Our first post about HSR Second Requests provided an understanding of the HSR Act and Second Requests, including how much faster the timeline for HSR Second Requests are compared to the typical discovery lifecycle for litigation. Exactly how fast are they? And what steps do you have to complete and when? It’s all about timing.
The HSR Timeline Can Be a Process of Hurry Up and Wait
The HSR Act and various rules associated with it require parties involved in mergers and acquisitions to submit premerger notification filings, then wait before completing the transaction. After announcing the transaction, the parties involved file an HSR notification with the FTC and DOJ (for § 801.30 transactions, only the buyer’s filing must be received). Once the filing is complete, the clock begins ticking with up to two waiting periods, depending on how the process unfolds:
Initial Waiting Period (15 to 30 Days): For most filings, the waiting period is 30 days (15 days for cash tender offers and 11 USC § 363 bankruptcies). It expires at 11:59pm ET on the last day. If the 15th or 30th day falls on a federal holiday or weekend, then the end of the waiting period will be extended to 11:59pm ET of the next business day. If a filing is not complete, the start of the waiting period is delayed until the deficiencies in the filing are corrected.
Typically, there are three potential outcomes associated with the initial waiting period.
- Expiration or Termination: If the waiting period expires without either agency issuing a request for additional information, the parties have met their HSR filing obligation and can complete the transaction. The agencies won’t send a letter or notice that the waiting period has ended, so no news is good news. Rather than waiting for the full waiting period to run, one or both of the parties also may request early termination of the waiting period, which both agencies must grant to receive the early termination.
- Withdraw and Refile: The withdraw and refile process allows the acquiring party to withdraw its HSR filing and refile again – there is no additional filing fee if the withdrawal is within two business days. The refile will trigger the start of a new 30 (or 15) day waiting period. The withdraw and refile process is only available one time to the acquiring party, and only if the proposed acquisition does not change in any material way. It’s not available if the waiting period has expired, early termination has been granted or a Second Request has been issued.
- Second Request: Before the 15 or 30-day waiting period expires, either the FTC or DOJ may issue a Second Request. A Second Request stops the waiting period until both parties substantially comply with the Second Request.
Substantial Compliance: A Second Request stops the waiting period until both parties substantially comply with it, which involves the production of data and documents that are responsive to the Second Request and issuance of certifications of substantial compliance. This is when the “rubber meets the road” from an eDiscovery standpoint and time is of the essence to respond quickly to the Second Request and keep the process moving forward.
Second Waiting Period: Once the parties respond to the Second Request and submit valid certifications of substantial compliance, the second waiting period will then occur. The duration of the second waiting period will depend on whether there’s a timing agreement or not. If there is not, the waiting period will then end after 30 days (or 10 days for cash tender offers and 11 USC § 363 bankruptcies). A timing agreement typically includes a commitment from the parties not to close the transaction before a certain date (for example, extending the second waiting period from 10/30 to 60/90 days respectively).
Possible Outcomes of the Second Request: There are three possible outcomes that stem from the Second Request process. They are:
- Expiration or Termination: Just as in the case of the first waiting period, expiration of the second waiting period or agreement for early termination without action from the FTC or DOJ enables the parties to complete the transaction.
- Parties Negotiate Consent Agreement: The FTC and/or DOJ may identify issues with the filing and the parties may negotiate remedies via a consent agreement to address the issues and enable the transaction to still be completed.
- FTC or DOJ Sues to Block the Transaction: If that happens, it’s on! A lot of the documentation that the parties compiled to respond to the Second Request can become evidence in the subsequent litigation.
Click here to view a flow of the HSR timeline to reflect the events described above.
HSR Second Requests may dictate a need for speed, but speed without control can cause you to “crash and burn”. When conducting discovery for a Second Request, it’s important to continue to keep the big picture in mind regarding the data and documents produced to satisfy the parameters of the Second Request as that information may become evidence in a possible litigation.
It’s important to work with a provider who understands both workflows well and understands how to respond to a Second Request in a manner that will eliminate rework should the same information be needed to support litigation. HSR Second Requests are all about timing and using that timing effectively to support any use case that stems from the Second Request process.
For more regarding Cimplifi Corporate Transactions & Antitrust capabilities, click here.