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Overview

The Federal Trade Commission (FTC) recently announced final rules that make numerous revisions to the Hart-Scott-Rodino (HSR) Premerger Notification Rules and Form. The amendments are intended to give the FTC and Department of Justice a more complete and accurate picture of the competitive impact of mergers and acquisitions and to eliminate certain HSR requirements that do not provide meaningful information.

The changes to the Rules and Form are discussed below and a chart summarizing the changes follows.

These changes will go into effect on August 18, 2011.

Highlights of Principal HSR Changes

Item 4(d) - Additional Documents

The following additional documents must now be submitted as part of every Premerger Notification filing:

Item 4(d)(i) - Confidential Information Memoranda

• Parties must now submit all Confidential Information Memoranda (or documents that served that function if there was no CIM) prepared by or for any officer(s) or director(s) of the acquiring or acquired person or entity that were produced up to one year prior to the filing date.
• • Note: CIMs were frequently produced under the prior Rules pursuant to Item 4(c) of the Form.

Item 4(d)(ii) - Materials Prepared by Investment Bankers, Consultants or Other Third Party Advisors

• Parties must now submit all studies, surveys, analyses and reports prepared by investment bankers, consultants or other third party advisers (collectively, "third party advisers") if they were prepared for any officer(s) or director(s) of the acquiring or acquired person or entity for the purpose of evaluating or analyzing market shares, competition, competitors, markets, potential for sales growth or expansion into product market or geographic markets that specifically relate to the sale of the acquired entity(s) or assets. Documents responsive to this item are limited to those produced up to one year before the date of the filing.
• • Note: Third party adviser documents were frequently produced under the prior Rules pursuant to Item 4(c) of the Form.
• Potentially responsive documents include "pitch books" or "bankers books" developed by investment banking firms for the purpose of seeking an engagement, or documents prepared by third party advisers hired by a particular company to develop and analyze a variety of strategic options.

Parties are not required to submit corporate subscriptions to market studies, information or periodicals; industry reference materials and databases; routine market research; information received by financial investors; unsolicited financial and market analyses from investment bankers and consultants; and reports prepared in the course of patent, securities, antitrust or other forms of litigation.

Item 4(d)(iii) - Materials Evaluating or Analyzing Synergies and/or Efficiencies

• Parties must now submit all studies, surveys, analyses and reports evaluating or analyzing synergies and/or efficiencies prepared by or for any officer(s) or director(s) for the purpose of evaluating or analyzing the acquisition.
• Parties are not required to submit financial models without stated assumptions.

Item 5 - Revenue Reporting Changes

• Parties must now also identify the 10-digit North American Industry Classification System (NAICS) product codes and U.S. revenues for the most recent year for each product they manufacture outside the United States and sell in or into the United States.
• • Previously, the form only required parties to report revenues by NAICS codes for operations conducted in the United States.
• Manufacturers, whether foreign or domestic, must report revenues from the sale of their manufactured products only under 10-digit NAICS manufacturing product codes (and not also under wholesaling codes), even if the product is sold through a separate warehouse or retail establishment owned by the manufacturer.
• Parties are no longer required to report revenues in a base year (currently 2002).

Items 6 and 7 - New Reporting Requirements Regarding "Associates" of Acquiring Persons

The FTC introduced a new term, "associates," to define entities under common management with the acquiring person, but not "controlled" by the acquiring person. The FTC's purpose in requiring information on associates is to be able to analyze the holdings of entities that are under common investment or operational management with the person filing notification. The new associates concept will primarily impact, among others, limited partnerships and private equity funds that manage investments in multiple businesses.

The term "associate" is defined as follows:

For purposes of Items 6 and 7 of the Form, an associate of an acquiring person shall be an entity that is not an affiliate of such person but: (A) has the right, directly or indirectly, to manage the operations or investment decisions of an acquiring entity (a "managing entity"); or (B) has its operations or investment decisions, directly or indirectly, managed by the acquiring person; or (C) directly or indirectly, controls, is controlled by, or is under common control with a managing entity; or (D) directly or indirectly, manages, is managed by, or is under common operational or investment decision management with a managing entity.

Under new Item 6(c)(ii) of the HSR form, an acquiring person will be required to report (based on its knowledge and belief) all of its associates' holdings of voting securities and non-corporate interests of 5 percent or more (but less than 50percent) in the acquired entities and in entities having six-digit NAICS industry codes that overlap with the codes of the acquired entity or assets.

In addition, Item 7 of the HSR form will now require an acquiring person to identify (based on its knowledge and belief) specific product overlaps between the acquired person and associates of the acquiring person, and to provide geographic information with respect to such overlap.

Changes at a Glance

For More Information

Please contact Charles L. Freed, Barry M. Block, or Rachel G. Talay for more information.

Disclosure

This advisory may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgement of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel. This document may be considered attorney advertising in some jurisdictions.