May 14, 2014

Antitrust Reverse Termination Fees--2014 Update

This post updates one we did over a year ago analyzing antitrust reverse breakup fees in public deals since January 1, 2005.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 760 strategic negotiated transactions announced between January 1, 2005, and May 1, 2014. Of these, 79 transactions, or about 9.8% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the sample was 5.8% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.3% of the transaction value.

Significantly, of the 72 completed transactions with an antitrust reverse termination fee, 50 were cleared without any antitrust challenge. One transaction (AT&T/T-Mobile) was terminated in the course of litigation with the Antitrust Division, 19 were subject to only a DOJ or FTC consent order, one (Boston Scientific/Guidant) was subject to both an FTC consent order and EC undertakings, and one (Federated/May) was subject to an assurance agreement with a group of state attorneys general.

Dale Collins

  Antitrust Reverse Termination Fees--Data Set (January 1, 2005 through May 1, 2014)

Categories: EU Mergers, US Mergers


April 7, 2014

DOJ Scores First Antitrust Extradition: More to Come?

With Friday’s announcement of the first-ever extradition of a foreign executive on criminal antitrust charges to the United States, the U.S. Department of Justice has won a major victory in its effort to prosecute and deter international cartels. Combined with the increased international trend towards criminalization of cartel activity, Friday’s extradition announcement represents a significant cautionary precedent for corporations and individuals alike.

Categories: EU Cartels, US Cartels


April 7, 2014

Cartel Fines: Liability of Private Equity Funds

The European Commission has held Goldman Sachs jointly and severally liable for a cartel infringement committed by Prysmian, an Italian cable maker formerly owned by Goldman Sachs’ private equity arm. The decision is a stark reminder that EU competition law allows the corporate veil to be readily pierced and that private equity companies are no exception.

Categories: EU Cartels