USA – WASHINGTON, DC Trends and Developments Contributed by: Nicholas S. Johnson, Jonathan S. Deem, Jennifer S. Fahey and Japera A. Parker, Bailey & Glasser, LLP
Structuring M&A Deals Around Regulatory Uncertainty and Delay in Washington, DC: A Practical Legal Guide Introduction Mergers and acquisitions have always been complex undertakings, requiring careful co-ordination across legal, financial, operational and strategic domains. But in an era defined by heightened antitrust scru - tiny, evolving foreign investment review frameworks, sector-specific regulatory regimes and geopolitical volatility, regulatory uncertainty has emerged as one of the most consequential variables in deal structur - ing. What was once a relatively predictable closing condition has transformed into an existential deal risk capable of unravelling years of negotiation, destroying billions in value, and exposing parties to protracted and expensive litigation. The regulatory environment facing deal makers today is structurally more complex than it was even a dec - ade ago, caused most recently in part due to changes triggered by federal agencies in Washington, DC. The United States, the Federal Trade Commission (FTC) and Department of Justice Antitrust Division have pursued increasingly aggressive merger enforcement strategies. The Committee on Foreign Investment in the United States (CFIUS) has expanded its jurisdic - tional reach following the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). The European Commission continues to refine its frame - work under the EU Merger Regulation, including its new tools under the Foreign Subsidies Regulation. Sector-specific regulators – from the Federal Commu - nications Commission to the Federal Energy Regula - tory Commission to banking supervisors – layer addi - tional review timelines and substantive requirements atop general competition review. Meanwhile, multi- jurisdictional deals increasingly face parallel reviews across dozens of antitrust regimes worldwide, each with its own substantive standards, procedural time - lines and political dynamics. Against this backdrop, sophisticated M&A counsel must approach deal structuring not merely as a legal exercise in documentation, but as a strategic exercise in risk allocation. This chapter of the guide explores the principal tools and techniques available to deal
lawyers navigating regulatory uncertainty and delay, including: • the design of regulatory conditions and outside dates; • reverse termination fees and specific performance provisions; • hell-or-high-water commitments; • interim operating covenants; • deal structure modifications to reduce regulatory exposure; and • the emerging use of regulatory escrows and deferred closing mechanisms. Throughout, the discussion is grounded in practical considerations informed by recent high-profile trans - actions and enforcement trends. Understanding the sources of regulatory uncertainty Before examining how deals can be structured around regulatory uncertainty, it is essential to understand the principal sources of that uncertainty and why they The past several years have witnessed a fundamental shift in antitrust enforcement philosophy in the Unit - ed States. The Biden-era FTC and DOJ challenged a remarkable number of transactions, including several that would historically have been cleared with modest remedies or not challenged at all. While the current administration has signalled some recalibration, the underlying analytical frameworks that support broad theories of competitive harm – including potential competition theories, labour market theories and nascent competitor theories – remain embedded in agency practice and litigation strategy. More funda - mentally, the HSR Act’s Second Request process can delay transactions by months, and the agencies retain the ability to seek preliminary injunctions that effec - tively block transactions even when ultimate litigation have intensified. Antitrust review
outcomes are uncertain. Foreign investment review
CFIUS review has become a near-universal feature of inbound investment transactions involving US busi - nesses with any connection to technology, data, criti -
1442 CHAMBERS.COM
Powered by FlippingBook