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DOJ's New Merger Remedies Manual: Altering M&A Deal Structures to Preserve Competition and Gain DOJ Approval

Recording of a 90-minute CLE video webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Wednesday, February 17, 2021

Recorded event now available

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This CLE course will analyze the Merger Remedies Manual recently released by the Department of Justice (DOJ)’s Antitrust Division, as well as recent experience from merging parties seeking to address the federal agencies’ concerns through a remedy, and how it might impact companies’ strategy when looking at proposed M&A deals. The panel will discuss the principles laid out in the Manual for evaluating a merger remedy and the nuances to consider when proposing structural (i.e. divestitures) and conduct remedies, as well as enforcement actions to help companies navigate these tricky waters.

Description

On September 3, 2020, DOJ's Antitrust Division released a new Merger Remedies Manual, which confirms the DOJ's preference for structural over conduct remedies to resolve potential anticompetitive concerns relating to both horizontal and vertical proposed mergers. Timelines faced by parties to proposed mergers have also expanded, potentially due in part to agency concerns about proposed remedies.

The Manual provides key principles DOJ will apply in evaluating structural remedies. These principles include: (1) remedies must preserve competition; (2) remedies should not create ongoing government regulation of the market; (3) temporary relief should not be used to remedy persistent competitive harm; (4) remedies should preserve competition, not protect or favor particular competitors; (5) the merging parties, rather than consumers, should bear the risk of a failed remedy; and (6) remedies must be enforceable.

The Manual also details a number of factors that may lead DOJ to reject a divestiture remedy as inadequate, including: (1) divestiture of less than a standalone business; (2) mixing and matching assets of both merging firms; (3) permitting the merged firm to retain rights to essential intangible assets; (4) ongoing entanglements between the merged firm and the divestiture purchaser; and (5) significant regulatory or logistical hurdles.

Consistent with DOJ’s strong preference for structural remedies, the Manual sets forth limited circumstances where conduct remedies may be appropriate. The Manual provides that merger parties can show that conduct relief is appropriate by establishing that: (1) a transaction generates significant efficiencies that cannot be achieved without the merger; (2) a structural remedy is not possible; (3) the conduct remedy will completely cure the anticompetitive harm; and (4) the remedy can be enforced effectively. The Manual also acknowledged that conduct remedies such as supply agreements, transitional services agreements, and temporary limits on a merged firm's ability to hire employees from the divested business may (and in some instances should) be combined with structural remedies.

Finally, the Manual emphasizes that a divestiture must include the assets necessary to ensure that the divestiture buyer will be a viable, long-term competitor in the marketplace, as well as ensure that the buyer has the incentive to preserve competition. Recent experience suggests that divestiture buyers are facing increased scrutiny in proving that they will be successful with a divestiture.

Listen as our authoritative panel discusses all this and more, as well as strategies for getting regulatory approval.

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Outline

  1. The new Merger Remedies Manual: DOJ's general preference for structural over conduct remedies and its applicability to both horizontal and vertical mergers
  2. Six principles to be applied in the evaluation and implementation of all merger remedies
  3. Structure of an appropriate divestiture remedy
  4. Evaluation of divestiture buyers, including strategic and private equity buyers
  5. Recent enforcement actions
  6. Working the remedy into the deal upfront
  7. Consent decrees: terms, compliance, and enforcement

Benefits

The panel will review these and other important issues:

  • Why does the Manual indicate a preference for structural over conduct remedies where proposed mergers are found to be anticompetitive?
  • What are the key characteristics for divestiture to be considered an adequate remedy under the Manual?
  • When might a private equity buyer be deemed to be preferable to a strategic buyer? Are there pitfalls for private equity buyers?
  • What are the advantages of a "fix-it-first" remedy, and how should it be spelled out in the merger agreement and presented to DOJ?
  • How does DOJ’s approach to remedies compare to the Federal Trade Commission’s?
  • Is President-elect Joe Biden’s election likely to have an impact on the types of divestitures that will be acceptable to the new administration?

Faculty

Adams, Sheila
Sheila R. Adams James
Partner
Davis Polk & Wardwell

Ms. Adams has represented clients in a variety of civil litigation and government investigations, and her practice...  |  Read More

Browdie, Megan
Megan Browdie
Partner
Cooley

Ms. Browdie advises clients on antitrust issues, including with respect to M&As, compliance with the...  |  Read More

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