Changes to U.S. Merger Guidelines May Impact the Number and Duration of Transactions Going Forward
In line with the Biden administration’s recent Executive Order on competition issues, the U.S. antitrust agencies have expressed their intent to conduct a joint review of existing merger guidelines. This follows the earlier formation of a working group between the FTC, DOJ, European Commission, U.K. Competition and Markets Authority, Canadian Competition Bureau, and Offices of State Attorneys General to “identify concrete and actionable steps to review and update the analysis of pharmaceutical mergers,” to which Dechert’s antitrust/competition practice recently submitted public comments highlighting the already robust merger enforcement and suggesting areas of improvement.
While these changes are expected to increase the number of significant U.S. merger investigations, it is difficult to predict the precise impact of any changes to existing guidelines on the average duration of investigations going forward. As described earlier, some recent examples—including three of the seven investigations concluded during the last quarter—show that the agencies have made progress in concluding some recent transactions on a surprisingly expedited duration of less than seven months. At the same time, DAMITT data generally has shown lengthening review periods over the last decade, even after agency statements and policy changes aimed at shortening the process. Without clear commitments to reduce review times, parties to significant investigations should anticipate that the duration of those investigations may extend longer than the 12.1-month average for H1 2021 looking forward.
In Q2 2021, the number of concluded significant U.S. merger investigations increased, while remaining just below the historical average for second quarters over the last decade. At the same time, the average duration of investigations declined to 12 months. As a result, parties to the average “significant” deal in the U.S. should plan on approximately 12 months for the agencies to investigate their transaction. Parties should also plan for another 7-9 months if they want to preserve their right to litigate an adverse agency decision.
By contrast, transactions likely to proceed to Phase II investigations in the EU should allow for 18 months from announcement to clearance under the current circumstances. If the investigation is likely to be resolved in Phase I with remedies, parties to the average investigation should plan on nine months from announcement to a decision.
Though often grabbing less attention, traditional industries continue to be the focus of most significant merger investigation activity on both sides of the Atlantic. Healthcare and pharmaceuticals transactions led to the most activity in the U.S., while transactions involving the industrial products and services and financial services industries also saw increased investigation activity. Industrial products and services, financial services, and chemicals similarly saw the most significant merger investigation activity in the EU. Despite the headlines devoted to Big Tech, the data demonstrate that antitrust and competition agencies in the U.S. and EU continue to keep a close eye on merger activity across a wide range of traditional industries in addition to Big Tech.