Tuesday, June 21, 2011
Monday, June 20, 2011
So late last week, the FTC granted early termination to Microsoft and Skype for their announced deal. Early termination of the HSR waiting period means that Microsoft and Skype can move towards closing that deal. Now, comes the news from Bloomberg that Skype has fired a number of executives prior to closing:
Skype Technologies SA, the Internet- calling service being bought by Microsoft Corp. (MSFT), is firing senior executives before the deal closes, a move that reduces the value of their payout, according to three people familiar with the matter.
The reasons for the letting go this group of 8 high level Skype execs prior to closing aren't known, but the Skype Journal blog reinforces what is hinted at in the Bloomberg report - that the firings were done in order to reduce the number of stock options that are vested at closing and thus raises the payout to venture investors.
Now, I have no way of knowing if increasing the payout for investors is in fact true or if the execs that were let go didn't get an equivalent cash payout on their way out the door. My guess is that they did, but I don't know. If on the other hand it's true, then it's pretty cheesy.
The prospect of getting a large cash payout from valuable options after an IPO or a when unvested options are automatically vested coincident with sale is a huge part of the incentive package that keeps talented people working at start-ups. If it's true, and I guess everyone in the Valley will know the truth soon enough, then it means that executives with unvested options will be spending more time than one might like ensuring their positions in the event of a sale rather than risk getting let go just before their big payout.
Tuesday, May 24, 2011
The DOJ's Antitrust Division filed a suit to block H&R Block's proposed acquisition of TaxAct yesterday. H&R Block is in the process of learning a lesson (likely expensive) about what not to say in the run up to a deal. For example, internal documents from H&R Block noted that the primary benefit of the acquisition would be “elimination of competitor.” That's never good a good document to hand over when the antitrust authorities come knocking. Another goodie - internal documents note that “acquir[ing] TaxACT and [will] eliminate the brand to regain control of industry pricing and further price erosion.”
Here's the DOJ's complaint.
Friday, May 13, 2011
This week the Competition Commission of India (CCI) released the new M&A regulations. These rules are somewhat softened from the stringent guidelines issued earlier this year (for various commentary see here). For example, deals entered into prior to June 1st have been exempted, and filing fees have been significantly decreased (see this useful Mayer Brown summary).
The rules exempt a host of transactions from the scrutiny of the CCI. For example, if an acquirer has a 50% stake in a firm then further acquisition will not trigger the competition law except where the acquisition leads to transfer from joint control to single control. Moreover a combination taking place entirely outside India with insignificant local nexus and effect on markets in India “need not normally be filed.”
With respect to timing, the regulations provide that within 30 days of submission of the notification form the CCI is to form a prima facie opinion as to whether the combination is likely to cause or has caused an appreciable adverse effect on competition within the relevant market in India. The proposed transaction will then be cleared or subject to a second phase investigation. The regulations provide that the CCI “shall endeavour to pass an order” in a second phase investigation within 180 days from the date of submission of the notification form.
The new regulations still leave some grey areas, such as failing to address pre-merger consultation, although the CCI has indicated that it will issue regulations on consultations. There is also concern about potential conflict between the new rules and the proposed overhaul of the Takeover Code by SEBI.
Monday, May 9, 2011
Hertz announced this morning that it was giving the acquisition of Dollar Thrifty another go. You'll remember that last year, Dollar terminated its agreement with Hertz after Dollar shareholders voted no on its $50/share offer. The sharehodler vote followed sharehiolder litigation in Delaware to try to get the deal protections in the Hertz-Dollar deal invalidated (In re Dollar Thrifty), resulting in a termination of the merger agreement. Following which Dollar and Avis entered into protracted - and so far unsuccessful = talks amongst themselves and the antitrust authorities about getting a deal done.
Apparently, Hertz has decided enough is enough and has decided to jump back in - hoping that Dollar shareholders will think differently this time around. Here's a summary of the new offer from the Hertz press release:
You may wonder why we are moving forward now after the unsuccessful Dollar Thrifty shareholder vote last fall. First, the vote did not prevent Hertz from re-engaging at any time of our choosing. Additionally, economic conditions continue to improve, creating revenue growth opportunities over the next several years. Moreover, Avis has been trying unsuccessfully for the past 12 months to secure government approval to buy Dollar Thrifty and all they have to show for their year-long efforts are “constructive discussions” with U.S. regulators. We don’t believe Avis can get a deal done and the time is right to resolve this matter once and for all to our and Dollar Thrifty’s satisfaction.
In contrast with Avis, we’ve picked up where we left off with the government last fall and we are confident we can secure its consent to proceed. Unfortunately, that will mean divesting Advantage Rent-a-Car in the U.S., which is not our preference, but it’s clear that a merger with Dollar Thrifty becomes far more difficult if the government opposes the transaction.
For its part, Hertz appears to be taking an aggressive stance towards offering Dollar's shareholders a deal they can't refuse. It's offering an improved bid and is committing to sell its Advantage rental brand (e-mail to Advantage employees)- to help clear the way for regulators to provide clearance to the proposed transaction. We'll see how Doolar II proceeds and whether shareholders have a different view on the transaction given what they've seen over the past few months.
Update: Reuters has a timeline for this deal here.
Tuesday, April 5, 2011
Daniel Sokol (Univ. FL) and James Fishkin (dechert) has posted Antitrust Merger Efficiencies in the Shadow of the Law:
Abstract: This Essay provides an overview of U.S. antitrust merger practice in addressing efficiencies both in terms of actual practice before the agencies and in scholarly work as a response to Jamie Henikoff Moffitt‘s Vanderbilt Law Review article Merging in the Shadow of the Law: The Case for Consistent Judicial Efficiency Analysis.
Tuesday, March 22, 2011
Sunday, March 20, 2011
AT&T announces that is acquiring T-Mobile for $39 billion. My first thought is that this will take a long time to clear the HSR process. I haven't given this much thought, yet, but if this transaction doesn't at least go through a 'second request' we should just shut down the FTC altogether. I mean, there is no question that this transaction will result in AT&T being the single largest wireless carrier by far. Because this is a telecom deal, the FCC will also have a say in whether this deal can go forward. The FCC's mandate to ensure that mergers are in the "public interest" has come under some criticism for being too far reaching at times. The FCC was able to squeeze out of CenturyLink/Qwest commitments to build out low-income broadband access as a condition to approving that merger just last Friday. I wonder if the FCC can squeeze out of AT&T a commitment not to drop more of my calls?
In any event, the FCC has recently been talking about reworking its merger approval process, perhaps narrowing its scope. Jonathan Baker, the Chief Economist over at the FCC posted a couple of days ago to the FCC's official blog on the proposed changes to the FCC's merger approval process.
AT&T and T-Mobile have a transaction web-site up already: http://www.mobilizeeverything.com. Go there for merger docs, etc.
Tuesday, March 15, 2011
I suppose the potential hostile offer by NASDAQ for the NYSE might raise antitrust issues, but the real worry should be the potentially anticompetitive effects of the rumored Starbucks-Peets tie-up. That might be a real headache - literally.
Friday, March 11, 2011
The Indian Competition Commission has recently published draft rules on the pre-approval of mergers in India. The draft rules are intended to go into effect this summer (June/July 2011). After they go into effect, India will join the growing list of countries (US, EU, Brazil, China, etc.) that will assert jurisdiction over international transactions where there is a nexus to India. Unlike the 30 day US HSR process for most transactions, the Indian process commits to resolving reviews of applications within 180 days of receiving them, with an outside date of 210 days. Nothing like efficiency!
The Commission is presently taking comments until March 22, 2011. I have an idea for a comment -- how about reducing the review period to say ... 30 days unless there is any reason to undertake a more extensive investigation.
Thursday, October 7, 2010
The FTC's annual report on enforcement of the Hart-Scott-Rodino Act is out now. You can download it now. Some interesting tidbits, including this figure:
In recent days, you've no doubt heard talk of the new merger wave - how business seems to have turned around and the prospect that businesses might be about ready to unleash the $3 billion on their books as a private stimulus. Indeed, the number of deals is up 20% or so this year. Looking at the figure above puts all that talk into some context. We're nowhere near the salad days of the Internet bubble in 2000 or even the height of the credit bubble in 2007. If things are turning around, no one should think those days will be back anytime soon.
What else? Well, there may not be nearly as many deals, but the FTC is busy - enforcement is up, way up:
Monday, May 10, 2010
It doesn't happen often. But, that doesn't mean it doesn't happen. The FTC is now suing Dun & Bradstreet (H/T Main Justice) to unwind a transaction D&B closed last year. According to the complaint, D&B acquired the Quality Education Data (QED), a division of Scholastic, Inc., in an asset purchase and integrated QED with its own Market Data Retrieval unit in February 2009. The FTC sums up the transaction this way:
Market Data Retrieval (“MDR”), a company of D&B, is the leading provider of data for marketing to kindergarten through twelfth-grade teachers, administrators, schools and school districts (“K-12 data”) in the
. K-12 data includes but is not limited to contact, demographic and other information relating to K-12 educators. K-12 data is sold or leased to customers that use the data to market products and services to educators. In early 2009, D&B acquired the assets of QED, MDR’s primary competitor. As a result of the acquisition, MDR now holds over 90% of the relevant market, with only a small fringe consisting of two firms accounting for the remainder. This transaction is in practical effect a merger-to-monopoly and, if allowed to remain, would likely allow MDR unilaterally to exercise market power in various ways, including increasing prices and reducing product quality and services to K-12 data customers. United States
"Merge-to-monopoly"? Acquiring your “primary competitor”? Neither of those sound good. In fact, they’re
not. So, why didn’t the HSR process
catch this transaction? Simply put, the
deal was too small to trigger a required HSR filing. The transaction was valued at $29 million,
well below the $69 million trigger at the time.
It was probably unwise not to file anyway. Certainly, in antitrust sensitive
transactions the FTC will accept a voluntary filing. Here it looks like the parties decided against such a filing. They either
neglected to consult antitrust counsel on the transaction, or they did, and then took
a shot (in Feb 2009) that the somnolent attitude towards enforcement that was a
hallmark of the previous administration would continue going forward. And anyway … unscrambling the eggs post
closing is so expensive and time-consuming, the FTC wouldn’t waste their time
on such a small market. Would they?
"Merge-to-monopoly"? Acquiring your “primary competitor”? Neither of those sound good. In fact, they’re not. So, why didn’t the HSR process catch this transaction? Simply put, the deal was too small to trigger a required HSR filing. The transaction was valued at $29 million, well below the $69 million trigger at the time. It was probably unwise not to file anyway. Certainly, in antitrust sensitive transactions the FTC will accept a voluntary filing. Here it looks like the parties decided against such a filing. They either neglected to consult antitrust counsel on the transaction, or they did, and then took a shot (in Feb 2009) that the somnolent attitude towards enforcement that was a hallmark of the previous administration would continue going forward. And anyway … unscrambling the eggs post closing is so expensive and time-consuming, the FTC wouldn’t waste their time on such a small market. Would they?
They would. Here's a little advice from the FTC's Richard Feinstein, Director of the Bureau of Competition:
They would. Here's a little advice from the FTC's Richard Feinstein, Director of the Bureau of Competition:
Despite its relatively low dollar value, this transaction dramatically decreased competition in the marketplace. When Dun & Bradstreet acquired QED, it bought its closest competitor and created a monopoly. That’s going to get the FTC’s attention every time.
While a voluntary HSR filing would not have created an absolute safe harbor from a subsequent antitrust suit, it might have cleared the ground and allowed the parties to address the government's antitrust concerns earlier on in the process - before there had been any integration work, before there had been any joint marketing, etc. True, making such a filing might have added additional costs and added time to an otherwise small transaction. These are common cost/benefit questions that parties have to consider with antitrust counsel in these kinds of transactions. They can be close calls. In this case, it looks like the parties may have made the wrong call. By avoiding a voluntary pre-closing process, the parties have apparently triggered a worse fate - the potential that the government will come in ex post and undo a deal that closed more than a year ago.
Update: A reader helpfully points out the following:
Wednesday, April 21, 2010
The FTC and the DOJ's Antitrust Division have just released their draft revised horizontal merger guidelines for public comment. The draft is available on the joint FTC/DOJ webpage. These revised guidelines are the result of a series of workshops that the FTC and DOJ conducted in the Fall and Winter. According to the press release major differences between the current and proposed Guidelines are as follows:
- The proposed guidelines clarify that merger analysis does not use a single methodology, but is a fact-specific process through which the agencies use a variety of tools to analyze the evidence to determine whether a merger may substantially lessen competition.
- The proposed guidelines introduce a new section on “Evidence of Adverse Competitive Effects.” This section discusses several categories and sources of evidence that the agencies, in their experience, have found informative in predicting the likely competitive effects of mergers.
- The proposed guidelines explain that market definition is not an end itself or a necessary starting point of merger analysis, but instead a tool that is useful to the extent it illuminates the merger’s likely competitive effects.
- The proposed guidelines provide an updated explanation of the hypothetical monopolist test used to define relevant antitrust markets and how the agencies implement that test in practice.
- The concentration levels that are likely to warrant either further scrutiny or challenge from the agencies are updated in the proposed guidelines.
- The proposed guidelines provide an expanded discussion of how the agencies evaluate unilateral competitive effects, including effects on innovation.
- The proposed guidelines provide an updated section on coordinated effects. They clarify that coordinated effects, like unilateral effects, include conduct not otherwise condemned by the antitrust laws.
- The proposed guidelines provide a simplified discussion of how the agencies evaluate whether entry into the relevant market is so easy that a merger is not likely to enhance market power.
- The proposed guidelines add new sections on powerful buyers, mergers between competing buyers, and partial acquisitions.
Wednesday, March 24, 2010
Thursday, March 11, 2010
The Senate Commerce Committee is having more hearings on the Comcast/NBC deal today at 10:00am. Chirstine Varney (head of the DOJ's anti-trust division), Brian Roberts (CEO of Comcast), Prof. Christopher Yoo (UPenn Law) are among those on the witness list. The webcast will be available here.
Tuesday, February 16, 2010
You might remember that the Oracle-Sun deal filed and then pulled its pre-clearance notification in Russia when it ran into difficulties with EU anti-trust authorities. At the time, I was a little mystified. Now, Clifford Chance is setting us all straight. Here's their memo on the Russian merger pre-clearance process and part of their assessment of notification requirements for transactions involving a foreign buyer and seller:
Russian competition law follows the "effects doctrine" and the notification requirements may also apply in case of foreign-to-foreign mergers.Until August 2009, merger clearance in Russia was required if a foreign-to-foreign transaction met both of the following criteria: (1) it resulted in the acquisition of shares or assets of Russian companies, or direct or indirect control over Russian companies; and (2) it results or may result in the restriction of competition in Russia.This structure was, however, reformed as a part of the Second Antimonopoly Package, which turned these two formerly cumulative criteria into alternative requirements. In addition, the second criterion was modified, which is expected to result in broader application of the Russian merger control rules by FAS. It is now sufficient that a transaction "affects" competition in Russia, while, previously, it was required that the transaction "restricts or may restrict" competition.To date FAS has not issued any official clarification as to how it interprets the revised requirement. Based on its current practice, one may, however, surmise that a foreign-to-foreign transaction falls within the Russian merger control regime where the target entity directly or indirectly controls any Russian entities, owns assets located in Russia or has substantial turnover from operations in Russia
Wednesday, January 27, 2010
In an unprecedented first, effective February 22, 2010, the notification thresholds under the Hart-Scott-Rodino Antitrust Improvements Act will be lowered. The jurisdictional thresholds are adjusted annually under the indexing required by the 2000 amendments to the Act, which require the Federal Trade Commission to revise the thresholds annually based on the change in gross national product.
Monday, January 25, 2010
The DOJ Antitrust Division just announced it has approved the proposed Tickmaster-Live Nation deal. This transaction was subject to a good deal of controversy -- including vocal opposition from The Boss. And if Springsteen has an opinion on a transaction, it's got to be a big deal. From the DOJ press release:
After a rigorous investigation, we concluded that the transaction, as originally proposed, was anticompetitive. ...
The relief here is both structural and behavioral. The settlement requires Ticketmaster to divest more ticketing than it will gain through its acquisition of Live Nation. Simultaneously, the licensing solves a second competitive issue by giving AEG, an integrated competitor, the ability and incentive to compete with the combination of Ticketmaster and Live Nation for concert promotion, venue management, and ticketing.
A copy of the DOJ's Competitive Impact Statement filed with the court is here and AEG and Tickmaster's technology agreement - required as part of the settlement is here.
Under the settlement, Ticketmaster will be required to license its ticketing software to AEG, its single largest customer. AEG will now have the opportunity and incentive to compete in primary ticketing, both in its own venues and third-party venues. Under the settlement, AEG will transition from using Ticketmaster for its ticketing needs, which last year involved about ten million tickets, to its own ticketing platform. Thus, the proposed settlement opens the door for AEG to become a vertically integrated competitor with competitive incentives similar to those of the merged company.
In addition, Ticketmaster will divest Paciolan, an established ticketing business that sells tens of millions of tickets annually. Within sixty days, Ticketmaster will divest Paciolan to Comcast-Spectacor, which has already signed a letter of intent, or some other buyer suitable to the Department.
Tuesday, January 19, 2010
Monday, January 11, 2010
Abstract: China's Anti-Monopoly Law went into effect
on August 1, 2008. Even
though enforcement authorities tend to build their capacity progressively, China has already seen three milestone case decisions in the past year: InBev/Anheuser-Busch, Coca-Cola/Huiyuan, and Mitsubishi Rayon/Lucite. In this article, we
elaborate the background of
each case and provide in-depth analysis of each decision. In particular, we explore the common characteristics of the cases, the economic theories on
which the merger control authority has relied in its merger decisions, and the patterns regarding China's merger policy. Along the same lines McDermott Will & Emery's China office has client memo on the new regulations on merger notification that went into effect on January 1, 2010. The regulations start to lay out premerger notification processes that corporations wishing to merge will have to comply with. -bjmq
Abstract: China's Anti-Monopoly Law went into effect on August 1, 2008. Even though enforcement authorities tend to build their capacity progressively, China has already seen three milestone case decisions in the past year: InBev/Anheuser-Busch, Coca-Cola/Huiyuan, and Mitsubishi Rayon/Lucite. In this article, we elaborate the background of each case and provide in-depth analysis of each decision. In particular, we explore the common characteristics of the cases, the economic theories on which the merger control authority has relied in its merger decisions, and the patterns regarding China's merger policy.
Along the same lines McDermott Will & Emery's China office has client memo on the new regulations on merger notification that went into effect on January 1, 2010. The regulations start to lay out premerger notification processes that corporations wishing to merge will have to comply with.