Don’t Forget the Lifeblood of Your Organization When Responding to HSR Second Requests

Our latest post about HSR Second Requests discussed an additional “bonus” consideration of whether to consider using Technology Assisted Review (TAR) to assist with your Second Request review.

There’s one more consideration for HSR Second Requests and it’s one that needs to be considered long before you are at the Second Request stage. In fact, it should be considered in advance of even considering an M&A transaction. It’s making sure your organization is prepared to quickly navigate “the lifeblood of your organization” when a Second Request does occur.

Contracts Are the Lifeblood of Your Organization

Contracts are considered by many to be the lifeblood of an organization – they establish the parameters of how we conduct business with other individuals and organizations, inside and outside the company. They dictate everything from where our offices are located (real estate contracts) to expectations of our staff and contractors (employment contracts, third party agreements) to the equipment we use (equipment leases) and any outsourced IT staff (information technology contracts). And, of course, they control your relationship with the customer base that buys your services.

Contracts and HSR Second Requests

Would you expect “the lifeblood of your organization” to be important to the Federal Trade Commission (FTC) and Department of Justice (DOJ) when they issue a Second Request to your organization? Of course! And you would be correct – in fact, contracts are referenced in the current Model Request for both government agencies.

Model Second Request for the FTC: Available here, this 25-page Model Request references contracts several times, including:

• On page 2, “a sample contract for each customer type” for each relevant product manufactured or sold (or relevant service provided);
• On page 10 for “each occasion that the Company (i) submitted a bid or negotiated to provide or sell any Relevant Product [Service] in or from any Relevant Area; or (ii) declined to submit a bid or negotiate to provide or sell any Relevant Product [Service] in or from any Relevant Area”:
  • “the date that the contract was awarded or that the Company expects it to be awarded”;
  • “the identity of the Person(s) to whom the contract or order was awarded, the price and terms of the winning bid(s), and the products or services included in the winning bid(s)”;
  • “whether the Company won the contract or order, and if so, state the Company’s actual Sales by Relevant Product [Service]; the total, fixed, and variable costs incurred by the Company; and the margin earned by the Company, pursuant to the contract”.

Model Second Request for the DOJ: Available here, this 18-page Model Request references contracts when it requests that you “Submit all documents relating to the bids identified above (i.e., “bid, estimate, quote, proposal, or response to any request for information, submission, or proposal”), including all proposed, draft, or submitted contracts.”

Plainly, both agencies typically expect the production of contracts as part of the Second Request response in addition to certain specific information from those contracts, as well as contract types and phases (not just executed or submitted contracts).

Applying the Contract Revolution to HSR Second Requests

Recently, we published a two-part series on the Contract Revolution (part 1 and part 2) and, as we discussed in part 1, “the legal sector, that focuses on managing risk has historically lagged embracing technology to improve manual contract management processes”. So, how well do manual contract management processes work with the “need for speed” that is a standard part of HSR Second Requests? Not very well at all.

The six essential considerations of building a foundation that will enable lasting change in implementing a successful digital contract transformation that we discussed in part 2 are considerations that must be explored and addressed early – well before the potential of receiving an HSR Second Request from a government agency during an M&A transaction. These are considerations that impact your organization’s contract management needs across the board, so your organization needs to embrace them whether it ever must respond to an HSR Second Request. Why continue with the old manual contract management processes when you can leverage analytics and technology to find the contract information you need quickly? Vive la révolution!

Conclusion

M&A transactions are happening at a faster rate than ever, which means a greater potential for your organization to be hit with an HSR Second Request. It’s important to understand that HSR Second Requests have a “need for speed” in terms of a much shorter response timeframe than litigation (typically), that it’s important to understand the HSR timeframe can be a process of “hurry up and wait”, that there are five key considerations for success in HSR Second Requests projects, and that there is a “bonus” sixth consideration of Technology Assisted Review (TAR) to consider.

And you don’t want to forget “the lifeblood of your organization” – your contracts. It’s best to work with an expert that understands the HSR Second Request process, the capabilities of TAR and how to manage TAR workflows and best practices for leveraging expertise and technology for contract management and analytics to position your organization to succeed in your HSR Second Requests projects!

To learn more about the CALM^TM practice at Cimplifi and our expertise in contract analytics and lifecycle management or corporate transactions & antitrust capabilities, click here. #keepCALMandcontracton^TM