Health Law Alert: Timing and Hold Separate Agreements in Mergers: When to Fold, Hold or Call

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Merging hospitals, physicians, and other health care entities who are investigated by the Federal Trade Commission, Department of Justice Antitrust Division, or a state Attorney General typically face a dilemma relatively early in the investigation: whether to agree to the government’s request to delay closing the transaction and hold separate until the government’s investigation is completed (and thus risk the transaction falling apart due to the potentially long delay in completing the investigation and obtaining clearance), or to decline the request and move towards consummating the transaction (and potentially risk an immediate legal challenge and request for preliminary relief enjoining closing or subsequent dissolution or divestiture, or at a minimum, creating a more adversarial relationship with the investigating agency). Historically, merging parties have perceived litigation with the government as the greater risk, and almost uniformly selected the former option and agreed to the government’s request. Four recent health care mergers illustrate these risks and the considerations that may go into this decision, and perhaps signal a change from this historical risk assessment.

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