Good News/Bad News: New Premerger Reporting Rules Streamline Form, but Create New Obligations, Particularly for Private Equity Funds and Hedge Funds


New rules issued by the Federal Trade Commission on July 7, 2011 will streamline some information required for the Hart-Scott-Rodino Act (“HSR Act”) Notification and Report Form (the “Form”), but also will impose several new, potentially burdensome requirements on filing parties. Notably, the rules will now require acquiring persons to include information regarding “associates” that operate in the same industry code as the target company. This new requirement will have the most significant impact on private equity funds, hedge funds and master limited partnerships. In addition, the range of documents analyzing the transaction that must be included with the Form has been expanded. The new rules and a new Form will become effective in early August 2011, 30 days following publication in the Federal Register.

The most important changes include:

- Documents now reach far beyond “4(c)” documents: All parties must now provide new categories of documents with their HSR filings. These include unsolicited “pitch books” from bankers, documents created for earlier attempts to sell the target or assets, documents related to synergies and efficiencies, and ordinary business documents that served the purpose of a Confidential Information Memorandum.

- Related “associate” entity information: Buyers must now include information on holdings by “associates.” This requirement will most directly affect private equity funds, hedge funds, master limited partnerships and other investment groups. In the past, information was typically only required for the particular fund making the acquisition. Now, investment groups must look to holdings—including minority holdings—by entities under common management.

- Detail on manufactured products: Revenue for products manufactured outside the United States must now be broken down by the more burdensome ten-digit manufactured product NAICS codes, rather than supplied in a more general distribution code.

- Some good news: The HSR Form has been modestly streamlined and certain requirements have been eliminated, such as the requirement for “base year” revenues and listing certain subsidiaries.

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