M&A Science
Managing Regulatory Compliance Risks in M&A
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Quick takeaways
- Regulatory compliance risks in M&A can be divided into substantive, procedural, and other risks, each requiring careful management to ensure a smooth transaction.
- Conducting thorough due diligence is essential for identifying potential antitrust liabilities and for implementing compliance measures before and after the merger.
Deep dives
Overview of Regulatory Compliance Risks in M&A
Regulatory compliance risks in mergers and acquisitions can be categorized into three main buckets: substantive risks, procedural risks, and other risks. Substantive risks involve potential antitrust issues that might arise if the acquiring company and the target company are direct competitors or if the acquisition could foreclose competition in key markets. Procedural risks pertain to the regulatory filings required under statutes like the Hart Scott Rodino (HSR) Act, where companies must notify and seek clearance from agencies such as the Department of Justice and the Federal Trade Commission before finalizing a merger. Other risks include gun jumping, where parties may prematurely act on a deal before obtaining regulatory approval, as well as the need for compliance due diligence to ensure both companies are aware of any potential liabilities associated with the merger.
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