That’s 759,000 More Billable Hours; Antitrust Plan Buoys Big Law

M&A attorneys’ workloads are poised to multiply following a new proposal by federal antitrust enforcers that promises to increase compliance to-do lists for merging companies.

The amount of time it would take companies to file required merger notification documents would jump, on average, from 37 to 144 hours, the Federal Trade Commission estimated in its notice of proposed rulemaking Tuesday.

That means merging companies’ costs could skyrocket. Based on the number of Hart-Scott-Rodino filings submitted in fiscal year 2023, the FTC calculated that companies will have to spend 759,000 more hours filling out new disclosures. That would translate to $350 million more on labor costs for attorneys and executives who work on them, calculated at an assumed rate of $460 per hour, the agency said.

The FTC and Justice Department’s new proposal is the first sweeping revamp to the merger review process in 45 years and would require companies to disclose drastically more information than they have in the past. Antitrust enforcers use HSR filings to screen mergers for potential anticompetitive effects that warrant deeper scrutiny.

“This will certainly require more of a devotion of resources and will certainly raise the costs for doing M&A,” said Maureen Ohlhausen, chair of Baker Botts’ global antitrust practice and a former FTC commissioner.

The agencies said the changes will help them identify deals that need an in-depth investigation.

“The proposed changes to the HSR Form and instructions would enable the Agencies to more effectively and efficiently screen transactions for potential competition issues within the initial waiting period, which is typically 30 days,” the FTC said in a statement.

Learning Curve

Law firms will have to make some decisions on personnel and other resources needed to accommodate corporate clients’ demands, attorneys said.

“Law firms will have to develop some expertise around these new rules, that’s going to take time,” said Adam Badawi, a UC Berkeley Law professor. “If these rules do become final, it will take a year or two for them to start feeling comfortable with them and it’s going to slow the deal process down.”

If the proposal is enacted, requiring more antitrust-related information in every major transaction will reward large firms with teams that are staffed to handle the task.

The wide range of questions for companies to answer include revenue projections, private equity investments, identifying minority investors and relationships with other relevant entities, like those who provide credit or have management agreements.

“Generally, I think the antitrust teams will need to grow,” said Barry Nigro, an antitrust partner at Fried Frank. “Most law firms have people that specialize in pulling together the HSR filings. We do and I think all the major law firms with big deal practices do, and we’ll need more people to do that.”

A silver lining for companies is that they will be forced to do their homework early and upfront. The information that’s been requested is broader and deeper than what the agencies previously asked for in a voluntary request, Nigro said.

“My hope is that the agency will reciprocate by reaching conclusions about deals during the first 30 days, not asking for voluntary requests or refiles as often, if at all,” he said.

‘Tax’ on Mergers

The proposal will likely draw backlash from the companies that would be subject to the more stringent reporting requirements. Deals lawyers will get a push from corporate clients to comment on the proposal during the FTC’s 60-day comment period.

“There could be core challenges to this,” Badawi said. “We’re a long way from this becoming finalized.”

The agencies’ proposed changes are in keeping with Biden administration enforcers’ policy to heighten scrutiny of deals that might have been passed over by previous agency leadership.

“What the FTC is doing here is imposing a tax on merging parties in the United States,” said Amanda Wait, the head of Norton Rose Fulbright’s US antitrust practice and a former FTC lawyer. “They are taking the vast number of transactions that don’t create any antitrust issues whatsoever and imposing significant costs on those parties.”