On February 1, 2021, the Federal Trade Commission (FTC) announced its revised annual threshold that determines whether companies may be required to notify federal antitrust authorities about a proposed merger or acquisition due to the size and value of the transaction. For the first time since 2010 and a reflection of the state of the economy, the annual threshold has been reduced rather than raised, from $94 million in 2020 to $92 million for 2021.
The Hart-Scott-Rodino (“HSR”) Antitrust Improvements Act (Section 7A of the Clayton Act) requires parties to certain mergers and acquisitions to notify the FTC and U.S. Department of Justice (DOJ) in advance of transactions that could create antitrust issues due to the size of the transaction and the parties involved. The FTC is required to update the HSR thresholds annually to reflect changes in the gross national product. The new thresholds will apply to all transactions that close on or after the effective date of March 4, 2021.
For 2021, the threshold for reporting proposed mergers and acquisitions will decrease from $94 million to $92 million. If the value of the transaction meets or exceeds $92 million (“size of the transaction test”) and the parties involved are large enough (“size of the person test”), both parties may be obligated to file Premerger Notification with the FTC and DOJ unless an exemption applies. Also reduced for 2021, if the transaction is valued at $368 million or more (down from $376 million in 2020), HSR notice filing may be required regardless of the size of the parties involved.
HSR Test (New 2021 Thresholds effective March 4, 2021)
An HSR Premerger Notification may be necessary if:
- As a result of the proposed transaction, the buyer will hold in the aggregate (including from previous recent transactions between the parties) securities, non-corporate interests, and/or assets of a seller valued between $92 million and up to and including $368 million;
- One of the parties to the transaction has $184 million or more in annual sales or total assets and the other has $18.4 million or more in annual sales or total assets;
- As a result of the proposed transaction, the buyer will acquire (in the aggregate) securities, non-corporate interests, and/or assets from a seller valued at more than $368 million and regardless of the size of the parties.
The standard waiting period for most Premerger Notifications is 30 days after filing unless the acquisition involves federal bankruptcy or a cash tender offer, in which case the waiting period is normally 15 days. Normally it is also possible to request expedited review and early termination of the waiting period if the FTC and DOJ determine no remedial or enforcement action is necessary. However, as of February 4, 2021, the FTC has temporarily suspended its discretionary practice of granting early termination during the transition to the new administration and due to the large volume of HSR filings since the beginning of the fiscal year. The FTC expects the temporary suspension to be brief but continue until further notice.
Failure to file a required HSR Premerger Notification can result in serious penalties of up to $43,792 per day of noncompliance (up from $43,280). The FTC also has the ability to unwind a completed transaction if it discovers after the fact that a non-reported transaction violates antitrust laws.
The HSR thresholds are only one part of the analysis to determine whether an HSR filing is required, and the rules are complex. Consult with an HSR attorney early when contemplating any transaction that may be subject to HSR notification requirements, especially given that the parties may need to wait the full statutory 30-day waiting period.