On February 1, 2021, the Federal Trade Commission (the “FTC”) announced that it will decrease the dollar-based thresholds that determine whether parties are required to notify federal antitrust authorities about a transaction under the Hart-Scott-Rodino Antitrust Improvements Act (“HSR”). The FTC is required to revise various HSR thresholds annually, based on the change in gross national product. However, this is the first time since 2010 that the thresholds have fallen. The new thresholds will go into effect on March 4, 2021, thirty days after they were published in the Federal Register. The following are some of the more important changes:
- The threshold for the “size of transaction” test will be decreased from $94 million to $92 million. An acquisition may be reportable if the value of the voting securities, non-corporate interests and/or assets held as a result of the transaction is above this threshold and it meets the “size of person” test.
- The “size of person” test will generally be met if either the acquiring or acquired party has annual net sales or total assets of at least $184 million and the other party has annual net sales or total assets of at least $18.4 million, with one exception – an acquired party not engaged in manufacturing must satisfy this test on the basis of the value of its assets alone if its annual net sales are less than $184 million. These thresholds had previously been set at $188 million and $18.8 million, respectively.
- Satisfaction of the “size of person” test will not be required, however, if the transaction is valued at more than $368 million (previously $376 million). Such transactions are reportable unless an exemption applies.
- The new thresholds do not affect the applicable filing fees, but the thresholds that determine the fees have been revised. Under the new thresholds, a fee of $45,000 will be required for transactions valued in excess of $92 million but less than $184 million, $125,000 for transactions valued at $184 million or greater but less than $919.9 million, and $280,000 for transactions valued at $919.9 million or greater.
The new HSR threshold modifications also apply to certain other thresholds and exemptions. Click here to read a full copy of the FTC’s announcement, including all of the revised thresholds.
Parties contemplating a transaction are strongly encouraged to seek legal advice to determine if the transaction triggers an HSR filing obligation pursuant to the revised thresholds. As a reminder, the HSR notification and waiting period requirements are not triggered solely by M&A transactions, but can also be triggered by other transactions such as open market purchases of shares of public companies and venture capital investments in private companies. Investors must be mindful of all changes to their holdings which may trigger HSR filing obligations. The failure to file when required to do so can subject parties to significant penalties.
If you have any questions concerning the foregoing, HSR generally or any exemptions therefrom, please contact your Seward & Kissel relationship attorney.