Big M&A deals are always in the headlines. But these days, the news seems less about details of transactions and more about potential antitrust lawsuits with the Federal Trade Commission.
According to Thomas Ensign, a partner at law firm, antitrust seems to be more prominent in the last 18-24 months than in any other time in the past two decades. Fenwick & West’A group for antitrust and competition.
Concerning the FTCs lawsuit Metasthen-Facebookpurchases years ago of Instagram WhatsAppTo conduct a thorough investigation of the proposal Amazon/MGMtransaction, to the recently failed merger Nvidia ArmDealmaking is governed by a more strict regulatory environment.
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It is at the forefront of concerns about deals, Jamilla Ferris, a partner at law firm Antitrust and Competition Group, stated. Wilson Sonsini. There are still many deals available. However, some deals will be affected by this change.
Although these deals were or could have been huge transactions involving some major tech names, increased regulatory review could have an adverse effect further down the startup ecosystem.
Venture capitalists as well as large growth equity firms are keen to understand the exit opportunities of companies before they invest. Despite the emphasis on public markets, most exits are still via M&A. If dealmaking gets disrupted, so does an investor’s path to liquidity.
System changes
Although enforcement actions by agencies have not increased merger enforcement actions, they fell From 31 in 2020, to 12 last year, while consumer protection actions dropped from 79-31The FTC has made several changes to the law in the last year that were noticed by the industry.
Ensign said it’s almost like the opening moves in Chess. Although it might not seem like much is happening, it is.
One of these changes was to suspend the early termination period of the 30-day waiting period, during which a deal can’t be concluded pending a preliminary inspection. The FTC announced last February that it had suspended the early termination action due to an unprecedented volume of filings.
Ensign, however, questions this reasoning. Ensign points out that there were 4,765 HSR or premerger notification filesOn average, between 1998 and 2000. 4,130 of these filings were made last year.
Senior FTC officials recite the “unprecedented volume of filings” mantra but they forget about the history of FTC. DOJ during similar periods, Ensign said.
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Last August, the FTC announced that it would send pre-consummation notice letters to parties involved in deals it could not fully investigate within the timeframes. This will let them know that their transactions are still under investigation and they can proceed at their own risk. The agency also changed its prior approval requirements to require companies that agree to remedies in previously challenged transactions, to get prior approval by the FTC before closing any future deals affecting each market for which a violation has been alleged.
Ensign stated that all these changes are meant to slow down the M&A process. Although I haven’t seen any chilling effects in M&A, I believe that is the intention.
Take a fresh look at deals with a new lens
Specialists in antitrust/competition say that although the FTC is not actively looking into deals as much as in the past, they are showing an interest in deals that would otherwise have raised eyebrows.
One example are so-called “acqui-hire” deals, Ferris said. These deals are a common feature of tech M&A. They bring talent to the acquirer but don’t add new technology or markets. The agency expressed concern about the inequal access to talent these deals could create.
She said that although they aren’t looking at these deals right now, they have shown that they might be open to future deals.
There also has been a willingness to go back and look at deals that were consummated years ago, such as Facebook’s purchase of Instagram. Although it is not unusual, it is quite unusual to look at deals years later.
However, many in the industry insist that this isn’t a tech-related issue.
Ferris said that although I believe big tech is more relevant to agencies at the moment, it is not just a tech challenge.
Ensign stated that the agenda is much more than tech. Big tech is not the most important, but it is still a leader.
Microsofts big deal
Proposed legislation is undoubtedly one of the biggest deals most people will be paying attention to. Microsoft/ActivisionA deal worth $69 billion for marriage would be the largest ever U.S. technology transaction.
Redmond, Washington-based Microsoft published new guidelines for its app shop last week. Many saw this as an opening salvo to appeal regulators as Activision deals begin to focus.
Paul Lennick, SVP M&A and Private Equity at a business sourcing company ContinuServeHe said that he believes the deal was a massive play by Microsoft to get in on a metaverse at the ground-level.
He said that Microsoft wants content for the metaverse. Gaming is the most important thing you can do.
Lennick indicated that there might be concerns that Microsoft will gain more control over this new online medium, and block out smaller competitors. This could lead to concerns that could prompt the SEC/FTC to examine the deal. Governments and agencies may try to limit the transaction or force Microsoft to sell something similar to its digital mobile platform.
One thing is certain, there will be a lot more eyes on the deal. This is especially true considering the FTC commissioner position likely to be filled in the next months by a Democratic nominee.
What is decided about this deal could have many impacts that go beyond Microsoft and Activision.
Illustration: Dom Guzman
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