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Mergers and acquisitions may now be subjected to more federal scrutiny

On Behalf of | Mar 5, 2024 | Business-Employment

Large business transactions can potentially be very profitable for companies and the parties invested in those organizations. A merger or acquisition could give one business access to the work of very skilled professionals or key intellectual property, like patents, that could change how the company operates. A successful merger or acquisition could increase a company’s market share and expand its profit margins.

A merger or acquisition can also be a strategy for someone who invested in a business to recoup their time and capital. Arranging to combine a business with another organization or sell the company to an interested outside party could allow an owner to retire or to move on to their next endeavor.

With all of this said, a recent announcement of new rules regulating mergers and acquisitions could mean that proposed business transactions may face more scrutiny from federal regulators and are at greater risk of falling through before completion.

Antitrust rules have recently changed

Occasionally, Federal Regulatory Agencies revisit laws and policies to better perform their duties to the public. The Justice Department recently announced an expansion and clarification of existing antitrust statutes developed in conjunction with the Federal Trade Commission (FTC). Specifically, there was a focus on mergers and acquisitions involving businesses in highly-concentrated markets.

The information technology (IT) sector, for example, sees a few major players with an outsized degree of influence on the industry. Any transactions involving businesses in highly-concentrated markets could potentially lead to violations of antitrust laws.

Regulators may look carefully at whether a proposed merger or acquisition could give one party too much influence over a specific industry or market niche. If a proposed merger or acquisition could prove damaging to fair trade and reasonable competition, then the government may intervene to prevent the merger or acquisition from taking place.

Regulatory intervention in a merger or acquisition could prove very damaging for the businesses involved. Companies often invest heavily in the research, due diligence and negotiation stages of mergers and acquisitions. If the transaction does not take place, those investments theoretically go to waste crucial.

It is incumbent upon those who operate businesses in certain industries, like information technology, to look carefully at the situation and determine whether a transaction might make the resulting business too powerful in the eyes of regulatory authorities. Reviewing and staying up-to-date on federal antitrust regulations can ultimately be crucial for the success of major upcoming business transactions. Seeking legal guidance is a good way to gain more personalized insight about this concern.