In connection with certain mergers and acquisitions, the FTC and the Antitrust Division of the US Department of Justice review information provided by parties about proposed transactions reportable under the Hart-Scott-Rodino Antitrust Act (HSA Act) to ensure that the transaction will not stifle competition. To further that goal, the Federal Trade Commission (FTC) recently published a final rule, 89 FR 89216, for pre-merger notification requirements (the Final Rule) that revised forms and instructions to address information gaps that the FTC found over the years in implementing the HSA Act. Entities will have to prepare for this new Final Rule as well as any laws that have been recently passed by certain states that require the review of healthcare transactions.
The Final Rule requires both the acquiring entity and the target entity to initially file, as applicable, information about:
- Entities and individuals that can influence decision-making post-merger (e.g., entities between the ultimate parent entity and the acquiring entity and minority holders with significant rights to direct the acquiring entity’s actions)
- Non-horizontal relationships (e.g., the acquiring entity’s and target’s supply relationships representing $10 million or more in most recent annual revenue and existing contracts between the parties)
- Acquiring entity’s and target’s business lines, including future products or services in development but not yet generating revenues
- Serial acquisitions and “roll-ups” (e.g., acquiring entity’s and target’s prior acquisitions that closed within the previous 5 years for more than $10 million in annual net sales or total assets)
The Final Rule did not adopt some of the proposals in the proposed rule, such as a 10-year lookback period for prior acquisitions, the requirement to submit drafts of transactional documents, and the requirement to create organizational charts, a deal timeline, and worker and workplace safety information. The agencies will still have only 15 days (for cash tender offers or acquisitions subject to federal bankruptcy provisions) or 30 days to review the filed forms with the additional information, because that timeline is in the HSA Act enacted by Congress.
The Final Rule will become effective 90 days after it is published, and at that time the FTC will lift its suspension on early termination of the initial waiting period, but the agency also noted that it is still within its discretion to terminate the 15- or 30-day wait for a proposed transaction. The FTC will also create a new online portal for public comment on how proposed transactions may impact competition.
In the next few months, entities should consider how the Final Rule could impact their proposed transactions, including healthcare entities contemplating how new state requirements are impacting proposed transactions. Currently, there are eleven states that have passed statutes requiring review of healthcare transactions. For more information about emerging state requirements, please view our webinar conducted on Thursday, November 7 on Navigating the Future: Trends and Strategies in Healthcare M&A for Multi-State Transactions.