Under the HSR Act, companies are required to file a notification with the FTC and DOJ and to provide certain information about the transaction, including details about the companies involved, the assets or voting securities being acquired, and any overlap between products or services. The agencies will then review the notification and may request additional information or documents to help them assess the potential competitive effects of the transaction. If the agencies determine that the transaction may harm competition, they may challenge it in court or require the parties to take steps to address the concerns before the transaction can be completed.

The HSR Act applies to a wide range of transactions, including mergers, acquisitions, and certain types of asset purchases and stock purchases. Certain thresholds must be met for the HSR Act to apply, such as the size of the companies involved and the value of the assets or voting securities acquired. The HSR Act also applies to transactions involving foreign companies if the companies meet the thresholds and the transaction has a sufficient connection to the United States.

For cybersecurity, information governance, and legal discovery professionals operating in the eDiscovery ecosystem, monitoring the monthly transaction reporting numbers published as part of the FTC and DOJ Premerger Notification Program can provide valuable insight into the potential impact of merger or acquisition activities and pulse rates on their respective areas of expertise.

Background Note: Fiscal Year 2023 (FY 23) in the context of Hart-Scott-Rodino Act (HSR Act) transactions offers a strong picture of numbers and trends characterized by significant monthly fluctuations, culminating in a pronounced annual decline.

The year commenced with 181 reported transactions in October, followed by a 34.25% increase in November to 243 transactions. A sharp 39.09% drop to 148 transactions was observed in December, leading to a modest recovery in January 2023 with a 3.38% increase to 153 transactions. February continued this upward trend with a 3.92% increase to 159 transactions.

However, March and April saw declines of 23.27% and 1.64%, respectively, followed by a resurgence in May with a 20% increase to 144 transactions. June recorded a 10.42% increase to 159 transactions, but July ended the fiscal year with a 9.43% decrease to 144 transactions.

Comparing the annual numbers to date, FY 23 has reported a total of 1,573 transactions. This represents a significant decrease of 51.73% compared to the 3,259 transactions in the complete year of FY 22.

These monthly and annual trends reflect the dynamic and complex nature of the market, influenced by various factors such as regulatory changes, economic conditions, and industry-specific elements. The pronounced annual decline in FY 23 may indicate broader trends in market consolidation, increased regulatory scrutiny, or other macroeconomic influences affecting merger and acquisition activities.

The fluctuations in HSR transactions have significant implications for the eDiscovery industry and Second Request support from eDiscovery providers. A rise in transactions triggers higher regulatory inquiries and compliance requirements, leading to increased demand for eDiscovery services. Conversely, a decline may signal a reduced need for these services, impacting providers’ strategic planning, resource allocation, and alignment with market demands.

The analysis of HSR transactions in FY 23 serves as a reliable reference for legal professionals, regulators, and companies. The complex interplay of monthly fluctuations and the substantial annual decline provides valuable insights into market behavior, aiding in planning, compliance, and strategic decision-making. For eDiscovery professionals and providers of Second Request support, understanding these trends is essential, reflecting the intricacies of legal, regulatory, and market dynamics in a rapidly evolving landscape.

Industry Update

A Hart-Scott-Rodino Act Transaction Update (July FY 2023)

Federal Trade Commission

Taken from the latest published Hart-Scott-Rodino (HSR) Premerger Notification monthly transactions as shared by the Federal Trade Commission (FTC) and augmented by released annual reports, the following transaction information and corresponding charts may be useful for law firms, legal departments, and legal service providers seeking to understand the real-time pulse rate of Hart-Scott-Rodino Act mandated transaction reviews. As these reviews may lead to Second Requests, the charts may also be useful as a baseline for considering provider assertions regarding the depth, breadth, and volume of their Second Request support for this unique type of eDiscovery during specific time frames.

Comparing the Operations Tempo for HSR Act Transactions: Informational Charts

Provided for context and comparison are charts that share HSR Act-related metrics for monthly filings based on real-time reporting in fiscal years (FY) 2023 and 2022, and annual reporting in 2010 – 2021.

Chart 1: Monthly HSR Act Transactions Reported in the Fiscal Year 2023 (October-September)*

Chart 2: HSR Act Annual Transactions Reported in Fiscal Years 2000 – 2023*/**

Comparing the Operations Tempo for HSR Act Reported Second Requests: Informational Charts

Background Note: HSR Act Reported Second Requests are reported as part of Annual HSR Transaction Reports and not noted in the monthly running reports. The latest published annual report is for FY 2021.

Chart 3: HSR Act Merger Transaction Candidates for Second Requests in Fiscal Years 2000 – 2021**

Chart 4: HSR Act Reported Second Requests in Fiscal Years 2000 – 2021**

Chart 5: HSR Act Reported Second Requests by the FTC in Fiscal Years 2000 – 2021)**

Chart 6: HSR Act Reported Second Requests by the DOJ in Fiscal Years 2000 – 2021**

Chart 7: Percentage of Transactions Resulting in HSR Act Report Second Requests in Fiscal Years 2000 – 2021**

*Monthly Real-Time Reporting First Report is October 2019 (Monthly Running Report)
**Based on Annual Reporting as Represented in Final Annual HSR Transaction Reports.