M&A and Antitrust — Top Tips to Help Antitrust Clearance - PowerPoint Presentation

M&A and Antitrust — Top Tips to Help Antitrust Clearance Rebecca Nelson Robert Bell18 May 2017 1

Robert Bell Robert Bell is head of the EU & UK competition team at Bryan Cave with over 20 years of experience advising on complex competition and regulatory matters involving some of the leading cases before the Competition and Markets Authority, the European Commission and UK and European Courts. He advises clients on a range of competition law issues including merger control, cartels, restrictive practices, competition litigation and public procurement law.Robert Bell has a particular sector specialism in advising international technology and media clients on the application of competition law and new media, telecommunications regulation, and on competition litigation.He is currently Chair of the City of London Law Society's Competition Law Committee, which liaises with the UK Government and the EU & UK competition regulators in connection with the reform of competition law and practice.Robert Bell is recognised as one of London’s leading lawyers by Chambers UK 2016.Contact: robert.bell@bryancave.com 2

Rebecca Nelson . 3 Rebecca Nelson devotes her practice to antitrust law, providing counseling, customized compliance training, and defending clients through state and federal government investigations. She regularly advises clients with respect to antitrust issues associated with contracts, pricing and sales practices. She has defended clients across a wide variety of industries under investigation by state Attorneys General, the U.S. Department of Justice, Antitrust Division, and the Federal Trade Commission for advertising violations, collusion, and deceptive trade practices.A core part of Ms. Nelson’s practice is her work in all phases of mergers and acquisitions – from advice regarding the antitrust implications of proposed joint ventures and business combinations, through defense of merger investigations by the Federal Trade Commission, U.S. Department of Justice Antitrust Division and state Attorneys General. In that capacity she has served as lead antitrust counsel on many multi-billion dollar transactions and coordinated merger defense strategies on a worldwide basis. Ms. Nelson has merger experience in a tremendous number of industries, including telecommunications, automotive, personal care products and services, construction and other heavy equipment, medical devices and pharmaceuticals, retail stores, food and agricultural products, software, and more .Contact: ranelson@bryancave.com

Agenda Introduction to merger control proceduresTips for seeking clearanceMulti-jurisdictional filingsRemedies 4

US Merger Control 5 Enforcement Agencies: Federal Trade CommissionU.S. Department of Justice, Antitrust DivisionHart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”) requires parties to some transactions to file and observe a waiting period before closing their dealMany types of transactions caught: mergers, acquisitions (even of minority stake), joint venture formations, etc.Filing fee = $45,000 to $280,000 (sliding scale based on transaction value)Fines = up to $40,654 per day (adjusted for inflation annually) for HSR violations

US Merger Control 6 Under current thresholds, filing obligation are generally driven by the “size” (i.e. value) of the transaction:> $323 million = filing required regardless of size of parties, unless exempt> $80.8 million, but ≤ $323 million = filing required if “size of person” test met, unless exempt≤ $80.8 million = filing not required Some Common Exemptions:Ordinary Course Transactions: Acquisitions in the ordinary course of business (e.g., purchasing supplies, used durable goods) Acquisitions of Foreign Stock/Assets : As long as the foreign assets/issuer do not generate significant revenues in the U.S. Certain Real Property Acquisitions : For example, unproductive real property, office or residential property, hotels Certain Acquisitions of Carbon-based Mineral Reserves: For example , acquisitions of oil or natural gas reserves and associated exploration or production assets, depending on their value Stock Splits : As long as it does not increase the percentage of voting securities owned by any person “ Investment Only” Acquisitions : If acquiring less than 10% and solely for the purpose of investment

US Merger Control 7 Where filing is required, parties must observe waiting period before closing deal Waiting period runs for: 30 calendar days, for most transactions15 calendar days, for cash tender offers and acquisitions subject to certain federal bankruptcy provisionsIf last day of waiting period falls on a weekend or public holiday, end of waiting period pushed to next regular business day Early termination often grantedIf “Second Request” issued, waiting period extended until 30 days after parties certify substantial compliance

US Merger Control 8 Prepare filing 30 Day Waiting Period HSR Filing Date HSR Waiting Period End Standard Access Letter Pull & Refile Prepare filing 30 Day Waiting Period Agency requests voluntary submission of additional information Time parties have to respond to prevent second request Pull Refile within 2 days Approx. Day 62 30 Day Waiting Period New 30 Day Waiting Period Prepare filing

US Merger Control 9 Useful HSR Statistics (FY2015): E arly termination was granted in ~ 80% of transactions in which it was requestedIn ~ 15% of transactions, either FTC or DOJ received clearance to reviewOf those, ~18% resulted in a Second Request Overall, the percentage of HSR transactions resulting in a Second Request was low – only ~ 2.7% (47 Second Requests)Most Second Requests (~66%) involved transactions valued over $1 billionThe bad news: a majority of deals where a Second Request is issued result in some enforcement action (or abandonment of transaction)

EU MERGER CONTROL One stop shop for mergers having EU effectCouncil Regulation 139/2004 (EU Merger Regulation) Covers mergers, acquisitions and full function joint ventures Turnover thresholds National EU Member State jurisdictionNo merger feesConsideration periods and timetable (on next slide)10

Pre-notification State of play meeting Notification / Start of Phase I Investigation Clearance / 10 day extension for remedies / Start of Phase II InvestigationFinal decision = clear, prohibit or clear subject to remedies25/35 working days 90/115 working days Statement of objections EU MERGER CONTRO L 11

EU Merger Control EU vs. national merger controlTrends: Long pre-notification  Increasing trend of blocked mergersIncreased perception of diligenceMore Phase I clearance with conditions /commitments12

Tips for seeking US clearance 13 Engage Early : Client should consult antitrust counsel early in the deal process – conduct an initial substantive antitrust assessment and determine key issues/hurdles Plan and Prepare: If potential antitrust concern identified, develop a plan Are there apparent show-stopper overlaps (e.g. a 3 to 2 merger)? If so, consider how those will be handled and develop proposed remedy offering if it may be needed.Gather documents that have already been created regarding the deal. What do they say about competition and “markets?”Identify any bad statements and develop facts to reduce their impact.Develop procompetitive themes. If documents are still being created for the Board, include these themes in documents as they are generated.Engage economist, if needed

Tips for seeking US clearance 14 Agency Interaction: Once the HSR filing is submitted, be ready to engageVarious approaches include:“Duck and cover” – your deal may land on the desk of very busy people who do not see enough interesting content to merit their time and enforcement resources. Even a deal with some obvious overlaps may sail through the HSR processPrepare for the questions you know you will get if an Agency calls. Have your procompetitive themes ready to describe to the Agency lawyer, and know the facts about your deal that offset any negative statements in the documentsPrepare an Access Letter response – if you are likely to receive an Access Letter, have the materials prepared in advance to give the Agency more time to review before the end of the waiting periodGo in with a presentation – for deals with obvious, significant antitrust issues, parties may choose to prepare a presentation and to contact the Agencies to request to come in for a meeting as soon as the HSR filing is madeGive the Agencies notice of your intention to file an HSR soon, even submitting the draft filing to them before you submit the official filing. This is a good approach when the parties know which Agency, shop and legal team will review the deal and how it will be analyzed

Tips for seeking US clearance 15 No “one size fits all” solution – approach should be tailored to deal and specifics of relevant market(s) Tools to consider: Advocacy presentationsWhite papersEconomic analysesPrepared access letter responseSubmission of internal and third-party documents that support the parties’ position on relevant markets and low likelihood of competitive harm

Tips for seeking EU clearance Complete Form CO in pre-notificationConcentrate on Phase I clearance Importance of company statements both internally and externally Use of economistsSite visits16

Tips for seeking EU clearance Importance of customer and competitor feedback Market share not always indicative - Relying on good economic and factual evidence Commission sceptical of future ‘Chinese competition ’/quantification neededConcentrate on how merger will not stifle innovationDanger of providing misleading information17

Multi-jurisdictional filings 18 Co-ordinating multi-jurisdictional filings Close co-ordination of authorities in particular US and EUWaivers between authoritiesUse of experienced local counselPresent consistent market share data in different geographies  

Remedies - US 19 Agency will carefully consider proposed remedies before approving Must solve competitive problem identified by the agency to be accepted Divestiture of fully operational business preferred over divestiture of selected assetsMost remedies involve upfront buyers Divested business must be capable of success in preserving competitionTransition services agreements, supply agreements, hold separates, etc. may be necessary for a period of timeMay need to add assets beyond the overlapping area of business to ensure success

Remedies - EU Putting together a remedies packageThreats to innovationRealistic to address market share concernsDetailed information in Form RM Divestments much preferred to behavioural remediesStand-alone business division sales preferred to collection of disparate assetsUpfront buyer remedy more popularThe size of the divestments has increasedEU Commission will have a say on who the divestment is sold to20

Conclusion Engage earlyPlan and prepare antitrust clearance timetableIdentify show stoppersEarly audit of documents/use of economistsDevelop consistent global pro-competitive arguments/remedies if needed Make comprehensive draft filings early 21

CLE points CPD points and CLE credit are available for this webinar.CPD points and CLE credit may be collected by emailing: europe.marketing@bryancave.com 22

Eu-competitionlaw.com 23

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