New Merger Disclosure Rules Double Review Time, Complicate Deal Process

The implementation of revised merger disclosure requirements under the Hart-Scott-Rodino (HSR) Act has significantly increased the time and effort required to process filings, according to Bloomberg Law. Lawyers who once completed filings in roughly two weeks are now finding that the process takes twice as long, leading to higher costs and greater complexity for companies pursuing mergers and acquisitions.

Per Bloomberg Law, these changes stem from a regulatory overhaul announced by the Federal Trade Commission (FTC) several months before President Joe Biden left office. The new rules, which took effect on February 10, demand more detailed disclosures from companies regarding their planned transactions. This has resulted in law firms dedicating additional time and resources to ensure compliance, forcing clients to adjust both their budgets and deal timelines.

“It is something clients have to budget for, both timewise and economically,” said Meredith Beuchaw, a mergers and acquisitions partner at Lowenstein Sandler, according to Bloomberg Law. She noted that the new requirements are “certainly affecting our deal timing.”

The FTC’s revisions require companies to disclose more information about their business structures and past transactions. This has created added work for legal teams, particularly those representing private equity firms with multiple portfolio companies or strategic buyers with diversified operations. Lawyers hurried to submit filings before the new rules took effect, resulting in a surge of 394 filings in the final week under the old system—far exceeding the usual weekly average of 35 to 50 transactions, per Bloomberg Law.

Now that the new requirements are in place, lawyers are grappling with gray areas in the rules. One such issue involves the definition of “regularly prepared” reports that must be disclosed. If a document is provided to a CEO sporadically rather than on a scheduled basis, it remains unclear whether it falls under the FTC’s mandatory disclosure requirements.

Legal experts say the added scrutiny and uncertainty are prompting companies to reassess how they document and communicate strategic plans internally. Some firms are beginning the filing process several weeks earlier than before to account for the increased workload. “Everyone is sufficiently nervous about how much time and how burdensome preparing the filing will be,” said Zarema A. Jaramillo, an antitrust and competition partner at Lowenstein Sandler, per Bloomberg Law.

With the new rules now in effect, the Chamber of Commerce has filed a lawsuit against the FTC, arguing that the expanded requirements place an excessive burden on businesses.

Source: Bloomberg Law