• New FTC rules, effective January 2025, will significantly slow down deal timelines for private equity firms.

• The revamped Hart-Scott-Rodino Act demands more transparency, including board meeting minutes and strategic planning documents.

• Deal preparation could take up to 121 additional hours under the new requirements.
  

The Federal Trade Commission (FTC), in collaboration with the Department of Justice (DOJ), is introducing a set of rules poised to reshape the mergers and acquisitions landscape, particularly impacting private equity firms. These updated regulations, part of the Hart-Scott-Rodino (HSR) Act, are scheduled to take effect in January 2025, according to a Bloomberg Law article by Case Western School of Law.

The new rules demand unprecedented levels of transparency. Private equity firms and other companies involved in deals must now disclose a broader range of internal documents, including:

• board meeting minutes,

• strategic planning materials,

• information about board members and officers involved in overlapping industries.

This level of scrutiny is intended to help regulators identify conflicts of interest or other competitive concerns early in the review process.

The FTC estimates the new form could take up to 121 additional hours to complete, compared to 37 hours currently.

Interlocking Directorates

The new FTC rules place increased focus on interlocking directorates, where the same individuals serve on multiple boards in the same industry, which can raise concerns about potential anti-competitive behavior.

Under the new HSR regulations, private equity firms are required to disclose more extensive details regarding such board connections. This compels firms to reassess how these overlapping roles might be perceived by regulatory authorities, especially in light of antitrust enforcement efforts aimed at preventing market collusion, the Bloomberg report says.

Empowering Labor Groups

While the new HSR rules don’t mandate detailed labor or employee-related information in initial filings, the FTC has noted that such data may still be requested.

Additionally, labor groups can raise concerns about how a merger could lead to job losses or suppression of wages, giving them more leverage to influence decisions about the deal.

Labor’s enhanced ability to scrutinize corporate moves that affect workers increases their power to challenge or negotiate conditions in M&A.

Subjectivity Concerns

The new regulations are very likely to slow down deals and even put a halt to some mergers and acquisitions if insufficiently prepared, a Law.com report suggests. 

Additionally, the new requirements are seen as leaving room for more subjectivity, according to Scott Sher, a partner at Paul Weiss. "We've gone from a (relatively) certain world centered around a notification that required objective information only to one that is much more murky and perhaps subject to the interpretation of rules by a particular attorney at the agency or manager at the agency,” Sher said. “That becomes problematic for parties hoping for consistency and predictability."