC review. And deals with a strong international component can take longer as firms coordinate with antitrust agencies overseas.

But antitrust lawyers say the U.S. agencies have gotten more demanding in asking firms for long periods to conduct exams.

By law, merging parties can put the agencies on a 30-day decision clock once they have complied with requests for detailed data about a merger, a process that can take months. In reality, firms almost always agree to give more time, with officials sometimes asking for 90 days or more, antitrust lawyers say.

The antitrust agencies are operating from a position of strength. Companies need the government's cooperation, particularly on narrowing the scope of agency information requests, because producing large volumes of documents is costly.

More important, firms prefer not to get sued, so they are usually willing to give the government more time if it might make a difference between a suit and a settlement. "If parties are unwilling to litigate, the agencies will sense it, and it can give the agencies greater leverage to lengthen investigations," said lawyer Joshua Soven of Gibson, Dunn & Crutcher LLP, who has worked at Justice and the FTC.

The Justice Department's Mr. Baer said it is mutually beneficial to have an endgame to talk through potential antitrust concerns. "If there's a way to get to a meeting of the minds before we have to litigate, most companies want to do that," he said.

Even when the risk of a lawsuit fades, the process of completing divestitures and other settlement conditions can push back a closing date. Some lawyers say the time it takes the government to sign on the dotted line has increased, particularly at the FTC.

"The agencies want to make sure they get it right. The last thing they want to do is a lengthy investigation and then not fully replicate the competition being lost," said Matt Reilly, a former FTC lawyer now at Simpson Thacher & Bartlett LLP. "It's going to take a long time. And it is going to be a little bit of a roller coaster."