The New Hart-Scott-Rodino Reporting Requirements: A Roadmap for Filers

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Key Takeaways

  • Starting in early 2025, a new and (in most cases) substantially more burdensome and time-consuming HSR filing form will need to be used for all HSR-reportable transactions.
  • As many form disclosures will be completely new, or radically modified versions of current requirements, filing parties will need to build extra time into transaction timelines.
  • There are no changes to HSR reportability thresholds, exemptions or filing fees.

As previously reported, the Federal Trade Commission (“FTC”), with the concurrence of the Antitrust Division of the U.S. Department of Justice (“DOJ” and, together with FTC, the “agencies”), recently finalized expansive changes to the Hart-Scott-Rodino (“HSR”) premerger notification form to provide the agencies with more up-front information to identify potentially anticompetitive transactions. These changes will take effect in early 2025 (90 days after the official publication in the Federal Register, which is expected in the coming days), impacting all HSR filings submitted on or after the effective date. It is anticipated that compliance with the new HSR requirements will become much more time-consuming in the majority of reportable transactions. However, no changes have been made to the criteria of determining whether the HSR reporting thresholds are met, or whether any exemptions apply. In addition, the annually-adjusted filing fee structure implemented in 2023 will remain in place.

How will the new HSR form be different?

General updates. For the first time, the agencies will be implementing separate filing form templates and instructions for acquiring and acquired parties.1 Once the new HSR form and rules become effective, the agencies have stated that they will resume discretionary grants of early termination of the initial HSR waiting period (which have been suspended since February 2021) for certain transactions that the agencies deem unlikely to raise competitive concerns. Finally, transactions filed based on a letter of intent rather than a definitive agreement will need to meet more stringent requirements for describing the relevant scope and terms of the transaction before they can be used as a basis for making a filing.

New disclosures. The new format of the HSR filings does away with the familiar “item” numbers in favor of broad categories. The expansive disclosures that will be required in the new HSR form are summarized in detail in this Annex. Some key new requirements are:

  • A description of the current or known planned products or services in which the acquiring person2 and the target compete;
  • An explanation of the strategic rationale for the transaction;
  • Expanded document requirements analyzing the proposed transaction and ordinary course business documents analyzing overlapping products;
  • The top ten customers of the acquiring person and the target for each overlapping product;
  • Disclosure of officers and directors that also serve as officers or directors of entities that overlap with the target;
  • Expanded disclosure requirements regarding minority investors, such as co-investors and certain limited partners;
  • Listing of d/b/a or “street names” for certain entities and investors so that the agencies can more easily identify companies as they are more commonly referred to by the public;
  • In sell-side filings, a list of prior acquisitions by the target in the last 5 years of entities or assets that generated revenues in the relevant area of overlap (previously only required in buy-side filings); and
  • Where applicable, disclosure of defense and intelligence contracts, as well as subsidies from foreign entities or governments of concern.

Expanded document requirements. The new HSR requirements expand the scope of documents that must be submitted. First, documents analyzing competition or the proposed transaction prepared by or for a “supervisory deal team lead” (defined as the individual who has primary responsibility for supervising the strategic assessment of the deal, and who would not otherwise qualify as a director or officer) must now be submitted, in addition to the usual document custodians. Second, if the proposed transaction involves any overlapping products or services, select ordinary course plans that address competition, even if not used to analyze the deal, must be submitted. Third, the agencies are modifying their previous guidance regarding when a draft would be treated as a “final” version (even if subsequent versions exist and will be disclosed). Previously, earlier drafts were not required to be submitted unless they were shared with the full board of directors or similar body, such as an investment committee. Under the new HSR filing regime, a draft that is shared with any member of the board or similar body will be considered a separate final version. Finally, all foreign language documentary material that is required to be furnished will need to be accompanied by an English language translation.

Streamlined requirements for certain non-negotiated transactions. The new HSR rules create a new category of “select 801.30” transactions where the burdens of HSR compliance will be reduced because they are viewed as having a low risk of violating the antitrust laws. These transactions are covered by Section 801.30 of the HSR Rules, and include open market purchases, acquisitions of voting securities by offerees in tender offers, tender offers, secondary acquisitions, acquisitions of target interests from third party holders other than the target and its affiliates, conversions, and option/warrant exercises. While these transactions are still potentially HSR-reportable, certain information requirements will no longer apply in certain circumstances. To qualify for this lesser burden, a transaction must be of a type to which Section 801.30 applies, must not result in an acquisition of control, and there must not be any agreement or contemplated agreement between any entity within the acquired and acquiring person. This would include, for example, an acquisition of voting securities on the open market where the investor has no other ties to the issuer and is not gaining control as a result of the acquisition.

How should companies prepare?

The FTC estimates that the average time to complete an HSR filing will nearby triple, with a low estimated increase of 10 hours for select 801.30 transactions and high estimated increase of 121 hours for acquiring person filings where there are overlaps or supply relationships. These are only estimates, and timeframes could be significantly longer, especially in the initial months after the new forms take effect, as filing parties, practitioners, and agency staff adjust to the new requirements. Hence, potential filing parties should allow time for extended filing preparations and avoid setting hard deadlines (such as the currently typical 10 business days post-signing) for submitting HSR filing in their acquisition agreements that may require filings after the new rule’s effective date. At the same time that the new rules go into effect, the agencies announced they will resume granting early terminations of the HSR waiting period, allowing some transactions that are unlikely to raise competitive concerns to close sooner than the standard 30 days post-filing. However, it is unknown at this point whether the agencies will grant early terminations with the same frequency and within similar timeframes as they did prior to 2021.

While the burden of HSR compliance will increase for most filing parties, there are steps that prospective filers can take to prepare before they begin (or while they are in the early stages of) exploring transactions that may not sign until after 2024:

  • Engage with antitrust counsel early in the process to identify all current and known planned products or services in which the acquiring person and the target compete.
  • Consider the deal rationale early and be prepared to discuss it with antitrust counsel to shape responses to the new deal rationale question.
  • Start a process for gathering and updating directorships held by individuals who serve on the board of directors at various entities within the filing person, including subsidiaries and portfolio companies.
  • Implement or enforce already-in-place version control procedures for documents, so it is easier to determine what is a draft, what isn’t, and what versions need to be produced.
  • Be prepared to discuss and determine which person on a deal team is the supervisory deal team lead and subject to document requirements.
  • Be aware that drafts shared with anyone who is a member of the board of directors at any entity within the filing person may be subject to HSR disclosure.
  • Create a central repository or other quick method to locate annual, semiannual, and quarterly reports prepared in the ordinary course and shown to either the CEO or board of directors that address competition.
  • For filings that are likely to have foreign language documents as attachments, build in the necessary time to obtain reliable English language translations.
  • Survey relevant entities within the organization (including subsidiaries, parent entities, and portfolio companies) regarding subsidies received in the last two years (or commitments to provide a subsidy in the future) from foreign entities or governments of concern, and contracts or pending proposals with the Department of Defense or any member of the U.S. intelligence community.

Annex

Footnotes

1 To the extent a filer is both an acquiring and acquired person, such as in a consolidation of two operating entities with different ultimate parent entities into a newly-formed entity, two HSR forms will need to be filed.

2 The term “person” includes the ultimate parent entity (“UPE”) of the acquiring or acquired entity (as the case may be), and all entities such UPE controls directly or indirectly.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.

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