Merger Risk Arbitrage
Our firm provides antitrust and regulatory advice and counseling to risk arbitrage managers of investment banking firms, private equity groups, hedge funds and institutional investors. Such advice is crucial to managers considering strategic investments and sophisticated trading strategies in the securities of publicly traded companies that are parties to either hostile or friendly mergers, tender offers, spin-off transactions, or re-capitalization participants. The services that we provide to our arbitrage clients are especially useful because they embody perspectives that can only come from former senior government antitrust attorneys who have had direct responsibility for reviewing mergers with both national and international implications. Our attorneys have appeared in from of the Department of Justice (“DOJ”) Antitrust Division and the Federal Trade Commission (“FTC”). Andre P. Barlow is a former trial attorney at the antitrust division. Andre has accumulated extensive experience in analyzing transactions at the DOJ, and that experience has given him a unique understanding of how government attorneys review transactions.
A comprehensive compilation of industry and company data sources is an additional valuable asset available to our clients. We maintain current files on all major corporations and have access to a number of electronic databases. These databases cover a wide variety of subjects and publications and can provide general economic data, company profiles, and investment banking research reports, as well as abstracts of all significant information appearing in hundreds of newspapers, magazines, journals, and government reports.
In the course of our review of a particular transaction, we undertake one or more of the following activities:
- Analyze public information regarding the parties to the transaction and the markets in which they compete, including company documents, various industry and trade data sources, past DOJ, FTC, Department of Defense, Federal Communications Commission (“FCC”) and foreign antitrust agency enforcement activities in the relevant product and geographic markets, and current antitrust agency enforcement policies;
- Interview customers and competitors who complain about particular transactions and assess their credibility as potential government witnesses, interview other participants in the industry who also may be affected by the transaction;
- Provide estimates of the likelihood of a government antitrust investigation, DOD investigation, DOE, FCC investigation, and/or enforcement action, the likely outcome of such an action, and whether a consent order can be negotiated eliminating the necessity for litigation;
- Evaluate the viability of a proposed buyer for the government’s requirement that the parties divest certain assets, and provide estimates of the likelihood that a transaction will close within a certain amount of time considering a variety of factors including political pressure that may accompany the antitrust review at the particular agency;
- Monitor litigation by the government and any private enforcement action and, in hostile transactions, analyze the viability on antitrust and regulatory grounds of possible white knight candidates;
- Analyze the requirements and procedures of various federal and state regulatory approvals that may be required, depending upon the nature of the acquired company’s business operations, as we are familiar with the various agencies that regulate the banking, communications, energy, transportation, and insurance industries;
- Analyze the viability of various anti-takeover devices created by the target corporation in anticipation of, or in the course of, the unwanted takeover attempt and litigation arising from these defenses;
- Evaluate risks associated with state corporate and contract law issues including fiduciary duty claims, corporate takeover defenses, and merger agreement interpretation including “material adverse effect” and “best efforts” provisions;
- Evaluate risks associated with transactions that potentially raise national security concerns, which are increasingly reviewed by the Committee for Foreign Investment in the United States (“CFIUS”), a multi-agency panel, pursuant to the Exon-Florio Act;
- Evaluate and analyze risks associated with transactions where one of the merger partners reveals current or prior Foreign Corrupt Practices Act (“FCPA”) violations which could delay or prevent the completion of a transaction; and
- Analyze mergers and other combinations among participants in regulated industries including banking/financial, telecommunications, and electric and gas generation and distribution. Combinations in these industries typically require the approval of federal, state and/or local authorities. Such approvals can be time consuming and complex.
We have analyzed transactions involving numerous industries including beer, banking, delivery service, software, real estate, healthcare, pharmaceutical, oil & gas, technology, consumer products, retail, defense, industrial, railroad, semiconductor, among others. Some of the recent deals that we have analyzed include InBev/Modelo, TNT/UPS, SAP/Ariba, IDT/PLX, Hertz/Dollar Thrifty, CoStar/LoopNet, Google/Motorola Mobility, Pfizer/Wyeth Pharmaceuticals, InBev/Anheuser Busch, Ticketmaster/Live Nation, United Healthcare/Sierra, Teva Pharmaceutical/Barr Pharmaceuticals, Roche/Genentech, Republic Services/Allied Waste Industries, BAE Systems/United Defense, Finmeccanica/DRS Technologies, Dow Chemical/Rohm & Haas, Alcoa/Alcan, Monsanto/Delta and Pine Land, United/Delta, XM/SIRIUS, Express Scripts/Wellpoint, Whole Foods/Wild Oats, Google/Yahoo, Mars/Wrigley, Brocade/McData, Nokia/Navteq, Oracle/Sun, Oracle/PeopleSoft, First Data/Concord, JNJ/Guidant, Boston Scientific/Guidant, Express Scripts/Caremark, CVS/Caremark, Merck/Schering Plough, and Western Refining/Giant Industries. With respect to CFIUS issues, we have reviewed a number of deals including BAE Systems/United Defense, Finmeccanica/DRS Technologies, CNOOC/Unocal, Huwaei/Bain Capital/3com, and Safran/L-1 Identity Solutions. With respect to FCPA issues, we have reviewed National Oilwell/Robbins & Myers, GE/Invision, Lockheed/Titan, and L-3/Titan. With respect to FCC investigations, we have analyzed numerous transactions including XM/Sirius, AT&T/BellSouth Corporation, Verizon Wireless/Rural Cellular, and Verizon Wireless/Alltel.