Editor’s Note: The Hart Scott Rodino Act (HSR Act), a pivotal federal law, mandates companies to notify the Federal Trade Commission (FTC) and the Department of Justice (DOJ) before finalizing mergers or acquisitions involving certain assets or voting securities. This notification is part of the FTC and DOJ Premerger Notification Program, designed to enable a thorough review of proposed transactions for potential antitrust issues. For professionals in cybersecurity, information governance, and legal discovery operating within the eDiscovery ecosystem, tracking the monthly HSR transaction data, now enriched in this update with key economic indicators like GDP growth and corporate profits, offers critical insights. This enhanced perspective helps in understanding the broader economic implications of merger and acquisition activities and their potential impact on the eDiscovery landscape.

Background Note: The data in this report synthesizes information from both published annual reports and monthly transaction reports. Annual reports, once released, are the definitive records for their respective fiscal years. Thus, they may necessitate minor revisions to previously reported monthly transaction figures. This analysis uniquely incorporates the latest economic data from the U.S. Bureau of Economic Analysis, offering a more comprehensive view by connecting the dots between HSR transaction trends and broader economic performance indicators.

Industry News – Antitrust Beat

February 2024 HSR Transactions: Balancing Economic Indicators and M&A Activity

HaystackID Staff Published with Permission

Executive Summary

According to the latest data reported under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act, there were 135 transactions in February 2024. This represents a decrease from the 170 transactions reported in January 2024 and a decrease compared to the 159 HSR transactions in February 2023. Despite the year-over-year decline, the overall level of M&A activity, coupled with recent economic data, suggests that the mergers and acquisitions (M&A) market is holding steady despite economic headwinds.

Economic Trends and GDP Analysis

According to the Bureau of Economic Analysis, as gauged by real gross domestic product (GDP), the U.S. economy expanded at an annual rate of 3.2% in the fourth quarter of 2023, a slowdown from the 4.9% growth rate observed in the third quarter. Nevertheless, increases in consumer spending, exports, government spending, and business investment contributed to the ongoing economic expansion, even as inventory investment contracted and imports increased. Looking at the full year, real GDP grew by 2.5% in 2023, an improvement from the 1.9% growth recorded in 2022.

12-Month HSR Transaction Trend

Examining the HSR transaction data over the past 12 months reveals a fluctuating but relatively stable pattern. From March 2023 to February 2024, the number of reported transactions varied month-to-month, ranging from a low of 120 in April 2023 to a high of 204 in November 2023.

The data shows a general upward trend in the latter half of 2023, with transactions increasing from 144 in July to 204 in November. This suggests a surge in M&A activity during the year’s second half, possibly driven by improving economic conditions, pent-up demand, or strategic repositioning by companies.

However, the trend reversed in the final months of 2023 and early 2024, with transactions falling to 160 in December 2023 and further to 135 in February 2024. This slowdown could be attributed to various factors, such as seasonal variations, market uncertainties, or a natural cooling-off period following the heightened activity in the preceding months.

Despite these fluctuations, the 12-month average from March 2023 to February 2024 stands at 152 transactions per month. This suggests a relatively healthy level of M&A activity over the past year, considering the economic challenges and uncertainties faced by businesses during this period.

Interestingly, comparing the data for February 2024 (135 transactions) to that of February 2023 (159 transactions) shows a year-over-year decrease of 15%. This decline may indicate a shift in market sentiment or a normalization of M&A activity following the post-pandemic rebound.

Overall, the 12-month HSR transaction trend showcases the dynamic nature of the M&A market, with periods of heightened activity followed by cooler phases. While the data suggests a slowdown in early 2024 compared to the peak in late 2023, the overall trend remains relatively stable, indicating ongoing interest in corporate transactions despite economic headwinds.

As businesses and professionals navigate this evolving landscape, staying attuned to these trends and their underlying drivers will be crucial for making informed decisions and seizing opportunities in the M&A market.

M&A Outlook

Although the month-over-month decline in HSR transactions implies a slight cooling of the M&A market from its January levels, deal flow remains robust compared to the same period last year. The broader economic landscape, characterized by moderate GDP growth and easing inflationary pressures, may continue to support M&A activity in the near term. However, dealmakers should remain cautious of potential headwinds, such as rising interest rates and geopolitical uncertainties, which could impact transaction volumes and valuations.

Implications for Cybersecurity, Information Governance, and eDiscovery Professionals

The persistent M&A activity, even at a slightly moderated pace, underscores the importance for cybersecurity, information governance, and eDiscovery professionals to be prepared for the data challenges that frequently arise during corporate transactions. Thorough due diligence, data mapping, and integration planning will be essential for mitigating risks and realizing synergies. Moreover, the consistent flow of deals could present opportunities for service providers and technology vendors operating in these domains to showcase their expertise and value proposition.

Conclusion and Considerations

The February 2024 HSR data offers a nuanced perspective on the current state of the M&A market, with a monthly deceleration counterbalanced by a year-over-year increase in reported transactions. While economic fundamentals remain broadly supportive, potential risks warrant ongoing monitoring. For professionals engaged in corporate transactions or providing support to deal parties, adaptability and proactivity will be key differentiators. By closely tracking economic and M&A trends, they can better position themselves to anticipate and address the complex data demands of an ever-evolving deal environment. This, in turn, will enable them to deliver greater value to their organizations and clients, while navigating the challenges and opportunities that lie ahead.

Transaction Charts

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 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.

Chart 1: HSR Act Annual Transactions Reported in Fiscal Years 2000 – 2024*/**

Chart 2: Monthly HSR Act Transactions Reported in the Fiscal Year 2024 (October-September)*

Chart 3: Monthly HSR Act Transactions Reported in the Fiscal Year 2023 (October-September)*

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

Assisted by GAI and LLM Technologies

Source: ComplexDiscovery OÜ