Deals Down to the Wire Face Likely Antitrust Hurdles Amid Virus

Mergers nearing critical closing deadlines that also require structural fixes to gain U.S. government antitrust approval may face the biggest delays during the new coronavirus pandemic.

Justice Department and Federal Trade Commission officials reviewing such transactions have likely been forced to alter routine investigative steps, such as brokering asset selloffs and conducting interviews with competitors and customers, as the workforce is adjusting to remote work, attorney say.

“Deals that are close to the finish line could be most impacted because they may be at a stage where the most heavy lifting by the agency and the parties has to be done,” David Wales, a former senior antitrust official at the DOJ and FTC, said.

Some deals have already faced coronavirus related delays, such as Waste Management Inc.'s $4.9 billion deal with Advanced Disposal Services. The company disclosed in a March regulatory filing that it’s still seeking approval from the DOJ and now anticipates closing the deal late in the second quarter of 2020, rather than the first quarter.

Virus Impact

Most companies expecting significant antitrust scrutiny over a proposed merger typically build out their anticipated closing date to be anywhere from six to 12 months or more from when the deal was first announced.

Those extra few months give antitrust regulators additional time to comb through thousands of pages of corporate documents, as well as talk to corporate competitors and current customers. In some instances, extra timing allows deal-makers to broker an asset selloff arrangement with regulators and outside buyers to ease antitrust concerns.

“In situations where the agencies are seeking interviews with and information from third parties, that may be more challenging in the current environment and this could have an impact on timing,” Peter Guryan, co-chair of Simpson Thacher & Bartlett LLP’s antitrust group, said.

DOJ and FTC officials often use interviews to help understand how a deal would impact the overall competitive landscape. Such interviews can also be the tipping point that leads investigators to sue to block a deal.

Given the pandemic, “I would imagine the point of contact at the third party doesn’t necessarily see a voluntary call about an investigation as the most important thing on their table,” a former DOJ attorney said.

“That either adds time to how long it takes to do the investigation or staff is put in a position of having to make a recommendation without as much information as they otherwise might have,” the former attorney said.

Deal Stage

Deals that are in the beginning or middle stages of review likely face fewer potential delays since the merger closing date is still several months away.

Companies with additional time already built in are still in a position to find ways to mitigate any potential timing delays with the government, Wales, now an antitrust partner at Skadden, Arps, Slate, Meagher & Flom LLP, told Bloomberg Law.

It’s deals that are coming within weeks of closing deadlines that are trying to broker agreements with the government, such as an asset selloff plan, that could face timing delays, Wales added.

Regulators at the DOJ and FTC have been able to clear some major deals during the pandemic, including United Technologies Co.'s merger with Raytheon Co. and Danaher Corp.'s $21.4 billion takeover of General Electric Co.'s pharmaceutical business.

The DOJ has indicated that it will seek an extra 30 days of review for mergers. FTC enforcers have similarly said they’ll seek more time to complete a deal review as needed.

Yet, Waste Management has already been forced to push back its anticipated close date of its Advanced Disposal Services acquisition

Analysts have predicted that Waste Management’s deal likely requires a divestiture package and asset buyers in order to gain DOJ approval.

“It may be more of a challenge to determine what a remedy looks like or if the government will sue or not for deals that are in the late stages of the process, those are the ones that may be more susceptible to a delay,” Wales said.