ANALYSIS: As reviews grow longer, M&A deals keep shorter deadlines
Although in depth, U.S. antitrust reviews take an average of 12 months to complete, Bloomberg Law’s review of large publicly available M&A deals signed in the first three quarters of 2021 shows that most have Initial “deadline” less than 10 months from the date of signature.
We reviewed 81 publicly available merger and acquisition agreements for transactions worth at least $ 1 billion, involving at least a U.S. party, signed between January 1 and September 30, and still in progress. pending our review date (Oct. 18). For each of these 81 agreements, we calculated the duration in months from the date of the agreement to the initial “outside date”. This date is the contractual deadline for concluding a deal, which, if not met, usually triggers the parties’ termination rights. It is also called “end date”, “long termination date”, “termination date”, “external termination date” and even the “employment end date”.Date of departure. “We also noted whether or not each agreement provided for defined extension periods, usually three months, under specific conditions.
We found that one agreement allowed for three months or less to close; 21 allowed between four and six months to close; 33 allowed between seven and nine months to close; 22 allowed between 10 and 12 months to close; three allowed between 13 and 15 months to close; and one agreement provided for 16 months or more for closure.
The average time to close for the 81 deals was 278 days (roughly nine months), and the most common exact time was one year (found in 19 of the 81 deals). Of the 81 transactions, 39, or almost half, contained defined extension periods that occur automatically or can be triggered by one or more parties under specified conditions.
For reference, a comprehensive antitrust review by the Federal Trade Commission and the Department of Justice takes about a year – an average that has been growing steadily for years, according to statistics compiled by Dechert srl. Recent changes to the antitrust review to treat suggest that customs clearance, even for simple transactions, might take longer. Policy changes also suggest stronger enforcement and other delays.
Many offers are suspended in the “waiting forcolumn. But, based on their due dates, the parties don’t seem to add time to their agreements for potentially extended regulatory scrutiny. This suggests that either they don’t expect the unlucky deal to be stuck. in regulatory limbo for an extended period of time, or they are willing to abandon or renegotiate any deal that raises serious regulatory concerns.
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