How to Navigate Antitrust Complexities in M&A

24:48If it crosses certain thresholds, not all deals are reportable. They have to be above a certain value. And if your deal is above that value and it needs to be reported, you have to submit this HSR form to notify the government. And then after that, the next big step to be aware of is whether the government comes back and asks you for more information. And that can come in the form of sort of a gentle ask. That could be an informal ask. That's almost like a request. They call a voluntary request for information. Or it could be a full-blown subpoena, a document that is enforceable in court and obligates you to produce documents in response to that request.

25:25And that is called a second request. That's just a term of art in the antitrust space. And that second request is really the biggest driver of delay and cost and burden for clearing a deal in the U.S. So you might have a follow-up as just a pure clarification. Hey, can you send this or clarify this little piece of information? Or it goes to this whole second request, which basically is like a big audit. That's exactly right. And it really, there's a spectrum that your inquiries will fall on. And you could receive no requests and 30 days after you submit the filing, you can just close. Or you might receive a limited request for information.

26:01Or you might receive something like a second request that is a full-blown, highly intrusive process. We're talking about requests that have now gone up to 50, even 100 custodians, meaning people whose documents have to be pulled in response to that request. These second requests seek data, sometimes terabytes of database files from the company's records. The scope of the documents that have to be collected can be massive, in the millions. And by the way, increasingly includes messaging platforms, ephemeral messaging, data on personal devices, that are used for work. These are things that surprise people in a company.

26:37Companies expect a regulatory process. They might expect a regulatory review. But when you tell them that a senior leadership member needs to provide their personal phone to our e-discovery vendor because their work emails or text messages on that phone might need to be produced to the government, that can come as a shock and surprise. It really can't be overstated. These are significant. Messages to girlfriends and mistresses and everything on those personal devices. If you talk to junior associates and big law firms, they all probably have some confidential story on a no-names basis where they've seen some document or some email in one of these reviews.

27:11Obviously, everyone's extremely professional in how they handle that. And you're always extremely careful in using vendors that protect that kind of information. But try telling that to the person who's handing over their phone. This is why you need a burner phone. It's why no matter how many times you hear it, you really have to try to separate your personal devices as much as possible. separate business and personal, as we noted. And then feel like you don't want the trail. Sometimes you just say things that are... Let's talk about that, like the language that is going to raise the red flags, where it's like, oh, we're going to burn this company down.

27:45Obviously, that's extreme, but what are general red flag languages if they're going to use their AI tool to start pulling up stuff? This is a tough question because there's different schools of thought. My view is you instill the right kind of business culture at a company and you rely on that business culture to prevail in how documents are created and how people talk about their dealings in the market, et cetera. I don't know if I'm personally a fan of words you should or shouldn't use. Business people need to be able to talk and converse and make informed decisions. At the same time, you have to advise business people that there's a risk involved in saying things in documents or emails or text messages, which later can be taken out of context, which later can look like something maybe they're not, which later can take on a whole different meaning during a review of a merger that no one may be even thinking about when they say those words.

28:36All those risks come up because we have a process in the U.S. in particular that's an adversarial process. When you submit a filing, if the government believes that your merger is problematic, they take you to court and they're going to try to block your deal. And that's an adversarial process. Now you're litigating with the government. What that means is the government is going to put forth their strongest case that they can. And part of that, they're going to be looking at all the documents and they're going to look at everything people said. And they're going to ask questions during depositions and maybe a trial about what those things meant and what they didn't mean.

29:08And they're going to be doing it in an effort to build their case and win their case. All that means that same advice you receive from lawyers and other advisors about always taking care of what you put in writing applies just as much in my context, sort of the M &A, antitrust legal context. You want to take care because when you're talking about competition, when you're talking about market shares, when you're talking about product roadmaps and build versus buy and moats and barriers to entry, these are things that can be commonplace terminology that's used across your sector or within your business, but they may have 15 different meanings depending on how they're being used.

29:43Or they might have a completely different meaning depending on who the audience is. You could have a small startup engaging in puffery to raise money. You could have a target trying to put the best foot forward in a confidential information memorandum. The motivations that drive that may not be the same motivations that drive being the clearest and most objective presenter of what the facts are. And later that is all going to get lost in the adversarial process. They're building a case so that they can win in court against you from doing the deal and that they're going to take things and build around that position, depending on what it is to support it and have some facts they can reference.

30:23Exactly. They're going to do within ethical limitations and moral limitations. I've worked with a lot of government lawyers. They're really good people, attention people, hardworking people. But their job is, if they have a merger challenge, their job is to develop the facts in a way that supports their view of the market that they have gained from their investigation. And you may disagree with that view, but that's not going to be a reason for an email to be thrown out of the evidential record. What's going to happen is you as a company will present your view of what that email means. The government's going to present their view of what the email means.

30:57And then the judge is going to decide who they believe or don't believe. That's why if you work backwards from there, the starting point is just be very careful how you talk in emails. And to me, that means instilling a business culture around document creation, irrespective of legal implications that focuses on clarity, accuracy, context, and avoid the kinds of things that you wouldn't otherwise want to have put in front of you five years later. Do the right thing. I think that's what it comes down to. Do the right thing on these deals. And 2R, what is that? That's the second request. That's the term of art for a second request.

31:33Okay. So 2R, I know that's the second request. For filing HSR, who has to file HSR? So in the US, both parties. Everybody for every deal has to do this? If it's a reportable deal. So if the transaction exceeds a certain value, which is now approximately almost$120 million, and then subject to other requirements and carve-outs and exceptions. But if you trigger the monetary threshold for a filable transaction, then both parties to the transaction must submit an HSR. This sometimes comes as a surprise to targets, especially smaller ones. That's a good tip for everyone to be mindful that just because you're the target doesn't absolve you from having to think about the implications of submitting a form, which, by the way, would be a huge mistake not to mention that HSR form is changing.

32:17We have a major change in a form going into effect in February of 2025. And that form now requires significantly more information, more documents. And that means not only from the acquirer submitting the form, but the target submitting the form will have to enclose documents that they've created about the deal. Some ordinary course corporate development documents may have to be created, all of which which by the way, leads back to document control, document management. Good document management, good document control practices will help mitigate any risks associated with submitting a broader HSR form.

32:51Okay. HSR filings are increasing, hence merger taxes going up. Earlier when you mentioned the deal horizon, can you help me understand the whole perspective of looking beyond the single transaction, but like the whole landscape? How does that work? The way it works is if you're looking at a deal today, if you are a serial acquirer, if you're a company that does many transactions. If you're looking at a transaction today and trying to understand what is the legal risk associated with this transaction, you need to look back and understand what the history of other transactions you've done in the same sector are to understand whether or not this particular deal may create a problem when you're looking at the cumulative effect of all those deals.

33:31So we talked about that earlier today and thinking about industry roll-ups and just thinking about not just one deal in isolation, but looking at the impact of all of them combined. Another element to that is the government authorities are increasingly looking at markets more broadly and looking at how competition occurs in the market more broadly. The way that plays out in practice is theories of competitive harm that have to do with ecosystems or market adjacencies. What I mean by that is you may have a transaction that involves acquiring a company that is not an immediate competitor, but maybe they're somewhere else in the vertical stack.

34:08They might be upstream, downstream. Whereas traditionally, that might have been viewed as the kind of deal that is presumed to be efficient, pro-competitive, create synergies, create cross-selling opportunities, help the acquirer enter new verticals, all those sorts of things. You have to look at those kind of transactions now with a little more careful eye because there are ways that the government authorities are viewing those as a way to consolidate an entire ecosystem. They may be looking at a transaction that is vertical in nature, but looking at whether it's creating a consolidation of an entire ad stack or an adjacent market that would allow, for example, other competitors to have a difficult time reaching market, distributing products.

34:50We've had some interesting cases like this. In Europe, booking had its acquisition of eTravel eBlocked by the European Commission. This is under appeal. You had a great conversation about this case. I know we've got to interview Todd. He got to vent about the whole situation. It was great to hear his story. That's exactly the kind of case I'm thinking of. There's one where booking his hotel, e-traveling his flight. The government is increasingly looking at, okay, combining those sorts of different parts of a vertical stack. Is there some way that disadvantages other players in the market, other competitors who may not get the same access to e-traveling distribution channels, et cetera?

35:26Those are kinds of theories that what that means is companies of all sizes could be in the crosshairs, especially if the acquirer is a large one. And if that acquirer has a big position somewhere in the stack, if you're being acquired by that kind of company, you need to think about these sorts of ecosystem theories that the government could be thinking about. Locking that deal in itself was anti-competitive because how are they supposed to compete with Expedia? Anyways. We'll see how the deal plays out. Teach me risk mitigation around all this. I know you mentioned getting involved with attorneys early.

35:58And just can you help me explain how do I manage my risk? I kind of break this down into the phases. So before a deal even exists, let's call that the ordinary course. Now, especially with the new HSR form, this is even more important, I think. Your ordinary course strategic planning, ordinary course corporate development documents, ordinary course competition market analysis, when you're scoping out what pond to go fishing in in advance of a specific deal. All those sort of ordinary course efforts are going to be creating documents. They're going to be creating spreadsheets and data, emails, all those things.

36:31To the extent that those are resulting in sort of high-level summary documents, bottom line documents, etc., you have to be mindful of the fact that, again, going back to those best practices around document control, whatever's in those documents is potentially going to be produced through a regulator in the future. So then the next stage would be, let's call it the pre-deal phase. Maybe you already have identified some potential targets or you're a seller and you're identifying some potential buyers. Here, document control becomes even more important because as we get closer to a specific deal, the chances of a document being produced in a subsequent review of that deal goes up.

37:08Document control is still a big issue here. And the other one I would add is once you're in the sort of pre-deal phase, this is when you have to start thinking about conducting a feasibility analysis. And what that means is going through that checklist we went through earlier, Kisan, which is what does a borderline deal look like? What does a risky deal look like? You have to understand the risk profile of the potential targets you're looking at or the potential suitors you're looking at. What you're trying to do is you're trying to, first of all, you don't want to waste time on a bad deal. If you spend all your resources pursuing a deal and then at the last step, the lawyers come in and tell you this is going to get significant scrutiny by the regulators.

37:43It's going to take 12 months to clear if it gets cleared at all, and then be pulling the rug off from underneath it. You want to avoid that. The purpose of the feasibility analysis is to avoid wasting time on bad deals and to identify the borderline deals so that you have your eyes wide open about that deal. That you're not entering the process completely blind to the fact that this is a deal that's going to require a lot of effort to secure regulatory clearance. So that's the sort of pre-deal tasks that you can perform. And again, all that is almost like a funnel. You want to make sure that by the time you get to the deal, you're not going to be surprised by lurking deal risk from a regulatory perspective.

38:20And then once you get into the deal, so once, let's say, you've identified a target, you've identified the suitor, you've started engaging in some sort of discussions, you're working towards an NBIO, document control becomes even more important. Again, the closer you get to a specific deal, the more likely those documents sort of surface as part of some sort of regulatory process later on. And now you really, your antitrust lawyer in-house, outside counsel starts to play a more pivotal strategic role, which is you really need to start thinking about what are the relative strengths of potentially different parties, like potential buyers that you're looking at or potential targets you're looking at.

38:57You may be considering whether it comes to a particular target, the agent's some sort of fix-it-first strategy. So that's the scenario I described earlier, which is one where you might carve something out of a deal in order to make it a lower-risk deal from a regulator's perspective. Maybe that's not the core asset. Maybe it's not the key value proposition of that deal. And so you say, look, why undermine the ability to clear this deal? Let's just get this asset out of this deal, and then we won't have challenges to deal with later. That's sort of a strategic role that I think you could see played by your lawyers.

39:29And then, of course, you have to do the screening for merger filings. We talked about that. What does the NBIO stand for? Indicative offer. Okay. So a non-binding offer of interest or a non-binding indicative offer. Letter of intent. Or a letter of intent. Term sheet. I don't know if you have a bunch of words. And the idea is, as you get closer to negotiating the actual deals of the acquisition of the transaction, As you get closer to that, you're going to start really having to get into the weeds of how to allocate any risk associated with that deal when it comes to securing antitrust clearance.

39:59As you get through due diligence, you're going to need to consider what kind of risks are present in the target from an antitrust perspective and then be able to negotiate around that risk through your deal documentation. This doesn't end. It's like from the beginning, you want to be aware early so you can try to mitigate risk. But then as you continue the process, it sounds like there's still stuff you got to look out for. But between sign and close, how big does that get looked into? Customers I've worked with are pretty aware about it. Is that like a real concern or is that just... It is. Throughout the process, once you have a...

40:36So you get through the term sheet phase, you get into due diligence, you're going to be managing the flow of information. And that's just a critical risk from a legal perspective because the presence of a transaction, of an M &A transaction is not an excuse to exchange and discuss anything and everything with the other side. You always have to be mindful of what kind of information is being exchanged because if companies to the deal have a competitive relationship, then they can create legal risk by talking about pricing and other sensitive topics. That's why you set up clean teams and other procedures to manage the flow of information.

41:11Now, a related point to that is gun jumping, which is that the mere exchange of sensitive information with a company, even if it's post-signing, can create a standalone violation of competition laws, which have to do with gun jumping. And gun jumping laws are there to prevent companies from prematurely integrating, from prematurely implementing a transaction, meaning they're there to require that the companies continue to operate independently, separately, until closing, so that the government has the opportunity to review the transaction if they need to. And customers benefit from sort of full competition during that period before closing.

41:49Gun jumping can come about because of exchanging and engaging in exchanges of commercially sensitive information that shouldn't be exchanged. That can't be justified, for example, by integration planning. But more often, the way it comes up in an advisory context is that the parties are very anxious to start preparing for closing. They're very anxious to integrate. They're very anxious to start telling customers, suppliers. They're very anxious to develop their brand. They're very anxious to think about what does operations look like post-closing? How do we make sure that there's a continuous flow of orders and customer support from day zero to day one?

42:23All those things are extremely valid concerns. And there's a lot of flexibility to engage in those sorts of activities as long as you're not coordinating your market activities. You're not out there jointly selling to the customers. You're not out there renegotiating supplier contracts. You're not out there tearing signs off the wall and changing your branding and marketing. You're maintaining the separateness of the companies, but you're planning for integration on day one. That's a safe place to be. And that's how you avoid gun jumping risk. I was going to say, because I feel like when you're doing proper planning, you're really getting a lot of information.

42:59Is there a balance of... Or is it more of just you're not actually executing anything. You're just really getting information for planning. But it sounds like there's information that you shouldn't have that's not related to planning integration. Exactly. And that's perfectly put. The information you're exchanging needs to have a good reason for that exchange. Before signing, you're exchanging information as part of confirmatory due diligence. You're trying to agree on the terms of the transaction. You're exchanging information to help you understand the risks you're acquiring and the benefits and potential benefits of the transaction you're acquiring.

43:32But after signing, you're no longer engaged in that kind of confirmatory due diligence. So at that point, the scope of the exchanges of information should be driven by integration planning, by day one planning. And it is very common for companies to engage in extensive integration planning. And that is permissible from the perspective of antitrust lawyers and enforcers. But the big but is that the information exchange needs to be limited to what's necessary for that integration planning. And that information exchange may need to go through clean teams and appropriate procedures and protocols because from the regulator's perspective, their main concern is going to be, what if your deal does not close?

44:11And that could happen for business reasons, right? It could happen for economic reasons. It could happen for legal reasons. But if your deal does not close, the regulator wants to know what happens then. Have you now exchanged all this sensitive information and now you're supposed to go back to competing like you were before to prevent or to help mitigate that concern, the agencies might expect that you put in place clean teams and other procedures to make sure that that information maybe sits in someone's head, but that person is not responsible for pricing, not responsible for sales and marketing, is not responsible for decision making on the strategic direction of the company.

44:48So there's ways that you can put in place protections, but as long as you do that, and as long as you only exchange what's needed for the integration planning, you're in a safe spot. And at that point, it's pretty common sense, generally, how you view yourself as independent competitors and independent companies, because that's what you've been up until. That's just a matter of educating the business up and down that, hey, we've signed, but we haven't closed. We still need to clear regulatory clearances, etc. You need to make sure you continue to operate like you are today. If you've been tasked to be on an integration planning team, then here's some additional obligations you're subject to and you're going to have access to more information but you can't use that information for anything else.

45:29During this stage we talked about the filings that you got to do and then there's a bunch of comms component because you got to have PR folks reaching outwards about the deal itself to the market and then internal communication. Yeah, that's a big one. It's all part of a structured M &A process inside of an organization. Not all companies have the scale and the resources to do this But especially a company that is engaged in multiple acquisitions and has an M &A strategy, they're going to have an M &A procedure set up. And part of that will be, ideally, a cross-functional role for lawyers to have input into communication plans internally, communication plans externally, to make sure that people are not exchanging information they shouldn't be exchanging prior to closing.

46:14make sure that there's no gun jumping. And by the way, to make sure that all those sound document control practices are continuing to be emphasized all the way up to closing. And ideally after that as well. Let's talk about after close. Are there any risks after close? You know, increasingly, I think there are. This is an area where you have to be very nimble as an advisor and as an M &A practitioner. I know in your podcast, you spend a lot of time talking about integration and how that can be the key to a successful M &A strategy is having a successful integration. And that includes, by the way, legal integration and compliance integration.

46:49What that means is when you have a company that you're integrating into yours, you're going to need to make sure you train them to be up to date on your legal policies, your antitrust procedures, protocols, and policies. You may, as part of the integration, have to update their contracts to make sure that they follow the template or form that you have, make sure that they're legally compliant. As part of diligence, you will flag these contracts, ideally. Then you'll know, as of day one, you need to call up the following six vendors, maybe exercise a termination clause and renegotiate the terms to make sure that they're compliant.

47:22Post-deal, there's also the call-in risk. We've talked about this. This is sort of a scary notion, but it is out there. There's always the possibility the government comes and asks about a deal after it's closed. Anything you're doing, the best practices that you're doing in the run-up to the deal and during a deal, I would continue to follow post-deal as well. There's no reason not to have a good communication plan and to have good document control practices all the time. You might have transition services. You might, for example, need to continue to provide some sort of support to the acquirer as a seller to help transition them over in the integration of a production or operations, etc.

47:57And there you have to be careful in managing that those transition services don't turn into an opportunity to be talking to your competitor about things you shouldn't be talking about that are outside the scope of that agreement and that transition. And then you might have non-complete obligations. This is one that's easy to miss. You might have a transaction that as part of that transaction, maybe you're the seller and you've agreed to a non-compete that says you're not going to reenter the same space in the next two years, let's say. Don't forget that a year and a half later when you're thinking about acquiring someone in that space.

48:26Make sure you have a process internally that tracks those obligations so they don't pop up at the last minute when you're thinking about signing a transaction and someone comes up and says, hey, we have a non-compete that prevents us from entering that space. So there's a lot of post-deal considerations. To me, that's why we'll talk about this shortly, but it's why your lawyers should be strategic thinkers. They should have a strategic role on your team, on your deal team, and they should be plugged in ideally throughout the entire life cycle of not just the deal, but your corporate development timeline.

48:56more and more podcasts I do it's like how diligence and integration are and should be very intertwined if we click into the diligence part I was getting to this question about like influencing the strategic deal of rationale like when you are in that diligence part is it just beyond looking at agreements and what things are obligated but like how you approach diligence that influences the actual rationale of doing the deal based on what we're trying to mitigate in terms of risk of anti-competitive. Absolutely. To me, bad due diligence is the rote check of the box, CYA. It's almost like doing homework.

49:34You look at a contract, you check off things. That's bad due diligence. And that's bad due diligence from, I think, a business perspective and also is trying to be a value-added lawyer as well. Good due diligence is, of course, strategic. To me, it's tailored to the deal hypothesis. I need to understand as a lawyer, what are we trying going to do with this deal so that as I'm conducting due diligence as a lawyer, I'm not flagging risks that may be not core to the deal hypothesis in the same way that I'm flagging a risk that is core to the deal hypothesis. For example, if an acquisition is driven by improving a go-to-market strategy, leveraging a target's go-to-market channels, you best believe that due diligence on the target's distributor contracts can have a key strategic impact on the deal's valuation and potential.

50:17It's always about understanding what is the goal here? What is the value that we're trying to create? Then I can tailor my advice as a lawyer to make sure that I'm targeting the risks that are really core and treating them appropriately, and then helping feed that back into the rest of the deal team that needs to maybe reassess the purchase price and may need to reassess some synergies that they're expecting. Because if it turns out that a key supplier contract is subject to a exclusivity provision that might be problematic under the antitrust laws, you have to let the deal team know that because the deal team may then need to discount the value of that contract.

50:56They may need to rethink what that contract means for the overall synergies expected from the deals. To me, it's always a feedback loop between understanding the deal, why we're doing the deal, and then mapping that to my role as a lawyer to look at risk from the perspective of what's the strategic sort of imperative here. Due diligence, real diligence. Can you tell me how companies use regulatory timing to their advantage when planning a deal? Are there particular regulatory signals like elections or policy shifts that businesses should be mindful of when considering M &A? I wouldn't try to time the market.

51:31And so I also wouldn't probably try to time a regulator either. The agencies are people, their actions are difficult to predict and often slow to change. So it's difficult to tactically time your filing, for example, to achieve a particular outcome with the regulators. They have a lot of tools at their disposal to respond to any sort of tactics you might be engaging in. It's almost like countermeasures. The agencies can kick a HSR form as being non-compliant. They can ask you to pull and refile the form if they want to extend the review. Don't forget, they can issue that massive second request for information, which is a looming threat always.

52:10I don't think you can be too cute when it comes to how you interact with the government agencies. You have to play it straight, and you have to just play it according to the procedures that are in place. And I don't know that you can time things. Certainly, you have to be aware of what's happening at the agencies and who's in the leadership role at the agencies and what they're saying. This goes back to the messaging point we talked about earlier. You cannot understand the profile, the risk profile of the deal without understanding who's going to be looking at that deal and what are they motivated by and what are they concerned about.

52:39I always leverage the expertise of good outside counsel because they work on a lot of deals and they're in front of the agencies all the time. and one of their best value adds from my perspective is as someone who can tell me what's going on on the ground, what's going on at the agencies at the moment that has them interested in particular sectors or has them focusing in one area, not another. They're always a good piece of intelligence, almost like a benchmark for what's happening in the agencies. As far as the election is concerned, this is the big topic right now is what impact does the election have on enforcement in the US?

53:13And that's a difficult one and there's a lot of different opinions on it. there's a lot that has changed under the Biden administration that will stick around. That aggressive inattrust enforcement is probably here to stay overall because there is some consensus we've seen emerge from both political parties in the U.S. around inattrust enforcement. Now, which industries are the focus of that enforcement? That's up to debate. And there's also broader headwinds that might conflict with that goal. Deregulation and downsizing federal workforces, et cetera. How do those end up playing out in practice?

53:45And from a perspective of someone working on deals, it's difficult to predict, but you have to be plugged into what's happening at the agencies and what's happening around you in the enforcement space, because no matter what you might gather from going to the FTC website, that's not going to be a replacement for talking to someone who is engaging in regular contact with them. TVD, but you shouldn't time the market or the political market on your deal. Let's say we do a deal, really clearly there's going to be anti-competitive issues. What are alternative ways of structuring a deal? Thinking of minority investments, joint ventures, is that a solution?

54:24How does that fit into it? It can be a solution in the sense that you can still try to extract the value without creating the competitive concern, but it's not always going to be an easy fix because even minority deals are reportable in the US And any deal can be called in by the agencies in the U.S., which means even if a deal is not reportable, if it gets on the agency's radar, they can review it and see if they have competitive concerns about that deal. That extends to minority acquisitions of any size. Engaging in a minority deal is not going to somehow make your deal disappear. But if it's structured in the right way, it can be a way for you to still extract value that you want, for example, from some of those cross-selling opportunities we talked about, other revenue synergies.

55:06There might be contractual relationships you're trying to enter into with a target. And you might think that a minority investment is a good way to formalize that and to really put some meat around it. That might be a valid way to achieve that value, but not integrate the business and not create the concerns that might cause an agency to challenge a deal. Minority deal can be one way, meaning an investment. Joint ventures can be another. joint ventures that do not eliminate all competition, but create some collaboration in one area will generally be seen as lower risk because they're preserving some level of competition.

55:43So that can be the best of both worlds option as well is to think about ways to structure a joint venture where you maintain the competition that you think is the kind of competition the agencies are most concerned about. And then you engage in collaboration, value-add partnership on another part of the business. And then the last version of that would be short of a joint venture, we have something we call competitor collaborations in that trust space. Think about any sort of joint R &D effort, joint development, maybe even licensing agreements. There are ways to, even short of having a joint venture, which might involve integration, it might involve sharing risks and benefits.

56:20Short of that, you may be able to engage in some sort of competitor collaboration to extract some of that value. And again, because you're maintaining your competitive, hopefully in the process, you're removing that risk that the antitrust agencies might have if you were to instead do a full-blown combination. A form of partnership. Yeah, you do a form of partnership. That can be as formalized as you want it to be or informal. Now, all those things would be still subject to regulatory scrutiny. So you can never use any of these tools as a pretext to engage in a full-blown merger. You can't use them as a way to try to consolidate a market.

56:53But if you use them appropriately, then you can still achieve a lot of those efficiencies without creating the problems for yourself. Sure, news to consider. Can you teach me how to use antitrust considerations as a negotiating tool, whether using it as a sword or shield? Yeah, sure. And I think this is one of the strategic roles that good antitrust lawyers can play, which is beyond just negotiating the standard sort of antitrust provisions in an agreement. there are aspects of the deal documents and there are terms that are negotiated over where an at trust can provide a benefit to one side or the other.

57:29And so I think the most common one I'm sure you've heard of are reverse breakup fees. This is a payment made to the target in the event that a deal does not secure a regulatory clearance. Reverse breakup fees have gone up significantly in recent years. There's a lot of statistics out there on this. The size of these fees has gone up in parallel with the perceived risks of deals not closing. Another thing you could consider is if you're a target and you may want to avoid highly expansive due diligence or intrusive due diligence, antitrust can be a reason to provide. You could say that, look, if I give you the following information, not only do I think it doesn't add value to what you're trying to do, not only do I think it's unnecessary to do due diligence process, it also exposes both of us to legal risk.

58:15Because I've provided you this commercially sensitive information. And if I can't justify it as being necessary to the deal, then we might create antitrust problems for each other. That's another way where you might have a little bit of leverage from pointing to the antitrust risk. And then there's always the ability to use the price to calibrate around antitrust risk is an important one, which means if you're a seller and you see a buyer as being a higher risk buyer, because you've checked off those boxes and you think, wow, this buyer has a bigger chance of running into problems with antitrust authorities if this deal gets filed.

58:49That could be a basis for seeking a price premium. You're taking on risk by partnering up with this buyer. You could ask for some sort of premium in return. The same can apply in reverse. So if you're a buyer and in the course of your due diligence, you have found some risks that are core to the deal hypothesis, let's say, you might request a price discount. You might just ask for a lower price to accommodate that risk that you're now taking on as the buyer. The sort of price adjustments, there's always can be something you utilize and they can come out of the antitrust risks or considerations that you're seeing.

59:22These are all new things for me, how they can leverage this whole scenario for negotiating price breakup fees. We're past our time, man. I got to ask you though, before we head off, what's the craziest thing you've seen in M &A? When I was in the government, We were litigating a hospital merger. We investigated and challenged a hospital merger. The theory of the case was that insurers would no longer have the ability to play these hospitals off each other during negotiations. This would cause the rates that they negotiate with the hospitals to go up. And then these higher rates would be passed on to the insurance company's members in a form of higher healthcare costs, higher premiums, etc.

59:59This is the sort of standard model for challenging a hospital merger. and in the course, and this is all public because there was a trial, I'm not revealing anything that isn't in the public record. In the course of the trial, one of the documents presented was the diligence notes from one of the targets. Deal teams talked about how going with this particular suitor could, quote, stick it to employers. And then it kind of actually goes on to explain exactly what's meant by that. And the interesting thing about that is this was someone on the deal team. This is not a senior leadership team member.

1:00:30This is not someone in C-suite. This is not someone in the steering committee. Then there was a prolonged cross-examination at trial about whether that person considered themselves a middle manager or not. And obviously with the goal of trying to indicate that these were notes from someone whose views were not necessarily indicative of leadership's views. All this is playing out in front of a judge. Needless to say, I'm sure everyone on the side representing the hospitals would have preferred that that kind of document wasn't being discussed in the middle of the trial, the takeaway from there, a lifelong career, maybe lesson is about the risks that can come from poor document control.

1:01:07Going back to one of our themes. Dirty laundry is going to get aired is what's going to happen. That's so funny. Kai, this has been a great conversation. I learned so much about this whole nature of anti-competitive regulation. I might start a little consulting practice on the side or something. Let me get in on that if you do. Yeah, I probably would love to work with you on that. Thanks so much for helping me learn more, become a better M &A scientist. Thank you for having me. Those of you fellow M &A scientists, you got this far. Bless you. Reach out to me. Tell me how I did. Give me some feedback.

1:01:38I'm on LinkedIn. I welcome the criticism. I'm trying to get good at this, so give you a better experience in the next interview. Until next time, here's to the deal.

1:01:58Thank you for taking the time to explore the world of M &A with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcasts. We'd love to hear from you. If you need help standing up an M &A function or optimizing one that you already have, we're here to help. And if we can't help you, we probably know someone that can. You can reach out to me by email, Kisan, K-I-S-O-N, at mascience.com. or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, visit mascience.com for a lot more content and resources. That's where you can also subscribe to our newsletter.

1:02:43Again, that's mascience.com. Here's to the deal.

1:03:07Thank you.