The following is a guest post from Mitch Berlin, EY Americas vice chair of strategy and transactions at EY. Opinions are the author’s own.
The recent updates to the Federal Trade Commission (FTC) antitrust disclosure rules will place more demands on CFOs and dealmaking teams ahead of filing for merger approvals. Yet they also give forward-thinking leaders the chance to prepare early and ultimately streamline deal timelines just as mergers and acquisitions activity is poised to surge.
Under the updated rules empowered by the Hart-Scott Rodino Antitrust Improvements Act of 1976), CFOs and their dealmaking teams must consider potential competition issues much earlier in the transaction process, be more proactive when compiling documentation, and prepare to submit additional information about competition, subsidiaries, related parties and prior transaction history. The rules generally apply to deals valued at $120 million or more, but smaller transactions may also be subject to increased scrutiny under certain circumstances.
Many CFOs may initially see these requirements as higher hurdles for securing deal approvals, but they’ll also present an opportunity for their dealmaking teams to weed out proposed deals likely to be deemed anti-competitive. This will help dealmakers avoid potential penalties, sunk costs, reputational damage and other effects of pursuing the wrong deals from an antitrust perspective.
The rule changes underscore the importance of rigorous antitrust evaluation before moving forward with any merger. By preparing early, strategically savvy CFOs can ensure regulators understand the full deal thesis and competitive landscape from the company’s perspective. This preparation should begin in parallel with negotiating the deal so both buyer and seller can determine the risk of the transaction and establish potential deal parameters.
More certainty as dealmaking activity grows
The new rules will most likely go into effect in early 2025 and were approved unanimously and on a bipartisan basis; a good indication that they may stick around awhile. That said, they’ll also provide more certainty in the review process, which seems essential as we expect deal activity to increase in 2025. The Federal Reserve’s shift to lowering interest rates is making deal financing less expensive while also easing macroeconomic concerns, and a shifting regulatory approach by the FTC and the Department of Justice under the Trump administration could focus on remedies to permit deals as opposed to blocking deals outright. Pent-up demand and capital waiting to be deployed, especially by private equity (PE) investors, should lead to a flurry of new deals.
In fact, the latest EY-Parthenon Deal Barometer forecasts M&A activity to rise 10% for deals valued at more than $100 million in 2025, with PE deals projected to rise 16% from 2024 levels. Companies that are prepared will find that the process could ultimately save time and money by potentially avoiding second requests, leading to faster closing and greater clarity on deal outcomes. To reap these benefits, here are three key strategies CFOs and their dealmaking teams can execute to comply with the new requirements and file deals efficiently:
1. Get your documents in order early
The new regulations require disclosing additional documents. These include studies, surveys, analyses and reports prepared for officers, directors or supervisory deal team leaders to analyze the acquisition with respect to market share, competition, competitors, markets and potential for sales growth or expansion into product or geographic markets. CFOs and deal teams should put in place practices to collect these documents as the deal is planned so that they are ready to be disclosed, thus shortening the time needed for review; eliminating a friction point after the deal is announced; and ideally reducing time-consuming second requests.
2. Make the case for the competitive benefits of the merger
Synergy and efficiency reports, traditionally prepared for officers, directors and supervisory deal team leaders, will be required. This can benefit dealmakers if they are prepared to highlight how merger-specific and non-anticompetitive efficiencies and cost savings will benefit consumers.
3. Change how you look at the competitive landscape
The mandate requires merging parties to provide an analysis of the transaction’s competitive impact and deal rationale, including horizontal overlaps and vertical relationships so that regulators can understand the strategic reasoning behind the deal. Supplier relationships, top overlapping customers and other analysis needs to be provided. This requires CFOs and deal teams to look at any competition issues earlier in the deal process and could even change how companies screen for which deals to pursue.
Catch the 2025 tailwinds
The 2025 economic and regulatory environment is expected to be more favorable to M&A, meaning the number of deals being reviewed is likely to increase. Navigating the nuances of regulatory scrutiny under a new presidential administration will be key to success. CFOs may find more costs on the front end, but the new pre-merger notification rules could ultimately cut down on companies’ time and expenses when executing transactions. By embracing proactive planning and a strategic approach to antitrust compliance, CFOs and their teams can capitalize on this momentum and achieve their growth objectives.
The views reflected in this article are the views of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization
