U.S. Merger Notification Threshold Falls to $92 Million

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U.S. merger notification thresholds decline for just the second time; take effect on March 4, 2021.

The Federal Trade Commission ("FTC") announced that the Hart-Scott-Rodino ("HSR") Act thresholds will decrease slightly in 2021. These thresholds determine which mergers and acquisitions must be reported to the federal government before consummation. The lower thresholds take effect on March 4, and will remain in effect through early 2022.

This marks only the second time that thresholds have decreased since they were indexed to gross national product in 2005. The first time followed the global financial crisis in 2010. Parties to any transaction that is expected to close on or after March 4, 2021, may wish to revisit their HSR filing analysis using the adjusted thresholds.

Adjusted HSR Jurisdictional Thresholds

Size-of-Transaction Threshold. An HSR filing may be required if an acquirer will hold, as a result of a transaction, voting securities, noncorporate interests, and/or assets of an acquired person valued in excess of $92.0 million (the 2020 threshold was $94.0 million). If the Size-of-Transaction is between $92.0 million and $368.0 million, the transaction also must satisfy the Size-of-Person threshold, described below. Transactions valued in excess of $368.0 million need not satisfy the Size-of-Person threshold.

Size-of-Person Threshold. A transaction meets the Size-of-Person threshold if either the acquired or acquiring person has annual net sales or total assets of at least $184.0 million and the other party to the transaction has at least $18.4 million in annual net sales or total assets. (The 2020 thresholds were $188 million and $18.8 million, respectively.) If the acquired person is not "engaged in manufacturing," the threshold is not met unless that person has at least $18.4 million in total assets or $184 million in annual net sales.

The tables summarize these threshold changes.

Threshold

2020 Threshold (million)

2021 Threshold (million)

Minimum Size-of-Transaction

$94

$92

Minimum Size-of-Person (Larger Person)

$188

$184

Minimum Size-of-Person (Smaller Person)

$18.8

$18.4

Maximum Size-of-Transaction for Size-of-Person to Apply

$376

$368

Filing Fee

2020 Threshold (million)

2021 Threshold (million)

$45,000

$94 to $188

$92 to $184

$125,000

$188 to $940.1

$184 to $919.9

$280,000

More than $940.1

More than $919.9

In January, the FTC also increased the maximum civil penalty amounts for a number of statutes with the daily penalty for HSR Act violations increasing to $43,792 per day.

Interlocking Directorates Thresholds Decrease

The FTC also decreased the jurisdictional thresholds for the prohibition on interlocking directorates under Section 8 of the Clayton Act. Section 8 prohibits a person from serving as an officer or director of competing corporations if each company has a net worth of more than $37,382,000. However, there is no violation if the competitive sales of either are less than $3,738,200.

There are exceptions both to the reporting requirements under the HSR Act and to the prohibitions on interlocking directorates under Section 8 of the Clayton Act. Qualified counsel should be consulted whenever a transaction may implicate either of these statutes.

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.

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