Merger Filing Essentials

Determining if a notification is required under the Hart Scott Rodino Antitrust Improvements Act of 1976 (HSR Act) is a critical first step for any deal team. This act mandates that parties to large mergers file a Notification and Report Form with the FTC and DOJ before closing the deal to allow for government scrutiny. The form requires extensive data on the companies, their revenues by North American Industry Classification System (NAICS) codes, and the transaction structure for a preliminary antitrust assessment. Filing this notification triggers a statutory waiting period, effectively freezing the deal until the government completes its review and grants clearance.

The HSR Act applies to transactions meeting specific size of transaction and size of person thresholds, which are adjusted annually based on the Gross National Product. As of 2025, a transaction is generally reportable if the acquired interests, whether securities or assets, are valued at more than $126.4 million. For transactions valued between $126.4 million and $505.8 million, a size of person test applies to filter out deals between smaller entities that are unlikely to impact commerce. Transactions valued over $505.8 million are typically reportable regardless of the parties size, reflecting the presumption that such large deals inherently require federal scrutiny to ensure market stability.

Submitting the filing starts a statutory waiting period where parties cannot close the transaction or integrate operations. This is typically 30 days for most transactions, or 15 days for cash tender offers and bankruptcy sales. If the agencies identify potential competitive harm, they may issue a Second Request for additional information. This formal demand for documents and data is burdensome and extends the review period by an additional 30 days after substantial compliance, often delaying the closing by several months.

A critical component of the filing is the submission of "Item 4(c)" and "Item 4(d)" documents, which are internal papers analyzing the deal. These documents include board presentation materials, confidential information memoranda, and strategic analyses that discuss market shares, competition, or potential synergies. Agencies scrutinize these documents heavily to understand the strategic intent behind the merger. Failure to include all relevant documents can result in the filing being bounced, restarting the waiting period clock and delaying the deal.

Agencies focus on whether the merger creates dominant market power or facilitates coordination among remaining competitors. The review begins with defining the relevant product market and geographic market to assess where the companies compete. This analysis is critical for horizontal mergers where parties are direct competitors and the risk of price increases is high. Agencies also review vertical mergers for effects like foreclosing competition in related markets, such as when a supplier buys a distributor to block rivals.

Parties may argue that the merger generates efficiencies, such as cost savings or improved products, that outweigh potential anticompetitive effects. This "efficiencies defense" requires verifying that the benefits are specific to the merger and will be passed on to consumers. In digital markets, agencies assess network effects and data accumulation where a merger might increase market power by providing access to a large user base. They look beyond simple revenue metrics to user engagement and innovation, scrutinizing acquisitions of nascent competitors that could eliminate future threats to the platform ecosystem.

Failure to comply with HSR filing requirements results in severe civil penalties for the companies and sometimes individuals. Gun jumping, or coordinating operations and exerting beneficial ownership before the waiting period ends, is strictly prohibited by the FTC. Civil penalties can reach up to $51,744 per day for every day the violation continues, quickly accumulating to millions of dollars. Beyond fines, the FTC or DOJ may seek injunctive relief to unwind the transaction or force divestitures post closing.

Companies should engage in strategic planning early, often incorporating specific antitrust clauses into the merger agreement. These provisions may include "hell or high water" clauses requiring the buyer to do whatever is necessary to get clearance, or "breakup fees" payable if the deal is blocked by regulators. Parties must also practice good document hygiene, training executives to avoid using language in emails or memos that could be misinterpreted as evidence of anticompetitive intent. Preparing for a potential Second Request by organizing data in advance can save critical time during the review.