Washington State Enacts Broad Antitrust Premerger Notification Law
On 4 April 2025, Washington became the first state to enact a broad, industry-agnostic merger control regime. Under the new law, parties submitting premerger notification filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) must simultaneously submit their HSR filings to the Washington attorney general (AG) if they meet certain local nexus requirements or are a healthcare provider or provider organization. The law will take effect on 27 July 2025.
While many states (including Washington) have recently established notification requirements for healthcare transactions, the new Washington law is unique in its broad application to deals in any sector. Together with the new HSR rules, which took effect in February 2025, the law could increase regulatory costs and antitrust scrutiny for reportable transactions, particularly for companies with a significant presence in the state. More broadly, the legislation continues a trend of heightened state-level merger review, and underscores that states remain an important factor in the US antitrust enforcement landscape.
Washington Premerger Notification Law
On 4 April 2025, Washington Governor Bob Ferguson signed into law the Uniform Antitrust Premerger Notification Act (the Act). The Act will take effect on 27 July 2025 and apply to any HSR filings made on or after that date.
Thresholds
The Act requires any “person”1 submitting an HSR filing to contemporaneously file an electronic copy of the HSR form with the Washington AG if any of the following applies:
The person’s principal place of business is in Washington.
The person, or any entity it directly or indirectly controls, had annual net sales in Washington of goods or services involved in the transaction of at least 20% of the HSR filing threshold (under the current threshold of US$126.4 million, this would mean local annual net sales of at least US$25.28 million).
The person is a healthcare provider or provider organization (as defined in RCW 19.390.020) conducting business in Washington.
Documents
If the “principal place of business” threshold is met, or if the AG otherwise requests, then the filing party must also submit documentary attachments to the HSR form, including the transaction agreement and any other agreements between the parties, audited financials for the most recent year, and documents analyzing the transaction with respect to various competition issues.
Confidentiality
Under the Act, filings and related materials are confidential and exempt from public disclosure, other than in connection with certain administrative or judicial proceedings, subject to protective order. The AG may also disclose information to the Federal Trade Commission, US Department of Justice, or the AGs of other states that have adopted similar reciprocal legislation.
Penalties
Failure to submit filings required by the Act can trigger civil penalties of up to US$10,000 for each day of noncompliance.
Interplay With Washington Healthcare Notification Law
Like many states, Washington already has a premerger notification requirement on the books applicable to certain healthcare transactions. Under this law, both parties to “material change transactions” (mergers, acquisitions, or contracting affiliations) between two or more in-state hospitals, hospital systems, providers, or provider organizations must submit a written notice (Notice of Material Change) to the AG at least 60 days prior to closing.2 This requirement applies to transactions involving an in-state and out-of-state entity where the latter generates US$10 million or more in healthcare services revenues from patients residing in Washington. The law also states that any provider or provider organization that conducts business in Washington and files an HSR form must provide a copy of the filing to the AG’s office in lieu of a Notice of Material Change.
The Act has a much broader scope, capturing HSR-reportable transactions in any industry, not just healthcare. HSR filings submitted under the Act by providers and provider organizations will be sufficient to satisfy the requirements under the healthcare transactions notification law, which will remain on the books. Note, however, that the definitions for “provider” and “provider organizations” do not specifically include hospitals or hospital systems. Therefore, absent additional guidance from the AG, hospitals and hospital systems that meet the thresholds under the Act may need to submit a copy of the HSR form and a Notice of Material Change.
What Happens Next? Premerger Notification in Other States
The Act is based on model legislation from the Uniform Law Commission, which adopted the Uniform Antitrust Pre-Merger Notification Act in July 2024. Similar bills have been introduced in Colorado, Hawaii, Nevada, Utah, West Virginia, and the District of Columbia. One of the goals of the model legislation is to “facilitate early information sharing and coordination among state AGs and the federal antitrust agencies” and encourage reciprocal adoption by states. As state AGs assume an increasingly significant role in US antitrust enforcement—including in the M&A context—the new Washington law could signal the beginning of a trend of heightened, industry-agnostic, state-level merger control.
What Should I Do Now?
In light of the new requirements under the Act, dealmakers should consider the following:
Evaluating state-level merger control filings alongside HSR, global merger control, and foreign direct investment filing requirements as part of standard transaction diligence, as well as building these filing considerations into deal negotiations and documents, as appropriate.
If an HSR filing is required, assessing potential filings under the Act, particularly where companies have a significant nexus to the state of Washington (in terms of principal location or local revenues).
Closely monitoring developments in other states, including new regimes coming online or proposed amendments broadening the scope of existing requirements, and preparing for reciprocal sharing of filings between states with similar legislation.
Assessing the impact of filings that may be required under the Act with respect to budget, timing, and the potential for increased visibility into business operations by regulators.
Assessing potential competitive impacts on local markets when evaluating transactions and how these effects are discussed in ordinary-course documents.
Footnotes
1 Under the Act, “person” means an individual; estate; business or nonprofit entity; government or governmental subdivision, agency, or instrumentality; or other legal entity. “Person” has a different definition under the rules implementing the HSR Act.
2 “In-state” entities are those that are licensed or operating in the state of Washington.
Federal Circuit Upholds Major Trade Secrets and Contract Damages Award in Dispute Stemming from Failed Merger Talks
The recent Federal Circuit decision in AMS-OSRAM USA Inc. v. Renesas Electronics America, Inc. offers valuable lessons related to failed merger attempts, specifically the vast exposure that can result from a party breaching its confidentiality obligations. This protracted case—lasting more than 15 years and involving multiple trials and appeals—also highlights important principles about trade secret and contract remedies for the unauthorized use of proprietary technology.
After multiple trials and appeals, the Federal Circuit substantially affirmed an Eastern District of Texas judgment against the defendant, fka “Intersil,” for misappropriation the trade secrets of the plaintiff, fka “TAOS.” The dispute arose out of failed merger talks between the parties in 2004. The merger discussions were covered by a confidentiality agreement signed in June of 2004, and that agreement expired in June 2007. During the merger discussions, TAOS gave Intersil confidential business information regarding its ambient light sensor technology (the “CBI”). Shortly after the discussions ended in August of 2004, TOAS launched a product embodying the CBI and, contrary to the confidentiality agreement, Intersil began using the CBI to develop competing products, denoted “Primary Products” and “Derivative Products.” Intersil later sold sensor chips to Apple based on the CBI, after being approved as a vendor for specific products between September 2006 and March 2008. TAOS sued Intersil in November 2008 for patent infringement (a claim later dropped), for trade secret misappropriation, and for breach of the confidentiality agreement.
In the first trial in 2015, the jury found Intersil liable for misappropriation of trade secrets under Texas law and breach of the confidentiality agreement under California law, the choice of law in the agreement. The jury awarded disgorgement of TAOS profits of $48M and exemplary damages of $10M for the misappropriation, and a reasonable royalty of $12M for the breach. On appeal, the Federal Circuit in 2018 affirmed the bases of both liability and exemplary damages for misappropriation, but it remanded the case to the district court to determine the amount of damages. The Federal Circuit held, in part, that disgorgement is an equitable remedy for the district judge to decide, and that certain facts needed to be found, notably “the length of any head start period” Intersil gained by its misappropriation.
In the second remand trial in 2021, the jury provided an advisory verdict on disgorgement of profits of $8.5M for the Primary Products, finding the trade secret was not properly accessible to Intersil until January 2006, and that the head-start period was 26 months. In addition, the jury awarded exemplary damages of $64M and reasonable royalty damages of $6.7M for breach of the confidentiality agreement with respect to the Derivative Products. Post trial, in its findings of facts and conclusions of law, the district court agreed with the jury that the proper disgorgement award was $8.5M for the Primary Product but found that Texas law capped exemplary damages at twice the disgorgement sum, or $17.0M. The final judgment reflected this $25.5M trade secret award and $7.3M in reasonable royalty damages, along with $15M in prejudgment interest award and $3.9M in attorneys’ fees from work on the contract claim.
On the second appeal, the Federal Circuit substantially affirmed the monetary awards, except the prejudgment interest calculation. The court reversed the finding that the trade secret was not properly accessible until January 2006. It held that the lower court was wrong in concluding that proper accessibility should be based on when Intersil reverse-engineered TAOS’s trade secrets. Instead, the court concluded under Texas law that proper accessibility is based on when Intersil could have reverse-engineered the trade secrets, which was in February 2005, shortly after TAOS released its product embodying the trade secret. It observed that the lower court must “ensure that a trade secret remedy is tailored to preventing or negating the unfair advantage derived from improper acquisition.” Still, the court upheld the disgorgement award. First, it affirmed the 26-month head-start period finding, though measured from February 2005 (instead of January 2006) to April 2007. Second, it agreed that sales of the Primary Products after April 2007 were recoverable because Apple had approved the designs in September 2006, within the head-start period, and that the sales followed directly from the approval. Third, the court agreed that the entirety of the Primary Products profits were attributable to the misappropriation occurring during the head-start period.
The Federal Circuit also affirmed the reasonable royalty damages award. It first rejected Intersil’s argument that the award resulted in an impermissible double recovery, holding that the disgorgement remedy related solely to the Primary Products sales and the reasonable royalty remedy related solely to the Derivative Products sales. The court held that TAOS had a reasonable expectation of compensation in the form of a reasonable royalty for breach, and it rejected Intersil’s argument that the royalty award was unjustified because it was undisputed that the Derivative Products did not actually embody the trade secrets. It held that it was sufficient that there was substantial evidence that Intersil used TAOS’s confidential information to develop the Derivative Products. “Under California law, a plaintiff may recover for the defendant’s breach of a confidentiality agreement not only if the defendant wholly incorporated the plaintiff’s contractually protected information into its own products but also if the defendant used the plaintiff’s confidential information in the development or implementation of its own products.”
Notable takeaways from AMS-OSRAM USA are as follows. First, in drafting agreements covering proposed mergers or other types of business transactions involving a sharing of technical information, consider negotiating terms designed to limit exposure in the event of a breach, including short confidentiality periods, limitations on liability, choice of law, and forum selection. Business lawyers may want to consult their brethren IP litigators in considering hypothetical scenarios and would be wise to avoid so-called “standard agreements.” Second, in evaluating risk, legal advisors should consider that a bona fide claim of breach of a confidentiality agreement protecting technology is likely to be accompanied by a trade secret misappropriation claim, thus significantly increasing the risk of exposure because of the enhanced remedies available for misappropriation. Moreover, it is the author’s belief that juries persuaded that a breach has occurred are likely to also include that misappropriation has occurred, particularly when the breach is egregious and economic harm or unjust enrichment can be traced to the breach.
New Executive Order Reinforces Federal Preference for Procurement of Commercial Products and Services
The federal government has long maintained a preference for selecting commercial products and services in the federal procurement space. This preference has been the case since at least the time President Clinton signed the Federal Acquisition Streamlining Act of 1994 (FASA) into law, and has been reiterated by Congress since then, including in the National Defense Authorization Act for Fiscal Years 2016 and 2017, for example, and the preference is enshrined in Federal Acquisition Regulation (FAR) Part 12.
On April 16, 2025, t President Trump issued an Executive Order, Ensuring Commercial, Cost-Effective Solutions in Federal Contracts, adding to government’s efforts to prioritize commercial products and services. From now on, when agencies choose to utilize non-commercial products or services, they must document that choice and receive approval from an agency’s approval authority (which is defined as the senior procurement executive).
The Executive Order provides specific timelines and requirements for procurement officials:
Within 60 days of the Executive Order, the senior procurement executive must direct their contracting officers to review all solicitations and other open procurement actions where the government was unable to identify a viable commercially available alternative, and all of these procurement actions should be consolidated into a consolidated application requesting approval to purchase noncommercial products or services.
Within 30 days of receiving the application materials, the senior procurement executive shall review the market research supporting the application and make any recommendations to advance the use of a commercial solution.
Within 120 days of the Executive Order (and annually thereafter), the senior procurement executive for each agency must provide a report to the Director of the Office of Management and Budget (OMB) detailing the agency’s compliance with its requirements to prioritize the use of commercial products and services and explaining how it is implementing the Executive Order.
Moving forward, non-commercial procurements will be subject to additional scrutiny:
When a contracting officer proposes to utilize non-commercial products or services, the contracting officer must provide detail to the senior procurement executive of the market research conducted and the justification for choosing that path. The senior procurement executive may accept or deny the contracting officer’s request.
The senior procurement executive may seek additional guidance from the Director of OMB who will notify the agency official in writing of its recommendation after conducting a review.
As a whole, this Executive Order pushes contracting agencies to conduct market research and justify the use of non-commercial products and services, consistent with FASA. Contractors selling non-commercial products and services to the federal government should take notice, especially when there is an arguably commercial alternative, even if the commercial alternative is less advantageous in price or features.
Delaware Chancery Court Puts CFIUS Mitigation in Focus for M&A
What Happened
In a recent decision, the Delaware Court of Chancery (the Court) ordered Nano Dimension Ltd. (Nano) to enter into a national security agreement in the form proposed by the Committee on Foreign Investment in the United States (CFIUS), finding that Nano materially breached the CFIUS clearance provisions of a merger agreement (Merger Agreement) entered into with Desktop Metal, Inc. (Desktop) on July 2, 2024.
The Bottom Line
The Court’s decision to require Nano to execute a national security agreement proposed by CFIUS as a condition to clear the Nano-Desktop merger sets an important precedent for understanding the meaning of regulatory approval covenants generally, and CFIUS clearance covenants specifically.
The Full Story
According to the Court’s Post-Trial Memorandum Opinion, Desktop is a Massachusetts-based company that makes industrial-use 3D printers that create specialized parts for missile defense and nuclear capabilities. Nano is an Israeli firm, and sought to acquire Desktop in a $183 million all-cash transaction. Under the CFIUS rules, this is a “covered control transaction” and would therefore be subject to CFIUS review. To achieve the regulatory certainty that CFIUS would not later seek to force Nano to dispose of Desktop, the parties agreed to seek CFIUS approval on a voluntary basis as a condition to closing the merger. Given the national security implications of Desktop’s business, the parties anticipated that CFIUS approval would be complicated and would likely require that Nano enter into a national security agreement.
Desktop and Nano included in the Merger Agreement a relatively standard “reasonable best efforts” provision with respect to resolving government objections to the transaction generally. In addition, the parties specifically agreed to take “all action necessary” to receive CFIUS approval, including “entering into a mitigation agreement” in relation to Desktop’s business (a so-called “hell-or-high-water” provision). Nano included a narrow carveout that would allow it to refuse to agree to any condition imposed by CFIUS that would “effectively prohibit or limit [Nano] from exercising control” over any portion of Desktop’s business constituting 10 percent or more of its annual revenue, with clarifications that certain common mitigation requirements (e.g., US citizen-only requirements, information restrictions, continuity-of-supply assurances for US government customers, and notification/consent requirements in the event the US business exits a business line) would not impact the carve-out. In effect, the CFIUS approval condition in the Merger Agreement preserved wide latitude for conditions imposed by CFIUS in a mitigation agreement notwithstanding the control exception negotiated by Nano.
As anticipated by Desktop and Nano in the Merger Agreement, CFIUS informed the parties that it identified national security risks arising from the transaction and proposed a mitigation agreement to address those risks. Specifically, the mitigation agreement would have imposed information restrictions preventing the integration of Nano and Desktop IT infrastructure, restricted manufacturing locations for supply to US government customers, limited remote access software for products supplied to US government customers, required a US citizen board observer and appointed a third-party monitor. According to the Court’s recitation of facts, Nano’s cooperation with CFIUS in negotiating the terms of the mitigation agreement ceased following a proxy contest that resulted in a turnover on Nano’s board to a position opposed to the merger with Desktop. Desktop subsequently sued to enforce the terms of the Merger Agreement.
The Court held that Nano breached its obligations under the “reasonable best efforts” clause, noting that this language has been interpreted to require parties to take all reasonable steps and appropriate actions, which it found Nano failed to do. The Court also noted that good faith is relevant and that a “reasonable best efforts” clause does not allow parties to use regulatory approvals as a way out of a deal. Given the facts recited by the Court that Nano sought to use the CFIUS clearance condition as a way out of the deal, it is tempting to view the precedential weight of this part of the decision narrowly. However, “reasonable best efforts” provisions relating to regulatory clearances are commonplace and the Court’s discussion of this language merits attention. This is particularly true in the CFIUS context where remedies can be less predictable than those in other regulatory contexts due to the wide range of national security risks considered by CFIUS and the relative “black box” nature of CFIUS reviews.
The Court’s holding also provides important take-aways regarding the “hell-or-high-water” provision. These provisions are used to clarify “reasonable best efforts” in specific contexts and, as the Court noted, represent hard commitments in a merger agreement with respect to regulatory approval. Moreover, these firm commitments are relatively rare in CFIUS or other regulatory contexts. In this case, Desktop and Nano correctly anticipated that CFIUS would request a mitigation agreement and sought to identify a list of mitigation measures that would be acceptable. However, in the Court’s view, these mitigation measures were separate from the parties’ effort to define control with reference to the target’s financial performance. Rather, as CFIUS’s proposed mitigation concerned information restriction, supply assurances and monitoring requirements (which were specifically excluded from consideration of the loss of control exit provision), Nano’s ability to object to these requirements was quite constrained. The Court therefore rejected Nano’s argument that CFIUS’s conditions would impact Nano’s control over more than 10 percent of Desktop’s revenue-generating business lines.
The Court’s remedy of specific performance also merits consideration. The Merger Agreement stipulated to specific performance in the event of a breach. The Court’s recitation of facts explains that, in order to achieve greater deal certainty, Desktop proposed that CFUS clearance be subject to either a reverse termination fee or the “hell-or-high-water” provision backed by specific performance and that Nano opted for the latter. Transaction parties should note that generally, if a buyer needs greater flexibility to consider potential CFIUS mitigation given the unpredictability, a reverse termination fee can be used to purchase more discretion in deciding whether CFIUS’s proposed mitigation sufficiently erodes the value of the deal, provided that the parties carefully define the specific parameters of acceptable mitigation. Note, however, that the Court’s opinion with respect to the “reasonable best efforts” clause suggests that this does not simply allow a buyer to use mitigation as a pretext to refuse to go forward with the deal and transaction parties should carefully consider the degree of flexibility provided by regulatory approval conditions.
This case is a clear reminder that transaction parties should carefully consider the scope of regulatory approval conditions in negotiating merger agreements. No transaction party can predict exactly what mitigation measures CFIUS might require or even what national security risks it might identify, and parties will need to understand all possible mitigation remedies in order to successfully draft a CFIUS approval condition that effectively balances deal certainty with the flexibility necessary to turn down unacceptable mitigation requirements. To illustrate this uncertainty, the National Security Memorandum on America First Investment Policy issued by the President in February 2025 indicates some of the conditions required by CFIUS in its proposed mitigation agreement in this case (for example, indefinite monitoring conditions) may not have been required if the present administration negotiated the mitigation agreement continued. Transaction parties should consider emerging CFIUS trends and policy developments as relevant to the scope of a “reasonable best efforts” clause.
Government Contractors Need to Be Prepared for Significant Reforms to the Federal Acquisition Regulation and Associated Agency Acquisition Supplemental Regulations
On April 15, 2025, President Trump issued Executive Order 14275, Restoring Common Sense to Federal Procurement (EO 14275). EO 14275’s purpose is to reform the Federal Acquisition Regulation (FAR) and associated agency acquisition supplements, such as the Defense Federal Acquisition Regulation Supplement (DFARS), to contain only provisions required by statute or essential to sound procurement. EO 14275 includes several significant provisions and deadlines that government contractors need to be prepared to address. Many of those are highlighted in this alert.
1. Why was EO 14275 Issued?
On January 31, 2025, President Trump issued Executive Order 14192, Unleashing Prosperity Through Deregulation (EO 14192), which expressed concern about the “the ever-expanding morass of complicated Federal regulation”, which “imposes massive costs on the lives of millions of Americans, creates a substantial restraint on our economic growth and ability to build and innovate, and hampers our global competitiveness.” To alleviate unnecessary regulatory burdens, EO 14192 established “that for each new regulation issued, at least 10 prior regulations be identified for elimination . . . to ensure that the cost of planned regulations is responsibly managed and controlled through a rigorous regulatory budgeting process.” EO 14192 applies to any regulation issued by any agency in the entire Federal Government.
Building on the concerns expressed in EO 14192, the recently issued EO 14275 related to government procurement further identified regulatory burdens causing inefficiencies in the government contracting process. For example, EO 14275 referenced a 2024 report written by Senator Roger Wicker, entitled “Restoring Freedom’s Forge – American Innovation Unleashed,” which advocated for various reforms to be made to Department of Defense procurements. EO 14275 also referenced the Section 809 Panel’s 2019 report on streamlining and codifying acquisition regulations, which recommends various acquisition reforms to leverage the dynamic marketplace, allocate resources effectively, enable the workforce, and to simplify acquisition.
Based on the information contained in these referenced reports and the Trump Administration’s goal of reducing regulations overall, EO 14275 establishes that it is the policy of the United States for the FAR to contain “only provisions required by statute or essential to sound procurement, and any FAR provisions that do not advance these objectives should be removed.”
2. Who will have responsibility for identifying which FAR provisions are required by statute or are “essential to sound procurement”?
The FAR is a single Government-wide procurement regulation, which is maintained by the FAR Council. The FAR Council was established by Congress “to assist in the direction and coordination of Government-wide procurement policy and Government-wide procurement regulatory activities in the Federal Government.” 41 U.S.C. § 1302(a). The FAR Council consists of the Administrator for Federal Procurement Policy, the Secretary of Defense, the Administrator of NASA, and the Administrator of General Services. Id. § 1302(a). A key mandate of the FAR Council is to “issue and maintain . . . a single Government-wide procurement regulation, to be known as the [FAR].” 41 U.S.C.A. § 1303.
Pursuant to EO 14275, the Administrator of the Office of Federal Procurement Policy (the Administrator), who also serves on the FAR Council, is required to coordinate with the members of the FAR Council, the heads of agencies, and appropriate senior acquisition and procurement officials from agencies to ensure that the FAR “contains only provisions that are required by statute or that are otherwise necessary to support simplicity and usability, strengthen the efficacy of the procurement system, or protect economic or national security interests.”
Additionally, in order to review agency supplements to the FAR, each agency “shall designate a senior acquisition or procurement official to work with the Administrator and the FAR Council to ensure agency alignment with FAR reform and to provide recommendations regarding any agency-specific supplemental regulations to the FAR.”
3. What are the timelines associated with these significant FAR reforms?
The FAR must be amended pursuant to EO 14275 by October 13, 2025, which is within 180 days of April 15, 2025 (the date that EO 14275 was issued).
To assist with the enactment of these reforms, the Director of the Office of Management and Budget (OMB), in consultation with the Administrator, “shall issue a memorandum to the agencies that provides guidance regarding the implementation of [EO 14275].” EO 14275 requires that this memorandum be issued by May 5, 2025, which is 20 days after the order was issued. The memorandum is required to “ensure consistency and alignment of policy objectives and implementation regarding changes to the FAR and agencies’ supplemental regulations to the FAR.” Contractors should watch closely for the issuance of this memorandum that will provide greater clarity on the Trump Administration’s expectations for government procurement.
4. What types of FAR reforms should government contractors expect?
EO 14275 references that “the FAR has swelled to more than 2,000 pages of regulations, evolving into an excessive and overcomplicated regulatory framework and resulting in an onerous bureaucracy.” Accordingly, a major focus of the coming reforms will be to reduce the size and scope of the FAR and associated agency supplements.
The Section 809 Panel’s 2019 report on streamlining and codifying acquisition regulations serves as a likely predictor of several potential reforms that will receive close attention. The report includes several specific recommendations related to reforms that should be made to the FAR that will likely be closely reviewed by the Administrator and FAR Council when reforming the FAR.
While EO 14275 eliminates several regulations, it will be interesting to watch how its provisions also align with new regulations imposed by other executive orders impacting government procurement. For example, as we wrote about in a prior alert, Executive Order 14222 requires the creation of a new public database that must record every government payment issued by an agency under a government contract, along with a written justification for the payment, regardless of the size or type of the payment. These written justifications add an extra task for contracting officials and contractors, which may be inconsistent with the Administration’s goals to streamline acquisitions.
The devil will be in the details for how the FAR is amended, but contractors should be aware that the primary regulatory scheme that governs their businesses is about to change significantly.
CONCLUSION
Government contractors should closely review EO 14275 and should further pay attention to the additional memorandums and directives that will be issued as a result of that order.
Preparing for a “Common-Sense” FAR: What Federal Contractors Need to Know About the Trump Administration’s Plans to Streamline the Federal Acquisition Regulation
In a new Executive Order issued on April 15, 2025 titled, “Restoring Common Sense to Federal Procurement,” President Trump has directed his Administration to make major revisions to the Federal Acquisition Regulation (FAR)—the voluminous set of rules governing the U.S. Government’s acquisition of products and services—with the stated purpose of making the federal procurement process more “agile, effective, and efficient.” As with many recent executive actions, the instructions to government officials are to undertake dramatic reforms at a breakneck pace, with a significant impact on the rules of the road for companies doing business or seeking to do business with the federal government. In this alert, Foley’s Federal Government Contracts team provides a summary of the key takeaways for government contractors from this latest Executive Order and the Trump Administration’s initiative to produce a streamlined version of the FAR.
Background:
On January 31, 2025, President Trump issued Executive Order 14192, “Unleashing Prosperity Through Deregulation,” which announced his Administration’s policy of alleviating unnecessary regulatory burdens. This recent Executive Order issued on April 15, 2025 extends the Trump Administration’s deregulatory initiative to the government contracting sector by directing the most significant overhaul of the FAR in more than four decades.
This move represents a dramatic shift in federal procurement policy—one aimed at streamlining the acquisition process, reducing regulatory burdens, and encouraging broader participation in the federal marketplace.
Key Takeaways for Contractors:
A Mandate for FAR Simplification—Fast. The Order establishes an aggressive timetable for the proposed revisions to the FAR. As the Order notes, the FAR now fills more than 2,000 pages, and the Order directs the Office of Federal Procurement Policy (OFPP) Administrator, working with the FAR Council and agency heads, to amend the FAR within 180 days. The objective is to retain only provisions that are statutorilyrequired or “otherwise necessary to support simplicity and usability, strengthen the efficacy of the procurement system, or protect economic or national security interests.”
Agency FAR Supplements Are Also Under Review. Each agency must designate a senior acquisition official within 15 days of the Order to work with the OFPP Administrator and FAR Council to provide recommendations regarding their agency-specific FAR supplements and identify FAR provisions that are inconsistent with the Order’s objective to streamline the FAR by removing unnecessary regulations.
Internal Guidance Issued to Agencies. Within 20 days of the Order, the Director of the Office of Management and Budget (OMB), with the OFPP Administrator, shall issue a memorandum that provides guidance regarding implementation of these reforms and proposes new agency supplemental regulations that are aligned with the new policy objectives. That guidance from OMB may provide important signals to contractors regarding the portions of the FAR and federal procurement policy most likely to change as part of this reform effort.
Regulatory Sunset for Non-Statutory FAR Clauses. The Order directs the OFPP Administrator and FAR Council to consider amending the FAR to include a regulatory sunset mechanism that would apply to any non-statutory FAR provision retained after this reform—or added in the future. As proposed in the Order, any non-statutory FAR provision would automatically expire after four years, unless renewed by the FAR Council. This sunset mechanism, if ultimately adopted in the revised FAR, would, at a minimum, require a significant amount of periodic review by the FAR Council of existing regulations, and it could introduce uncertainty regarding the long-term status of certain FAR provisions, complicating contractor compliance planning.
Interim Guidance and Deviations Expected. To avoid delays, the FAR Council is empowered to issue deviation and interim guidance as needed during the rulemaking process, suggesting that significant FAR changes could begin impacting procurements well before final rules are issued or the government contracting community is given the opportunity to weigh in on those revisions.
Implementation Uncertainty. While the policy objective of the Order is clear—to simplify the FAR by removing “unnecessary regulations”—it remains to be seen how the FAR Council will execute that objective. The Order allows for retention of some FAR provisions that cannot be tied back to a specific statutory basis, if such provisions are determined “necessary to support simplicity and usability, strengthen the efficacy of the procurement system, or protect economic or national security interests.” Given these subjective considerations, it will bear monitoring to see how the Administrator and the FAR Council interpret those concepts in determining which FAR provisions to keep or cut.
What This Means for Federal Contractors:
This Executive Order has potentially far-reaching implications:
Reduced Complexity: Contractors may soon face fewer compliance hurdles, especially in acquisitions of commercial products or commercial services.
Opportunities for Commercial Vendors: By directing the elimination of regulatory burdens and requirements, the Order may lead to reduced barriers to entry for new commercial contractors looking to do business with the Federal Government.
Uncertainty During Transition: Contractors should prepare for a period of regulatory uncertainty, as interim guidance may vary across agencies.
Concrete Steps Contractors Can Take:
Monitor FAR-Related Rulemakings: Contractors should closely track upcoming Federal Register notices, and deviation and interim guidance for indications as to how the FAR Council is carrying out the Order’s instructions to streamline the FAR.
Engage in Public Comment Opportunities: When proposed FAR rule changes are released for public comment, consider submitting comments to influence the final rulemaking.
Be on the Lookout for Agency-Level Changes: Agency supplements to the FAR are also being reviewed. Contractors should monitor changes to agency-specific procurement regulations that may impact contracting opportunities with those agencies.
We will continue to monitor developments and provide updates as additional guidance is released and implementation proceeds.
Executive Order Proposes Big Changes to Federal Procurement
The 2,000 page Federal Acquisition Regulation (the “FAR”) has guided and dictated federal procurement for more than forty years. Periodically, the FAR has been updated to make procurement more efficient and simpler. The Trump administration is now undertaking its own effort with the rollout of an executive order entitled “Restoring Common Sense to Federal Procurement.” It goes without saying that significant changes to the FAR will impact how federal contractors and their subcontractors do business with the federal government.
While changes to the FAR could take some time (though the Executive Order lays out an aggressive timeline, as discussed further below), some changes may come sooner through class deviations. Class deviations can be issued at any time without public comments and may have immediate effect.
What is Staying in the FAR?
The Executive Order provides that the only provisions that should be in the FAR are those required by statute or “or essential to sound procurement.” What falls in the latter category remains to be seen, but will probably be shaped by existing Administration priorities that have been signaled through already-released executive orders impacting procurement.
Recent previous efforts, such as the Section 809 Panel established by the 2016 National Defense Authorization Act (NDAA), proposed comprehensive changes to the FAR, many of which were not adopted because they required Acts of Congress. It remains to be seen how much of this effort will impact Congressionally-required FAR clauses (though the Executive Order seems to explicitly carve those out from consideration for removal).
Congressionally mandated FAR clauses include efforts to protect the supply chain (such as FAR 52.204-25 “Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment” implementing Section 889 of the 2019 NDAA) and domestic preferences (such as FAR 52.225-1 “Buy American-Supplies” implementing the Buy American Act). The origins of other familiar clauses are murkier – such as the ability of the Government to terminate for convenience (see 52.249-2), but will probably fall under a clause that is “essential to sound procurement.”
What is Next?
The Executive Order requires that “Federal Acquisition Regulatory Council (FAR Council), the heads of agencies, and appropriate senior acquisition and procurement officials from agencies” amend the FAR within 180 days to include only provisions that are required by statute “or that are otherwise necessary to support simplicity and usability, strengthen the efficacy of the procurement system, or protect economic or national security interests.” This will be a massive effort with far-reaching consequences.
Agency supplemental regulations will also be getting a closer look. As government contractors know well, the FAR overlays the entire regulatory system, but individual agencies are able to issue their own regulatory supplements so long as they do not contradict the FAR. See FAR 1.304(B)(2). Designated agency leads will work the FAR effort to identify and streamline agency-specific regulations. This includes, for example, the Defense Federal Acquisition Regulation Supplement, which is almost as lengthy as the FAR in its own right.
The Executive Order also contains a subset provision aimed at any regulatory clauses not required by statute. That provision suggests amending the FAR to subset those regulations unless specifically renewed by the FAR Council (or the individual regulations themselves). If this comes to fruition, contractors and their supply chains will have to pay close attention to a regulatory environment that will be more dynamic with significant changes coming more frequently as provisions are considered for renewal.
The Executive Order may have far-reaching impacts on companies, including retailers, supporting the nearly $1 trillion government marketplace. We will continue to monitor developments and provide updates when appropriate.
Ten Minute Interview: Bridging M&A Valuation Gaps with Earnouts and Rollovers [VIDEO]
Brian Lucareli, director of Foley Private Client Services (PCS) and co-chair of the Family Offices group, sits down with Arthur Vorbrodt, senior counsel and member of Foley’s Transactions group, for a 10-minute interview to discuss bridging M&A valuation gaps with earnouts and rollovers. During this session, Arthur explained the pros and cons of utilizing rollover equity, earnout payments, and/or a combination thereof, and discussed how a family office may utilize these contingent consideration mechanics, as tools to bridge M&A transaction valuation gaps with sellers.
Mergers and Acquisitions in Australia in 2025
A Recap: Expectations for 2025 Versus Reality to Date
2025 began with optimism that mergers and acquisitions (M&A) activity would continue to increase this year. In Australia and globally, 2024 saw the value of M&A activity increase on the prior year, with many surveys recording cautious optimism for increased deal flow in the year ahead across sectors and regions.
The key drivers of the expected upturn in M&A were the following:
Record levels of dry powder in private capital and private equity (PE) hands.
An expectation of further interest rate reductions.
The benefits of reduced regulation—cutting red tape was a mainstay of the policy promises of many of the political parties elected in 2024’s election cycles around the globe.
Greater political certainty following the unusually high number of elections globally in 2024.
Hot sectors, including technology, especially digital transformation, and artificial intelligence starting to deliver (or not) on its transformative promise, energy transition and financial services.
However, Q1 did not deliver on these early promises in the manner expected. In the United States, the expectations of greater certainty that dealmakers looked forward to because of single-party control of the White House and both houses of Congress was tempered by a lack of clarity on implementation.
Whilst directionally it remained clear through Q1 that significantly higher tariffs will be imposed by the United States on imports from many countries in addition to China, the extent remained unpredictable and the real motivations for introducing them uncertain. Similarly, whilst the new administration’s efforts to remove red tape were eagerly anticipated by many, the pace and extent of executive orders has surprised and is leading to widespread challenge, again undermining certainty.
Citing productivity and wage growth concerns, the Reserve Bank of Australia indicated at the end of March that further target rate cuts were unlikely in the near term.
Then the US “Liberation Day” tariffs were announced on 2 April, and the hopes of a more stable economic and political environment for M&A in 2025 were confounded. The sharp declines in global market indices immediately following their announcement is testament to the significant underestimation of the scope and size of the tariffs initially announced. Pauses on implementation, retaliatory and further tariffs, as well as bi-lateral tariff reduction negotiations, are set to continue to bring surprises for some time. Market sentiment will continue to decline as recessionary fears abound.
Meanwhile, Australia is gearing up for its own federal elections in May 2025, and economists currently predict that interest rate cuts of around one percentage point (in aggregate) are likely over the next 12 months, with the first cut predicted in May.
So, what for M&A in the balance of 2025?
Predictions
Trade Instability
In terms of the political forces shaping Australian M&A, Australia’s federal elections have already been trumped by US tariff announcements.1 We are at the start of the biggest reworking of international trade relations in over a century. With only 5% of our goods exports going to the United States, and (so far) the lowest levels of reciprocal US tariffs applied to Australia, the direct impacts to Australia’s economy are likely to be far outweighed by the indirect effects of the tariffs applied to China and other trading partners. Capital flows, including direct investment, must shift in anticipation of and in response to these changes, but forecasting the impacts on different sectors and businesses (and their effect on valuations) will remain complex for some time, weighing heavily on M&A activity until winners and losers start to emerge.
Foreign Investment
With a weak dollar and a stable political and regulatory environment, Australia will continue to be an attractive destination for inbound investment, not least in the energy transition, technology and resources sectors. Rising defence expenditure around the globe, and AUKUS, remain tailwinds for Australian defence sector investment. We expect further increases in Japanese inbound investment driven by their own domestic pressures. However, a report prepared by KPMG and the University of Sydney2 pours cold water on a further strengthening of interest from Chinese investors, despite the 43% year-on-year increase in 2024, citing Foreign Investment Review Board (FIRB) restrictions on critical minerals and, more generally, a move toward greater investment in Southeast Asia and Belt and Road Initiative countries.
FIRB
Last year, FIRB made welcome headway in shortening its response times for straightforward decisions. The recent updates to FIRB’s tax guidance and the new submissions portal are likely to require front-loading of the provision of tax information by applicants, which should further support a shortening of average approval times. These changes are welcome, as is the introduction of a refund/credit scheme for filing fees in an unsuccessful competitive bid. Whilst these changes will not affect the volume of M&A, they may well facilitate an increase in the speed of execution of auction processes.
Regulatory Changes
Whilst we do not expect the outcome of federal elections to be a key driver of M&A activity in 2025 overall, the slowing of FIRB approvals during caretaker mode and the potential backlog post-election will lead some inbound deal timetables to lengthen in the short term, especially if there is a change in government. In Q2, we expect Australia’s move to a mandatory and suspensory merger clearance regime will have the opposite effect. Even as full details of the new merger regime continue to be revealed, we expect some activity will be brought forward to avoid falling under the new regime at the start of 2026.
Larger Deals
Although surveys report an increase in total transaction value in 2024, they also show there were fewer transactions overall. After the rush of transaction activity in 2021 and 2022, and the proximity to the end of post-pandemic stimulus, it is perhaps too easy to characterise the current environment as one of caution. However, market perception is still that deals are taking longer to execute, with early engagement turning frequently into protracted courtship and translating into longer and more thorough due diligence processes. This favours a concentration on deals with larger cheque sizes, a trend mirrored in Australian venture capital (VC) investing in 2024 and which we see set to continue in 2025.
PE
Globally, PE deal volumes surged in 2024, with Mergermarket reporting PE acquisitions and exits exceeding US$25.3 billion and US$18.9 billion, respectively. There remains an avalanche of committed capital to deploy and a maturity wall of capital tied up in older funds to return. It is these fundamentals that are expected to drive sponsor deal activity, in spite of the ongoing global sell-off in equities. PitchBook’s Q1 results for Oceania PE bear this out. Corporates looking to refocus away from noncore operations or requiring cashflow will continue to find healthy competition for carve outs among PE buyers, and an increase on the relatively low value of PE take-privates in Australia in 2024 is predicted. Family-owned companies with succession issues are also expected to provide opportunities for PE buyers. Nevertheless, we expect more secondary transactions, including continuation funds, will be required to grease the cogs in these circumstances.
VC Exits
The rising prevalence of partial exits via secondary sales is shown neatly in the State of Australian Startup Funding 2024 report.3 Whilst those surveyed still rate a trade sale as their most likely exit, secondaries were next and IPOs were considered the least likely. The report notes 59% of surveyed Series B or later founders said they had sold shares to secondary buyers, and 23% of investors said they sold secondaries in 2024. Following the success of secondaries like that of Canva and Employment Hero, secondaries will continue to provide much-needed liquidity to founders and fund investors alike. There is also a recognition of the value of such transactions in advance of an IPO, because they bring in new investors who may be expected to stay invested longer post-float. With valuations settling following their retreat from pandemic highs, PE acquisitions of Australian venture-backed companies rose in 2024 especially from overseas buyers. With the launch of more local growth funds targeting these assets, we expect that trend to increase.
Footnotes
1. President Trump Announces “Reciprocal” Tariffs Beginning 5 April 2025 | HUB | K&L Gates2. Chinese investment in Australia shifts from acquisitions to greenfield – KPMG Australia3. State of Australian Startup Funding 2024 | Insights
What’s It Worth? Valuing a Business for Sale
If you’re thinking of buying or selling something (anything), it’s important to know the value of that thing. Whether a piece of art, a shirt, a house, or a business.
Perhaps the best definition of the value of a thing is that the thing is worth what a buyer is willing to pay and what a seller is willing to receive for that thing. That’s a tautology, however.
Valuing a business is useful, if not necessary, in a variety of circumstances. Some examples include when a business is seeking a bank loan, when a business’s owners are divorcing (either figuratively or literally), and when a business is getting ready to be acquired (or, from the perspective of the would-be acquirer, when it is a potential target).
This article is intended as a brief introduction to the subject.
It’s important to note that valuation is not a one-size-fits-all process; different methods provide different insights, and the choice of method depends on the specific circumstances and purpose of the valuation. As Megan Becwar, principal at Dispute Economics, puts it, failing to match the intended purpose of the valuation with the correct valuation method for that purpose will likely result in an incorrect (or irrelevant) conclusion of value.
Importance of Accurate Business Valuation
An accurate valuation of a business in the context of a potential M&A transaction is important to a seller because overpricing can lead to a business lingering on the market while underpricing means the owner leaving money on the table. Moreover, a well-substantiated valuation can withstand scrutiny during negotiations, audits, and legal proceedings.
Methods of Business Valuation
There are several approaches to business valuation, each with its own set of methodologies and assumptions. The three primary methods are:
Income Approach: This method is based on the principle that the value of an asset is the present value of its expected future economic benefits. Discounted Cash Flow (DCF) Analysis is a common technique under the Income Approach. It estimates the present value of expected future earnings. This approach is particularly useful for businesses with stable and predictable cash flows.
Market Approach: The Market Approach compares the business to similar companies that have been sold, using industry multiples such as the Price-to-Earnings (P/E) ratio or Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) multiples. It relies on the principle of substitution, suggesting that a prudent buyer would not pay more for a business than the cost of acquiring a similar one. This approach is most effective in active markets with ample comparable transactions.
Asset-Based Approach: This method values the business based on its tangible and intangible assets, subtracting liabilities. It considers the net asset value, essentially calculating the difference between total assets and total liabilities. This approach is often used for companies with substantial tangible assets or those facing liquidation, as intangible assets must be separately valued.
Understanding the nuances between intrinsic and relative valuations is important.
Intrinsic valuation is based on widely accepted academic methods, but assumptions can be manipulated.
Relative valuation, on the other hand, depends on actual market dynamics.
John Levitske of HKA Global notes that these distinctions underscore the importance of both selecting the appropriate valuation method and being mindful of the assumptions underpinning each approach.
Legal Considerations in Business Valuation
Legal factors play a pivotal role in business valuation, influencing both the valuation process and the final assessed value. Key legal considerations include:
Fair Market Value vs. Fair Value: Understanding the distinction between these terms is crucial. Fair Market Value (FMV) represents the price at which a property would change hands between a willing buyer and a willing seller, with neither under compulsion and both having reasonable knowledge of relevant facts. Fair Value, however, is a legal standard often used in shareholder disputes and may not consider discounts for lack of control or marketability. Richard Claywell, Certified Public Accountant, explains that fair market value assumes a hypothetical buyer and seller, while an actual transaction involves real-world negotiations, synergies, and motivations.
Minority Discounts and Control Premiums: A minority interest in a company may be less valuable due to the lack of control over business decisions, leading to a minority discount. Conversely, a controlling interest may command a premium. The application of these adjustments depends on the specific circumstances and the standard of value being used.
Buy-Sell Agreements: Buy-Sell Agreements outline the terms under which a business owner’s interest can be sold or transferred, often specifying the valuation method to be used. Properly drafted buy-sell agreements can prevent disputes and provide clarity during ownership transitions.
Legal Structure and Compliance: The legal structure of a business (i.e., sole proprietorship, partnership, corporation) affects its valuation due to differing tax implications, liability issues, and regulatory requirements. Ensuring compliance with all applicable laws and regulations is vital, as legal issues can significantly diminish a company’s value.
Editors’ Note: Legal structure is also significant for estate planning purposes. See Estate Planning for the Business Owner Series, Part 3: Examples of Business Transfers and Valuations by Andrew Haas of Blank Rome LLP to read more about this.
Financial Considerations in Business Valuation
Financial factors are at the core of business valuation, providing quantitative measures of a company’s performance and potential. Tom Walsh of Brody Wilkinson PC emphasizes the role of due diligence, noting that a buyer will scrutinize everything, from vendor contracts to customer concentration risks.
Key financial considerations include:
Financial Performance: Strong revenue, profitability, and growth prospects enhance value. Analyzing historical financial statements provides insights into the company’s earnings stability and operational efficiency. Potential buyers often scrutinize metrics such as gross margin, operating margin, and net profit margin to assess financial health.
Cash Flow Management: Cash flow is the lifeblood of any business, and its management directly impacts valuation. Buyers focus on free cash flow (FCF) as an indicator of a company’s ability to generate profits and sustain operations. Effective cash flow management can significantly enhance a company’s attractiveness to buyers.
Debt and Liabilities: The level of debt and financial obligations influence business valuation. A company with high debt levels may be considered riskier, potentially leading to a lower valuation. Conversely, a well-managed capital structure with manageable liabilities can enhance valuation by demonstrating financial stability.
Industry and Market Conditions: The external economic environment, industry trends, and market demand play crucial roles in determining business value. A company operating in a high-growth sector may command a higher valuation than one in a declining industry. Investors often look at comparable market transactions to gauge valuation expectations.
Conclusion
By understanding different valuation methods, preparing in advance, and seeking expert guidance, business owners can maximize their company’s worth and ensure a successful transaction. Whether you’re planning to sell now or years down the road, starting the valuation process early is one of the smartest business moves you can make.
To learn more about this topic, view What’s it Worth? Valuing a Business for Sale. The quoted remarks referenced in this article were made either during this webinar or shortly thereafter during post-webinar interviews with the panelists. Readers may also be interested to read other articles about valuation.
This article was originally published on here.
©2025. DailyDACTM, LLC d/b/a/ Financial PoiseTM. This article is subject to the disclaimers found here.
Buying Assets in Bankruptcy: Opportunities, Risks, and Strategies
Introduction
Acquiring assets from a bankrupt company presents unique opportunities for investors, business owners, and legal professionals. Understanding the intricacies of a Section 363 sale process, the role of a stalking horse bidder, and the dynamics of bankruptcy sales is crucial for navigating these complex transactions successfully.
What Makes Bankruptcy Asset Sales Unique?
Section 363 of the US Bankruptcy Code allows a debtor (the company or person in bankruptcy) to sell assets outside the ordinary course of business, typically through a court-approved auction process. This mechanism enables the sale of assets “free and clear” of existing liens, claims, and encumbrances, providing buyers with a clean title.
The section 363 sale process is a public auction. The debtor must market the assets and sell them through a court-approved auction process.
This process benefits buyers by offering:
Expedited Transactions: Bankruptcy courts often prioritize swift asset sales to maximize value and reduce administrative expenses.
Transparency: The auction process’s public nature ensures that all interested parties have access to information, promoting fair competition.
Legal Protections: Court approval of the sale minimizes the risk of future disputes over asset ownership.
However, potential buyers must conduct thorough due diligence to understand the specific terms and any possible exceptions that might affect the sale.
Benefits of Buying Assets in Bankruptcy
Purchasing assets through a bankruptcy sale can offer several advantages:
Discounted Asset Prices: Assets are often sold at reduced prices due to the distressed nature of the sale.
Acquisition Free of Liens: Buyers can acquire assets free and clear of most prior claims. James Sullivan, partner at Seyfarth Shaw, notes that assets bought out of bankruptcy are often priced lower than when purchased through a typical M&A transaction and are acquired free and clear of virtually all liens, claims, and interests burdening the assets.
Court-Supervised Process: The involvement of the bankruptcy court provides a structured environment, reducing the risk of undisclosed liabilities.
Opportunity for Strategic Expansion: Buyers can acquire valuable assets, intellectual property, or business units that align with their strategic goals.
The Role of the Stalking Horse Bidder
A stalking horse bidder is an initial bidder chosen by the debtor to set the baseline bid for the assets. This arrangement establishes a minimum price, encouraging other potential buyers to participate in the auction. The stalking horse bidder often negotiates certain protections, such as break-up fees, to compensate for the risks associated with being the initial bidder.
Often in section 363 sales, there will be an initial ‘stalking horse’ bidder that will perform the initial due diligence on the assets to be sold and enter into an asset purchase agreement with the debtor for the sale of the property, subject to the possibility of higher and better offers being accepted at the auction.
Break-up fees are payments made to the stalking horse bidder if another bidder wins the auction. These fees compensate the initial bidder for the time and resources invested in setting the floor price. The debtor and the stalking horse bidder negotiate these bid procedures and may seek and receive input from others, including secured creditors. Richard Corbi of Corbi Law notes that a bidder might not win the assets despite all their upfront effort if the auction gets competitive.
The Auction Process & Competitive Bidding
The auction process in a bankruptcy sale is designed to maximize the value of the debtor’s assets. Key steps include:
Bid Procedures Approval: The debtor proposes bidding procedures, which must be approved by the bankruptcy court. These procedures outline the requirements for potential bidders and the rules governing the auction.
Marketing the Assets: The debtor markets the assets to attract potential buyers, providing necessary information to facilitate due diligence.
Submission of Qualified Bids: Interested parties submit bids that comply with the approved procedures by a specified deadline.
Auction Conducted: If multiple qualified bids are received, an auction is held where bidders can increase their offers competitively.
Selection of Winning Bid: The debtor, in consultation with creditors and subject to court approval, selects the highest and best offer, considering factors beyond just the purchase price.
Court Approval: A sale hearing is conducted where the court reviews the process and approves the sale to the winning bidder.
Closing the Sale: Following court approval, the transaction is finalized, and the assets are transferred to the buyer.
It’s important to note that the ‘highest and best’ offer isn’t solely determined by the monetary value. Cliff Katz explains that other considerations include the ability to close promptly, contingencies, and the impact on stakeholders.
Risks and Challenges of Bankruptcy Sales
While bankruptcy asset purchases offer attractive opportunities, they come with inherent risks:
Due Diligence Constraints: The expedited nature of bankruptcy sales can limit the time available for thorough due diligence.
Potential for Overbidding: Competitive auctions may drive prices higher than anticipated, potentially reducing the expected value proposition.
Regulatory Approvals: Certain transactions may require approvals from regulatory bodies, which can introduce delays or complications.
Successor Liability Concerns: Although assets are sold free and clear, certain liabilities, such as environmental obligations or union contracts, may transfer to the buyer under specific circumstances.
Financing Challenges: Securing financing for distressed assets can be more complex, requiring lenders to be familiar with bankruptcy processes.
Jonathan Friedland explains that potential buyers of distressed companies often have the ability to influence whether the target company files bankruptcy at all, “Bankruptcy is just one tool among many that are available to a financially distressed company, and many transactions happen in the context of an Article 9 sale, a receivership sale, or an assignment for the benefit of creditors.” Friedland notes that “these other venues each have their relative pros and cons as compared to purchase through bankruptcy.” Editors’ Note: for more information on business bankruptcy alternatives, read Buying Operating Assets from a Distressed Seller and Dealing with Corporate Distress 18: Buying & Selling Distressed Businesses.
Private Sales in Bankruptcy
Not all bankruptcy asset sales involve public auctions. In some cases, a debtor may pursue a private sale, negotiating directly with a buyer without a competitive bidding process. This approach can be advantageous when:
Time Is of the Essence: Private sales can be faster, avoiding the time-consuming auction process.
Limited Market Interest: If the pool of potential buyers is small, a private sale may be more practical.
Confidentiality Concerns: Private negotiations can keep sensitive information out of the public domain.
However, private sales still require court approval, and the debtor must demonstrate that the sale serves the best interests of the estate and its creditors.
Special Considerations for Foreign Buyers
Foreign investors interested in acquiring US assets through bankruptcy should be aware of additional considerations:
Regulatory Compliance: Transactions may be subject to review by the Committee on Foreign Investment in the United States (CFIUS), especially if they involve sensitive industries.
Currency Exchange Risks: Fluctuations in exchange rates can impact the overall cost of the investment.
Legal Representation: Engaging US-based legal counsel is essential to navigate the complexities of the US bankruptcy system.
Tax Implications: Understanding the tax consequences in both the US and the investor’s home country is crucial for effective planning.
Conclusion: Is a Bankruptcy Purchase Right for You?
Acquiring assets through bankruptcy can be a strategic move, offering access to valuable assets at potentially discounted prices. However, it’s essential to approach such opportunities with a clear understanding of the process, associated risks, and legal implications. Engaging experienced legal and financial advisors is crucial to navigating the complexities of bankruptcy.
To learn more about this topic, view Advanced Bankruptcy Transactions / Purchasing Assets in Bankruptcy. The quoted remarks referenced in this article were made either during this webinar or shortly thereafter during post-webinar interviews with the panelists. Readers may also be interested in reading other articles about purchasing distressed assets.
This article was originally published here.
©2025. DailyDACTM, LLC. This article is subject to the disclaimers found here.
Washington State Enacts Antitrust Pre-Merger Notification Act
What Happened: On April 4, 2025, Washington was the first state to enact the Uniform Antitrust Pre-Merger Notification Act (the Act). The Act requires certain parties with a nexus to the state that make a Hart-Scott-Rodino (HSR) filing to also submit the filing to the state’s attorney general (AG).
The Bottom Line: Adoption of the Act requires direct notice of large transactions to the state AG’s office. The Act also promotes sharing of the information submitted among states that have enacted the Act. As more states pass their own versions of the Act, state involvement in the review of such transactions may increase. Recently, some state AGs have taken a more active role in merger enforcement, including filing their own state court cases separately from the federal antitrust agencies. Certain state AGs have also said they stand ready to fill in gaps, if the federal agencies under President Trump become more lenient on antitrust enforcement.
The Full Story: Washington’s law requires a person making a Hart-Scott-Rodino (HSR) filing that (a) has its principal place of business in the state; (b) has annual net sales of 20 percent of the HSR threshold (adjusted annually, currently $126.4 million) of the goods or services involved in the transaction in the state; or (c) is a healthcare provider conducting business in the state, to also submit the HSR filing and attachments to the state AG’s office. The statute requires notice only, does not require payment of a filing fee and does not include additional enforcement powers or impose a waiting period on the transaction before the parties can close (as under HSR). Nor does the statute require both parties to submit their HSR filings to the state AG, as they must under HSR to the Federal Trade Commission (FTC) and Antitrust Division of the Department of Justice (DOJ). The statute authorizes a civil penalty of $10,000 per day of noncompliance. The statute contains confidentiality measures, including exempting the information submitted from the state FOIA law. In certain merger investigations where state AGs join their federal enforcer counterparts (FTC or DOJ), state AGs will request waivers from the merging parties to allow for the federal enforcers to share material obtained from the merging parties (including their HSR filings) with state AG offices. Washington’s law is mandatory and obviates the need for the Washington AG to obtain a waiver to gain access to the HSR filing of a party with one of the above connections to the state.
Washington is the first state to enact the Uniform Antitrust Pre-Merger Notification Act (the “Act”), which was adopted last year by the Uniform Law Commission. Other states have introduced bills with versions of the Act, including California, Nevada, Utah, Colorado, West Virginia, and the District of Columbia. This is in addition to other state laws requiring pre-merger notification (baby HSRs) for certain transactions in the healthcare industry including in California, Colorado, Connecticut, Hawaii, Illinois, Indiana, Massachusetts, Minnesota, Nevada, New York, New Mexico, Oregon, Rhode Island, Vermont, and Washington.
Conclusion: As state-specific pre-merger notification regimes are adopted, state antitrust review of mergers is expected to become more active. During the first Trump administration, several blue state AGs challenged the T-Mobile/Sprint merger after DOJ and several red state AGs settled the case. Also, during the Trump 1.0, the California AG challenged Valero’s proposed acquisition of petroleum terminals from Plains All American Pipeline and obtained a settlement in the Cedars-Sinai/Huntington Memorial Hospital transaction after the FTC declined to take action. Under the Biden administration, the Washington AG and Colorado AG challenged the Kroger/Albertsons merger separately in state courts and chose not to join the FTC (and nine other state AG co-plaintiffs) in the FTC’s case brought in federal court. The New York AG just recently won its challenge of Intermountain Management’s acquisition of Toggenburg Mountain ski resort, a case brought under New York state antitrust law. AGs from Colorado, California, and Michigan have stated that they are committed to take independent enforcement action if warranted regardless of what their federal enforcer counterparts decide to do. Companies need to stay apprised of new state merger filing requirements, as well as increased state antitrust review of transactions. This is especially true for industries that are localized in nature such as healthcare and retail.