(FROM THE WALL STREET JOURNAL 6/8/15)
By Brent Kendall
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.
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.
"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.
"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."
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