Category: Mergers & Acquisitions

2025 HSR Thresholds and Filing Fees Published, Effective in 30 Days

What Happened: The Federal Trade Commission published revised Hart-Scott-Rodino (“HSR”) thresholds and updated filing fees, and revised thresholds for interlocking directorates, in the Federal Register. The new thresholds and filing fees become effective on February 21, 2025.
The Bottom Line: The new HSR thresholds are higher than current thresholds, and the new filing fees have been increased for transactions valued above $555.5 million. The new interlocking directorates thresholds are also higher. Clients contemplating mergers or acquisitions or appointing board members need to be aware of the new thresholds and filing fees. Companies may need to file with the Federal Trade Commission (“FTC”) and Department of Justice (“DOJ”) if the value of the deal exceeds $126.4 million.
The Full Story:
HSR Thresholds and Filing Fees
The FTC revises the HSR thresholds each year based on gross national product, and now also revises filing fees and fee tiers based on gross national product and CPI. Generally, under the revised thresholds, if the “size of transaction”—value of non-corporate interests, assets, voting securities or a combination thereof held as a result of the transaction—exceeds $505.8 million and no exemption applies, the parties must file. If the size of transaction exceeds $126.4 million but is less than $505.8 million, then antitrust counsel will need to do a “size of person” analysis. Generally, an HSR filing will not be required unless one party to the transaction has total assets or annual net sales of $25.3 million or more and the other party has total assets or annual net sales of $252.9 million or more.
The new Size of Transaction thresholds are as follows:

The new Size of Person thresholds are as follows:

The notification thresholds for less than 50% acquisitions of voting securities, which are designed to act as exemptions, also increased as follows:

Pursuant to the Merger Filing Fee Modernization Act signed into law at the end of 2022, the HSR filing fees now have a six-tier structure, and the thresholds and the amount of the fee for each tier have been adjusted based on changes to gross national product and the consumer price index.

The civil penalty for violating the HSR Act is also expected to increase soon. The current penalty is $51,744 per day for each day of noncompliance.
Interlocking Directorates
The FTC also published revised thresholds relating to interlocking directorates based on gross national product. Section 8 of the Clayton Act prohibits a person from serving simultaneously as an officer or director of two or more competing corporations, subject to certain exceptions. Under the revised thresholds, Section 8 may apply when each of the competing corporations has capital, surplus and undivided profits aggregating more than $51,380,000 and each corporation’s competitive sales are at least $5,138,000.
Conclusion
HSR and interlocking directorates analysis is fact-specific and requires a comprehensive and thorough understanding of both the statute and relevant regulations. Clients are advised to consult with antitrust counsel as early as possible to determine if an HSR filing is needed before closing the deal or when appointing board members.

FTC Announces 2025 HSR Notification Threshold and Filing Fee Increases

The Federal Trade Commission (FTC) has announced the annual revisions to the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) thresholds and HSR filing fees, which will become effective on February 21, 2025. The revised thresholds will apply to any merger or acquisition closing on or after the effective date. 
The FTC is required to adjust these thresholds annually based on changes in the gross national product and the Consumer Price Index. This year, the HSR “size of transaction” threshold has increased from $119.5 million to $126.4 million. 
Under the HSR Act, when a deal satisfies the “size of person” and “size of transaction” thresholds, and no exemption from reporting is available, the deal must be reported to the FTC and the US Department of Justice and the parties must wait for a designated period of time before closing the transaction.
Size of Person. The revised size of person thresholds will generally be met if one party involved in the deal has assets or annual sales totaling $252.9 million or more and one other party involved in the deal has assets or annual sales of at least $25.3 million. Satisfaction of the size of person thresholds is not required, however, if the transaction is valued at more than $505.8 million.
Size of Transaction. The revised size of transaction threshold will be met if the buyer will hold an aggregate amount of stock, non-corporate interests and/or assets of the seller valued at more than $126.4 million as a result of the deal.
The notification thresholds applicable to purchases of voting securities will increase as follows:

February 1, 2001 Thresholds (Original)
Current Thresholds as of March 6, 2024
New Thresholds Effective February 21, 2025

$50 million
$119.5 million
$126.4 million

$100 million
$239 million
$252.9 million

$500 million
$1.195 billion
$1.264 billion

25% if worth more than$1 billion
25% if worth more than $2.39 billion
25% if worth more than $2.529 billion

50% if worth more than$50 million
50% if worth more than $119.5 million
50% if worth more than $126.4 million

The thresholds applicable to many exemptions, including those governing foreign acquisitions, also will increase. However, the $500 million threshold applicable to acquisitions of producing oil and gas reserves and associated assets will not change.
The civil penalty for failing to comply with the notification and waiting period requirements of the HSR Act has also increased to up to $53,088 per day for each day a party is in violation. 
Additionally, the HSR filing fee thresholds and filing fee amounts have increased as follows:

Original Filing Fee
Original Applicable Size of Transaction
2025 Adjusted Filing Fee
2025 Adjusted Applicable Size of Transaction

$30,000
Less than $161.5 million
$30,000
Less than $179.4 million

$100,000
Not less than $161.5 million but less than $500 million
$105,000
Not less than $179.4 million but less than $555.5 million

$250,000
Not less than $500 million but less than $1 billion
$265,000
Not less than $555.5 million but less than $1.111 billion

$400,000
Not less than $1 billion but less than $2 billion
$425,000
Not less than $1.111 billion but less than $2.222 billion

$800,000
Not less than $2 billion but less than $5 billion
$850,000
Not less than $2.222 billion but less than $5.555 billion

$2,250,000
$5 billion or more
$2,390,000
$5.555 billion or more

The new fees also will become effective on February 21, 2025. 

Looking Back and Looking Forward: Healthcare Antitrust in a New Administration: What Stays the Same and What Changes?

President Trump was sworn into office on Monday, promising swift action on several fronts. There is already a new Federal Trade Commission (“FTC”) Chair, Andrew Ferguson, with former FTC Chair Lina Khan expected to step down shortly. At the Department of Justice, Antitrust Division (“DOJ”), proposed AAG Gail Slater will need to be confirmed by the Senate before she can take the helm.
Overall, our view is that antitrust enforcement in the new administration will be complicated. However, while the Biden administration has been criticized in some quarters for overreach in antitrust enforcement, there has been bipartisan consensus that certain industries, including Healthcare, have become too concentrated.
Healthcare Antitrust Enforcement Under Biden: Active to the Very End
The Biden administration’s FTC and DOJ were extraordinarily active in the healthcare space, not just bringing enforcement actions against various industry participants (some of which were brought on the literal last business day of the administration), but putting forth new guidance and rules, while withdrawing others. Some examples of the Biden administration’s healthcare-focused antitrust program included:

Merger Enforcement: The Biden FTC and DOJ adopted a stringent approach toward healthcare mergers, challenging transactions that threatened to excessively consolidate market power. This included both horizontal mergers between direct competitors and vertical mergers involving companies at different stages of the supply chain. The agencies were less inclined to settle merger challenges with remedies, often opting to block transactions outright to preserve competition. The administration scrutinized the role of private equity in the healthcare industry, particularly concerning acquisitions that could lead to monopolistic practices.
Conduct Investigations: The administration targeted anticompetitive practices in the healthcare and pharmaceutical industries, including “pay-for-delay” agreements and monopolistic behaviors that kept drug prices high. Notably, the FTC pursued investigations into pharmacy benefit managers (“PBMs”), examining their role in drug pricing and their potential conflicts of interest and releasing a staff interim report in the last few days of the outgoing Biden administration.
Withdrawal of Antitrust Healthcare Policy Statements and other Guidance: The agencies withdrew longstanding healthcare-specific policy statements that provided firms with clear guidance, including explicit safe harbors, about how to engage in certain conduct and transactions in the healthcare industry without running afoul of the antitrust laws. The withdrawal of the policy statements has introduced uncertainty to companies operating in the healthcare space and left them vulnerable to antitrust scrutiny for practices that were previously expressly permitted.

What will Federal Healthcare Enforcement Look Like Now? 
Although particular priorities may change between administrations, the prior Trump administration pursued robust antitrust enforcement in the healthcare industry, and there is every reason to believe that the new Trump administration will pick up where the prior one left off. Below, are three specific areas to watch in the new administration:

More Guidance (Please)?: We are curious to see whether the old Healthcare Statements or Antitrust Guidelines for Collaborations Among Competitors (“Collaboration Guidelines”), which are highly relevant to the antitrust analysis of healthcare collaborations and joint ventures, are reinstated or new ones are introduced in this Trump administration. The two Republican FTC commissioners during the Biden administration, including the current new FTC Chair, Andrew Ferguson dissented from the prior decision to withdraw the Collaboration Guidelines and the decision was criticized by many conservative antitrust commentators. Although the healthcare industry will likely remain in the crosshairs for antitrust enforcement, a Trump administration will nonetheless likely be more business friendly and pragmatic in its approach to enforcement and reinstating guidance for industry participants would not be a surprising move for it to take.
“Middlemen” Still the Bogeymen?: We anticipate that the Trump administration will continue investigations into the role of middlemen in the healthcare industry—particularly PBMs—begun under the Biden administration. Trump has previously criticized PBMs for their role in inflating drug prices, and we will likely see continued efforts to investigate these entities, though whether either agency will pursue more novel theories of antitrust harm remains to be seen.
Merger Guidelines: Do they Stay or Do they Go (or Something in Between)?: As we have discussed in a previous post, the FTC and DOJ revised substantially the Merger Guidelines at the end of 2023, which is the substantive framework they use to evaluate whether they consider a proposed transaction to substantially lessen competition under Section 7 of the Clayton Act. While the new Guidelines have been in place for only a year, both Agencies have brought several successful litigations under them. Moreover, while they have been highly controversial, new FTC Chair Andrew Ferguson recently stated, “[o]n the question of, should they be rescinded, reformed, whatever, I don’t think they should be categorically rescinded. I don’t think we should get into a cycle where we are just rescinding guidelines every time the chairmanship changes hands. The guidelines will become useless to everyone if everyone thinks that they just embody the very particular preferences of a particular party.” But he noted in the same interview, “I am open to reforming them.”

CONCLUSION
Although we expect antitrust enforcement trends in healthcare to be broadly consistent between administrations, it is the differences that will be telling as we move forward into the Trump Presidency. And, even were the antitrust agencies to shift their priorities or approach under President Trump, that change would not affect the many states, like California, that have passed new healthcare-focused antitrust laws and implemented aggressive new enforcement regimes in recent years.
Listen to this post

FTC Announces Significant Increases to the 2025 HSR Reporting Thresholds

On Jan. 10, 2025, the Federal Trade Commission (“FTC”) announced significant increases to the Hart-Scott-Rodino (“HSR”) premerger notification thresholds for 2025.[1] The FTC also updated the filing fee schedule to reflect these increased thresholds. The higher thresholds come ahead of the effective date of the new HSR rules, which are currently set to go into effect on Feb. 10, 2025[2] and will significantly increase the information, burden, and cost required of parties preparing and submitting HSR premerger notification and report forms.
Increased Reporting Thresholds
The FTC updates the premerger merger notification thresholds each year based upon the change in the gross national product. The premerger notification thresholds provide the minimum numbers that must be met for the size of transaction and, where applicable, size of persons for a proposed transaction to be reportable under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”). The size of transaction is the value of voting securities or assets that will be acquired after the value of exempt assets such as mortgage-backed securities, cash, and hotels are excluded. The size of person is determined by the value of the assets or, for entities engaged in manufacturing at the lower threshold and all entities at the higher threshold, annual net sales.
The new thresholds have not yet been published in the Federal Register. Typically, the new thresholds become effective thirty days after they are published in the Federal Register. We anticipate that the notice will be published soon and that the effective date of the thresholds will be in late February, 2025. If you are working on a transaction that is closing before the effective date, your transaction will be under the current, lower thresholds. Transactions closing on or after the effective date will be under the new, higher thresholds. We will update this blog post with the effective date once the notice is published. The chart below summarizes the changes to the thresholds:

New Reporting Thresholds

Test
2024 Threshold (currently effective) (in USD)
2025 Threshold (to be effective likely in late February 2025) (in USD)

Minimum Size of Transaction for Filing Where the Size of Person is Met
$119.5 million
$126.4 million

Smaller Size of Person Threshold (must be met by one party)
$23.9 million in assets or, if engaged in manufacturing, annual net sales
$25.3 million in assets or, if engaged in manufacturing, annual net sales

Larger Size of Person Threshold (must be met by one party)
$239 million in assets or annual net sales (regardless of engagement in manufacturing)
$252.9 million in assets or annual net sales (regardless of engagement in manufacturing)

Size of Transaction Where Size of Person Test Does not Apply
$478 million
$505.8 million

New HSR Filing Fee Schedule
HSR filing fees, which are based on the size of transaction, are updated annually in accordance with the consumer price index published by the Department of Labor. The new filing fee schedule will also go into effect 30 days after the publication of the notice in the Federal Register and is as follows:

New Filing Fee Schedule

Filing Fee
Size of Transaction

$30,000
more than $126.4 but less than $179.4 million

$105,000
$179.4 million or greater, but less than $555.5 million

$265,000
$555.5 million or greater, but less than $1.111 billion

$425,000
$1.111 billion or greater, but less than $2.222 billion

$850,000
$2.222 billion or greater, but less than $5.555 billion

$2,390,000
$5.555 billion or greater

Generally, and unless an exemption applies, HSR will apply to transactions where the size of transaction and size of person tests below are met, although for larger transactions, only the size of transaction test applies. 

[1] FTC Announces 2025 Update of Size of Transaction Thresholds for Premerger Notification Filings
[2] On Jan. 10, 2025, the U.S. Chamber of Commerce, along with Business Roundtable, American Investment Council, and the Longview Chamber of Commerce filed a complaint against the FTC and FTC Chair Lina Khan alleging that the new HSR rules exceed the FTC’s statutory authority under the APA. Chamber of Commerce of the United States of America v. FTC, No. 6:25-cv-009 (E.D. Tex. Jan. 10, 2025). Plaintiffs have not sought a preliminary injunction to stay implementation of the new rules yet; however, with the effective date drawing near, a request for a stay may be on the horizon. Nevertheless, companies should continue preparations for the increased requirements under the new rules.

A Wait Until the Deal Closes: The Antitrust Agencies Send a Strong Message About the Dangers of Gun-Jumping

One of the most common questions clients have after a merger or acquisition has been signed is, “When can we start on combining the operations and doing business?” And one of the most challenging pieces of counseling is to help a client understand the antitrust compliance principle that until a deal closes, the parties must compete as separate and independent entities. While merging companies may plan the integration of their operations, they may not actually integrate their operations or otherwise coordinate their competitive behavior before the transaction has closed without risking a “gun jumping” violation.
Gun-jumping violations can be triggered under two laws: (1) §1 of the Sherman Act, which prohibits agreements in restraint of trade (such as price fixing and market allocation); and (2) the Hart-Scott-Rodino Act (HSR Act), which requires parties to certain transactions to submit a premerger notification form and observe the necessary waiting period(s) prior to closing their transaction and the transfer of beneficial ownership.
While there have been a number of gun-jumping enforcement actions over the years, the Federal Trade Commission (FTC) and the Antitrust Division of Department of Justice (DOJ) (collectively, the “Antitrust Agencies”) made it clear recently that these types of violations will be scrutinized and penalized. The Antitrust Agencies imposed a record $5.6 million civil penalty on three crude oil suppliers for engaging in gun-jumping in violation of the HSR Act.1
According to the complaint, XCL Resources Holdings, LLC (XCL) and Verdun Oil Company II LLC (Verdun) filed an HSR for their $1.4 billion acquisition of EP Energy LLC (EP).2 However, prior to the expiration of the HSR waiting period, XCL and Verdun assumed control of a number of EP’s key operations including but not limited to managing EP’s customers and coordinating pricing strategies. These and other actions effectively transferred beneficial ownership to the buyers before the deal closed, in violation of the HSR Act.
The enforcement action is the largest civil penalty ever imposed for a gun-jumping violation in history. Moreover, the Antitrust Agencies imposed a number of antitrust compliance and monitoring obligations on the buyers.
[1]https://www.ftc.gov/news-events/news/press-releases/2025/01/oil-companies-pay-record-ftc-gun-jumping-fine-antitrust-law-violation and https://www.justice.gov/opa/pr/oil-companies-pay-record-civil-penalty-violating-antitrust-pre-transaction-notification
[2]https://www.ftc.gov/system/files/ftc_gov/pdf/complaintforcivilpenaltiesandequitablereliefforviolationsofthehartscottrodinoact.pdf

Annual Adjustment of HSR Thresholds Comes at a Time of Uncertainty

There is a lot of uncertainty in the Hart-Scott-Rodino Act (HSR) world. The new rules on what must be included in an HSR filing have been issued and are due to take effect on February 10, 2025, but that could be derailed or delayed. Either the new administration could issue a freeze on federal regulations that have not yet gone into effect, or implementation could be delayed by a recently filed lawsuit alleging that the new rules exceed the statutory authority of the Federal Trade Commission (FTC).
But one bit of certainty in this uncertain landscape is the new HSR thresholds that are released every year around this time.
The HSR requires that transactions over a certain value be reported at least 30 days prior to closing to the FTC and U.S. Department of Justice Antitrust Division (DOJ) (collectively, the “Agencies”). The FTC adjusts the HSR reporting thresholds annually based on the change in gross national product. In 2025, the new threshold to keep in mind for transactions is $126.4 million (which is up from $119.5 million in 2024). There are additional considerations when acquiring or selling voting securities, non-corporate interests in a business (such as interests in an LLC or partnership) or assets valued over $126.4 million.
When determining whether an HSR filing is necessary, the following questions must be considered:
What is the Value of the Transaction and the Size of the Parties?
The HSR rules are complex, and whether the size-of-the-transaction threshold is met depends on a number of details such as the transaction’s structure and whether any HSR exemptions apply. Additionally, one important preliminary question is, if the transaction exceeds the $126.4 million threshold, are the parties large enough to warrant further assessment of HSR filing? If the transaction is valued at or above $124.6 million but less than $505.8 million, then the size of the parties must be considered. If one party to the deal (and all of that party’s parents, affiliates and subsidiaries) has sales or assets over $252.9 million, and if the other party has sales or assets over $25.3 million, then the transaction might be reportable, and the HSR filing analysis should continue. All non-exempt transactions valued over $505.8 million are reportable, regardless of the size of the parties. 
Do Any Exemptions Apply?
The HSR rules contain several exemptions that can reduce the transaction value or eliminate the obligation to make a filing altogether. For example, the HSR rules do not apply to certain acquisitions of non-U.S. entities or assets, acquisitions made solely for the purpose of investment or certain real estate acquisitions.
How Much Will it Cost for an HSR Filing?
The HSR filing fees remain relatively unchanged from last year, except for some minor increases for larger transactions:
What Will the FTC or DOJ Do After the Filing is Made?
During the 30-day waiting period, the parties cannot close the transaction, which allows the Agencies to review whether the transaction could adversely impact competition in the market for any particular product or service. One potential change under the new administration is the return of early termination of the waiting period for deals that have no significant antitrust issues. For deals with competitive overlaps, and in light of the Merger Guidelines issued in 2023, if the parties compete in the same market or industry and/or the deal will add to a portfolio of assets in the same market or industry, it is critical that antitrust counsel be engaged early in the process to determine how the transaction might affect competition and the likelihood that the Agencies may oppose or challenge the transaction.
Finally, ignoring the HSR threshold can lead to reputational and financial harm. Failure to submit a required HSR filing can draw penalties of $51,744 for each day of noncompliance.

SBA Final Rule Impacts Small Business Government Contractor Valuations

Go-To Guide:

Small Business Administration Final Rule will impact the valuation of small business government contractors holding Multiple Award Contracts (MACs) and Federal Supply Schedules (FSS). The rule takes effect Jan. 16, 2025. 
Under the rule, if a business cannot recertify as small 30 days following a merger or acquisition (i.e., disqualifying recertification), it will no longer be eligible for options or task orders set-aside for small businesses under MACs. 
Disqualifying recertifications made before Jan. 17, 2026, will not affect eligibility for small business MAC orders or options. This delayed effect encourages the sale of small business contractors holding MACs in 2025. 
The rule eliminates an exception for FSS orders and blanket purchase agreements (BPAs). As of Jan. 16, 2025, a disqualifying recertification makes an FSS vendor ineligible for FSS orders or BPAs set aside for small businesses. 
For transactions involving two small business contractors and for single award contracts, the rule does not impact future orders or options eligibility. 

Effective Jan. 16, 2025, the United States Small Business Administration (SBA)’s Final Rule will significantly impact mergers & acquisitions involving small business government contractors and investors in the government contracting industry. A September 2024 GT Alert summarizes important aspects of the SBA’s Proposed Rule and discusses key changes that might impact small business government contractors. The Final Rule echoes much of the Proposed Rule’s language and will affect the landscape for small business contractors and investors in the federal government contracting industry.
This GT Alert highlights several aspects of the Final Rule.
Small Business Recertification Applicable to Multiple Award Contracts
Small businesses government contractors must recertify their size and small business program status (i.e., 8(a), HUBZone, women-owned, or service-disabled veteran-owned) within 30 days of a merger, sale, or acquisition. Traditionally, following a recertification, the size of a small business (including its affiliates) was determined at the time the business submitted its initial offer that included price. When the small business received a contract award, the business was generally considered small throughout the life of that contract (including options thereunder). Before the Final Rule, that was generally true even where a large business merged with or acquired the small business.
Single Award vs. Multiple Award Contracts
The Final Rule draws a distinction between single award and MACs. Whether a small business can continue to receive future orders under an underlying contract after a disqualifying recertification depends upon whether the underlying contract or agreement is a single award or MAC. For single award small business contracts (or any unrestricted contract), a business that recertifies as other than small (i.e., “large”) remains eligible to receive orders and options. Conversely, for MACs set-aside for small businesses, a business that recertifies as other than small would be ineligible to receive orders and options.
One-Year Delay
This aspect of the Final Rule delays the effective date to Jan. 17, 2026, and explicitly states that it should not be retroactively applied. In response to industry comment, the Final Rule notes that it makes sense to allow some time to adapt and plan how best to comply with the new recertification provisions. Once in effect, the Final Rule will apply to existing contracts, but the provisions making businesses ineligible for orders or options after disqualifying recertifications will apply only to future disqualifying recertifications (i.e., ones that occur after Jan. 17, 2026). Accordingly, businesses that have made or will continue to make disqualifying recertifications before Jan. 17, 2026, will continue to be eligible to receive orders and options after Jan. 16, 2025.
The Final Rule’s delayed application will increase transaction volume involving small business contractors through Jan. 17, 2026. Until that date, the current regulatory regime will govern transactions involving a small business, meaning small businesses with set-aside MACs will continue to be eligible for set-aside orders even after they are acquired by a large business. If the transaction closes after Jan. 17, 2026, however, small businesses will not be eligible for set-aside orders or new MAC options.
This aspect of the Final Rule takes effect Jan. 17, 2026.
Eliminating the Federal Supply Schedule Exception
General Services Administration (GSA) Federal Supply Schedule (FSS) Multiple Award Schedule (MAS) Contracts 
There has been a recognized exception to recertification requirements for set-aside orders or BPAs placed against an FSS contract, meaning that size status would be determined by the underlying FSS contract award date (or the date of its recertification for an option exercise). The Final Rule eliminates this exception and is not subject to the one-year delay. Therefore, as of Jan. 16, 2025, if a small business submits a disqualifying recertification, it will be ineligible for set-aside orders or BPAs under its GSA FSS MAS contract.
This aspect of the Final Rule takes effect Jan. 16, 2025.
Notable Exception: Transactions Between Two Small Businesses
The Final Rule carves out an exception for transactions involving two small businesses. In response to industry comment, the Final Rule amends which businesses will be ineligible for orders and options after a disqualifying certification due to merger, sale, or acquisition.
The Final Rule makes ineligible only those contract holders that have disqualifying recertifications involving a merger, sale, or acquisition with a large business. Where two small businesses individually qualify as small before a transaction, the Final Rule allows the contract holder to remain eligible for orders issued under an underlying set-aside MAC. As a result, small businesses will be poised to engage in transactions with other small businesses.
This aspect of the Final Rule takes effect Jan. 16, 2025.
Application to Outstanding Offers (the “180 Day Rule”)
The Final Rule also clarifies the effect of transactions that occur after a small business submits an offer for a set-aside opportunity and prior to award. Traditionally, if a merger, sale, or acquisition occurred after 180 days from the date in which a small business submitted an offer and the business could not recertify as small following the transaction, the government could still award to the business. This was generally true for single award and MAC set-asides.
Under the Final Rule, if the transaction occurs within 180 days of offer submission and the business submits a disqualifying recertification, the business will be ineligible for award.
But for transactions that occur after 180 days of offer submission, the Final Rule again draws a distinction between single award and MAC set-aside opportunities. If the merger, sale, or acquisition occurs after 180 days of offer submission and the business submits a disqualifying recertification, the business will still be eligible for single award set-asides. But if the transaction occurs after 180 days of offer submission and the business submits a disqualifying recertification, the business will be ineligible for a set-aside MAC or task order thereunder.
This aspect of the Final Rule takes effect Jan. 16, 2025.
Authorization to Protest a Size Recertification
Traditionally, there was no mechanism to allow a size protest or request for a formal size determination from another interested small business who believes that a size recertification is incorrect. For example, if a small business recertified as small following a merger, sale, or acquisition, another MAC contract holder could not challenge that recertification arguing the small business was not eligible for award.
The Final Rule authorizes MAC contract holders to request a formal size determination relating to size recertifications. Because the Final Rule will render a small business ineligible for orders set-aside under a MAC following a disqualifying recertification, the SBA believes that other contact holders should have the ability to question a size recertification.
This aspect of the Final Rule takes effect Jan. 16, 2025.
Conclusion
These changes will impact M&A activity, size protests, and related small business counseling and compliance. Small business regulations are consistently one of the most active areas of regulatory change. With a new administration and Congress, there is potential for further changes to these or other small business regulations. 

FTC Secures $5.68M HSR Gun-Jumping Penalty From 2021 Deal

Go-To Guide

FTC announced a $5.68 million penalty against Verdun Oil Company II LLC, XCL Resources Holdings, LLC, and EP Energy LLC for premature control of EP Energy during their 2021 transaction. 
FTC took issue with the exercise of certain consent rights and coordination of sales and strategic planning with EP Energy before the deal closed. 
The settlement also requires that for the next decade, the companies appoint an antitrust compliance officer, conduct annual antitrust training, and use a “clean team” agreement in future transactions. 
The case highlights that maintaining independent operations pre-close is critical, regardless of the merits review of a transaction by the antitrust authorities.

On Jan. 7, 2025, the Federal Trade Commission, in conjunction with the Department of Justice Antitrust Division (DOJ), settled allegations that sister companies Verdun Oil Company II LLC (Verdun) and XCL Resources Holdings, LLC (XCL) exercised unlawful, premature control of EP Energy LLC (EP) while acquiring EP in 2021. This alleged “gun-jumping” HSR Act violation involved Verdun and XCL exercising various consent rights under the merger agreement and coordinating sales and strategic planning with EP during the interim period before closing.
In settling, the parties agreed to pay a total civil penalty of $5.68 million, appoint or retain an antitrust compliance officer, provide annual antitrust trainings, use a “clean team” agreement in future transactions involving a competing product, and be subject to compliance reporting for a decade. 
Background
Under the HSR Act,1 an acquiror cannot take beneficial ownership of a target prior to observing a waiting-period, which allows the DOJ and FTC to investigate the transaction’s potential impact on competition in advance of any integration. During the pre-close period, parties to a proposed transaction must remain separate, independent entities and act accordingly. Penalties for HSR Act violations are assessed daily, currently at a rate of $51,744 for each day a party is in violation (amount adjusted annually for inflation).
In July 2021, Verdun and XCL agreed to acquire EP’s oil production operations in Utah and Texas for $1.4 billion. The transaction was subject to the HSR Act’s notification and waiting-period requirements. The transaction closed in March 2022 after an FTC investigation, with a consent decree settlement that required divesting EP’s entire Utah operation (an area where XCL also operated as an oil producer). 
The FTC’s current complaint asserts that immediately after signing, Verdun and XCL unlawfully began to assume operational control over significant aspects of EP’s day-to-day business during the HSR Act review period. The complaint alleged Verdun and XCL

required EP to delay certain production activities in return for an early deposit of a portion of the purchase price; 
exercised consent rights to discontinue new wells EP was developing;  
agreed to assume financial risk of production shortfalls arising from EP’s commitments to customers, and then began coordinating sales and production activity with EP, which included receiving detailed information on EP’s pricing, volume forecasts, and daily operational activity; 
required changes to EP’s site design plans and vendor selection; 
exercised consent rights for expenditures above $250,000, which the complaint alleged inhibited EP’s ability to conduct ordinary course activities, such as purchasing drilling supplies or extending contracts for drilling rigs; and 
exercised consent rights for lower-level hiring decisions, such as for field-level employees and contractors for drilling and production operations.

The complaint also criticized EP for taking “no meaningful steps to resist” XCL and Verdun’s requests for competitively sensitive information and “making no effort” to limit XCL and Verdun employees’ access or use of information, including data room information. 
The alleged gun-jumping conduct occurred for 94 days, from July to October 2021, when an amendment to the agreement allowed EP to resume independent operations.
Takeaways

Gun-Jumping Enforcement is a Bright-Line Issue. The FTC’s action against Verdun, XCL, and EP is consistent with the conduct and “bright-line” enforcement approach in past gun-jumping cases—meaning the agencies will bring an action regardless of the magnitude of the impact on commerce. For example, in 2024, the DOJ brought an action against a buyer involving pre-closing bid coordination;2 in 2015, the DOJ brought an action involving the closing of a target’s mill and transferring customers to the buyer pre-close;3 and in 2010, the DOJ brought an action involving the exercise of merger agreement consent rights with respect to three ordinary course input contracts, one of which represented less than 1% of capacity.4
Significant Penalties May Ensue Regardless of Closing. Even though the parties resolved substantive concerns about the merger with a divestiture, they will have to pay a significant penalty for the gun-jumping violation. Though parties settled for an estimated 40% discount off the statutory maximum penalty, the FTC assessed the penalty to both the buy-side and the sell-side, which, since the deal has closed, leaves the buyer with the full obligation. In the past, both sides have also been assessed in abandoned deals and the authorities also have sought disgorgement when there are financial gains because of the violation.5  
Consider Covenants that Allow for Ordinary Course Activities. Sellers should ensure they retain the freedom to operate in the ordinary course of business in purchase agreement interim covenants, which in turn maintains the competitive status quo remains while the deal is pending. As illustrated by this case, parties should be concerned with both the conduct that is allowed—e.g., entering into ordinary contracts, maintaining relationships with customers, or making regular hiring or investment decisions—and the dollar thresholds for any consent rights (ensuring they are sufficiently high).  
Clean Team Process Needed Pre- and Post-Signing with Overlap. The FTC criticized EP as the seller for failing to impose restraints on the information it provided for diligence and post-close integration planning. The consent decree settlement obligates the parties to use a “clean team” process for future transactions with product or service overlap that antitrust counsel supervises. It also specifies that information shared must be “necessary” for diligence or integration planning, and where competitively sensitive, not be accessible by those with “direct[] responsibil[ity] for the marketing, pricing, or sales” of the competitive product. 
Consult Antitrust Counsel Before Exercising Consent Rights. Even where the parties have agreed to certain interim covenants to protect the acquired assets’ value, the facts and circumstances at the time of exercise should be carefully considered for their impact on the seller’s competitive activities. Accordingly, parties are best served to seek the advice of antitrust counsel prior to either seeking consent or responding to a request for consent. A proactive approach may help avoid delays to closing and penalties.

1 15 U.S.C. § 18a.
2 U.S. v. Legends Hospitality Parent Holdings, LLC.
3 U.S. v. Flakeboard America Limited, et al.
4 U.S. v. Smithfield Foods, Inc. and Premium Standard Farms, LLC.
5 See U.S. v. Flakeboard America Limited, et al.

GT Newsletter | Competition Currents | January 2025

United States 
A.        Federal Trade Commission (FTC) 
1.        Competitor collaboration guidelines withdrawal. 
On Dec. 11, 2024, the FTC and DOJ Antitrust Division withdrew the Antitrust Guidelines for Collaborations Among Competitors. The agencies determined the Collaboration Guidelines, issued in April 2000, no longer provide reliable guidance on how enforcers assess the legality of collaborations involving competitors due to the subsequent development of Sherman Act jurisprudence, rapid evolution of technologies and business combinations, and reliance on outdated policy statements and analytical methods. The FTC voted 3-2 to withdraw the guidelines. Commissioners Andrew Ferguson and Melissa Holyoak issued separate dissents highlighting the absence of replacement guidance. 
2.        Trump names Andrew Ferguson as next FTC chair. 
President-elect Donald Trump has named FTC Commissioner Andrew Ferguson as the next FTC chair.  Sworn in on April 2, 2024, Commissioner Ferguson was one of two Republican FTC Commissioners President Biden appointed. He previously served as Virginia solicitor general, chief counsel to U.S. Sen. Mitch McConnell, and U.S. Senate Judiciary Committee counsel. Ferguson earned undergraduate and law degrees from the University of Virginia before clerking for the D.C. Circuit and U.S. Supreme Courts. The president-elect also announced his intention to nominate Mark Meador, a partner at law firm Kressin Meador Powers and former antitrust counsel to U.S. Sen. Mike Lee, as an FTC Commissioner to fill current FTC Chair Lina Khan’s seat. 
B.        U.S. Litigation 
1.        Borozny v. RTX Corp., Case No. 3:21-CV-01657 (D. Conn.). 
On Jan. 3, 2025, the Honorable Judge Sarala V. Nagala initially approved a $34 million settlement for a nationwide “no-poach” class action against several aerospace companies. The proposed $34 million settlement from the principal defendant, RTX, settles claims that RTX entered into agreements with several suppliers and competitors to not hire one another’s aerospace engineers—a highly skilled profession. This civil suit ran parallel to the DOJ’s criminal case, which was dismissed by another court. If approved, the $34 million settlement from RTX would augment the $26.5 million settlement previously negotiated with other alleged conspirators. 
2.        2311 Racing LLC, et al. v. National Association for Stock Car Auto Racing, LLC, Case No. 3:24-CV-886 (W.D. N.C.). 
On Dec. 20, 2024, defendant National Association for Stock Car Auto Racing, LLC (NASCAR) sought to stay a preliminary injunction that prevents NASCAR from barring various racing teams who initiated an antitrust lawsuit from competing in the 2025 season. Initiated by 2311 Racing, the lawsuit alleges that NASCAR exercises monopoly power over racetracks and requires all NASCAR teams not to participate in competing events. According to 2311, NASCAR then barred its participation in the upcoming 2025 season because, among other things, 2311 would not sign contracts that require the teams to relinquish all rights to bring antitrust claims. The Honorable Judge Kenneth D. Bell granted 2311’s preliminary injunction requiring NASCAR to allow the teams to compete, which NASCAR intends to appeal in the Fourth Circuit. 
3.        SmartSky Networks, LLC v. Gogo Inc., Case No. 3:24-CV-01087 (W.D. N.C.). 
On Dec. 17, 2024, airplane technology company SmartSky Networks, LLC brought a $1 billion lawsuit against competitor Gogo, Inc. and Gogo Business Aviation, LLC (collectively, Gogo). SmartSky alleges Gogo unfairly blocked it from selling its in-flight Wi-Fi services to private aircraft customers. According to the lawsuit, Gogo engaged in a systematic campaign to create “fear, uncertainty and doubt” about SmartSky’s allegedly superior services while falsely promoting a future Gogo alternative that never launched. As a result of this campaign, SmartSky claims it failed after nearly 10 years of trying to enter the market.
 
Mexico 
A.        COFECE discovers possible collusion in radiological material sales to the government. 
COFECE’s Investigating Authority has issued a Probable Liability Opinion against several companies and individuals accused of rigging public tenders for radiological material, an illegal act under the Federal Economic Competition Law. 
In Mexico, public health institutions perform more than 20 million x-rays a year. The Mexican Social Security Institute conducts approximately 19 million of these studies annually, while the Institute of Security and Social Services for State Workers conducts an additional 1.6 million. 
In its announcement, COFECE highlighted that when companies agree not to compete in tenders, they not only affect public finances, but also compromise Mexicans’ access to essential medical services. COFECE further emphasized that transparency, equity, and efficiency are fundamental principles that should govern government procurement, especially in the health sector. A trial will follow. 
B.        COFECE investigates lack of effective competition in live entertainment events. 
COFECE’s Investigating Authority (AI) has initiated an investigation into live entertainment markets to determine if there are obstacles that limit competition in these markets, which could negatively impact the millions of live entertainment event consumers. 
Between 2023 and 2024, half of adults in Mexico attended live entertainment events, such as concerts, live music or dance performances, plays, and art or history exhibitions. In 2023 alone, Mexicans spent more than MEX 7 billion on online tickets for music events. This positions Mexico as the largest Latin American market for the sale of tickets to musical events and the 16th largest market worldwide. 
Through its investigation, the AI seeks to identify and eliminate the barriers that prevent competition in these markets. If the AI identifies barriers to competition or essential inputs, the COFECE Plenary may order eliminating those barriers, issue recommendations and guidelines for their regulation, and/or order divestment to improve efficiency.
 
The Netherlands 
Dutch ACM Statement 
Further investigation into KPN joint venture’s acquisition of DELTA needed. 
The Dutch Authority for Consumers and Markets (ACM) has decided that further investigation is required for Glaspoort’s (a joint venture of KPN and APG) acquisition of a portion of Delta Fiber Nederland’s fiber optic network. KPN is the incumbent telecommunications operator in the Netherlands, while Delta is currently KPN’s largest competitor in the fiber optic market. 
According to the ACM, the acquisition may significantly reduce competition in the areas where KPN and Delta operate, potentially leading to higher prices for consumers. The ACM also points out that KPN already has a substantial market position, and the acquisition could further strengthen this position, putting smaller providers at a disadvantage. Finally, while each individual small acquisition may have a limited impact, the cumulative effect of KPN’s multiple, small acquisitions could significantly undermine competition in the long term, which may weaken smaller providers’ negotiating positions. 
Before the acquisition can be finalized, Glaspoort and Delta must apply for an acquisition license – the equivalent of a Phase II or in-depth investigation in other jurisdictions – after which the ACM will continue its investigation.
 
Poland 
A.        The UOKiK President questions consortium agreements and other competitor practices accompanying tenders. 
The Polish Office of Competition and Consumer Protection (UOKiK) has fined 11 geodesy and cartography companies PLN 1.8 million (approximately EUR 422,000 / USD 436,000) for bid-rigging in cartographic services contracts with the Geodesy and Cartography Agency. 
The investigation found that these companies engaged in anticompetitive practices through several coordinated actions. The companies formed unnecessarily large consortia, submitted coordinated bids, and divided awarded contracts among themselves. Some participating companies performed no actual work, serving only as nominal consortium members. UOKiK determined that smaller consortia could have completed the projects independently, indicating the larger groups were formed solely to eliminate competition. 
In a separate case, UOKiK has initiated antitrust proceedings against seven laundry service providers suspected of bid-rigging in hospital service contracts. The investigation uncovered evidence of potential price-fixing across multiple provinces and coordinated withdrawal of bids. During court-approved searches conducted with police assistance, investigators discovered mobile app communications showing companies exchanging specific price information to influence tender outcomes. The investigation revealed that participants strategically withdrew lower bids to ensure higher-priced bids would win, likely resulting in increased costs for hospitals and patients. This investigation remains ongoing. 
Companies found engaging in bid-rigging face severe penalties under Polish law. Organizations can be fined up to 10% of their annual turnover, while individual managers may face personal fines up to PLN 2 million. These regulations apply regardless of company size, as there are no exemptions for companies with small market share. Any anti-competitive provisions in contracts are automatically void under law. Furthermore, affected parties retain the right to seek damages through private antitrust litigation. Notably, bid-rigging stands as the only form of competition-restricting agreement that may result in criminal penalties, including imprisonment. 
B.        The UOKiK President investigates ENEA Group’s potential abuse of dominant position in renewable energy market. 
The Polish Office of Competition and Consumer Protection (UOKiK) has launched an explanatory investigation into the ENEA Group, a major Polish energy conglomerate responsible for electricity generation, distribution, and trading. The investigation focuses on ENEA Operator, the group’s distribution arm, which holds a natural monopoly in its regional distribution network. 
The investigation stems from allegations that ENEA Operator may have provided unfair advantages to renewable energy installation (OZE) applications from its own group companies and select third-party businesses. Following these concerns, UOKiK conducted searches at three ENEA Group facilities. Complaints UOKiK received indicate that ENEA Operator may have shown preferential treatment by issuing connection approvals to certain entities that failed to meet formal requirements or by disregarding the chronological order of application submissions. These practices allegedly resulted in other entities being unfairly denied network connections for their renewable energy installations. 
UOKiK suspects that this preferential allocation of connection capacity may have depleted available capacity at crucial balancing nodes, leading to the rejection of other companies’ connection requests due to claimed technical limitations. This issue is particularly significant because network access is fundamental for participation in the electricity trading market. 
The investigation is examining whether these actions constitute an abuse of dominant market position, particularly regarding the selective restriction of access to essential infrastructure, discriminatory access conditions, or intentional delays in providing access. Additionally, UOKiK is investigating potential illegal agreements between ENEA Operator and the entities receiving preferential treatment for renewable energy installations. 
Should the investigation yield sufficient evidence, UOKiK may initiate formal antitrust proceedings against the involved parties. Under Polish law, companies found to have abused their dominant position face fines of up to 10% of their previous year’s turnover. This penalty may extend to entities exercising decisive influence over the company engaged in such practices. Furthermore, any anti-competitive contractual provisions are automatically void, and affected parties maintain the right to pursue damages through court proceedings.
 
Italy 
Italian Competition Authority (ICA) 
1.        ICA launches investigation into alleged cartel in copper cable manufacturing industry. 
On Dec. 3, 2024, ICA opened an investigation against the Italian main copper cable producers for an alleged restrictive competition agreement aimed at coordinating prices and commercial conditions for producing and selling low-voltage copper cables in violation of Article 101 TFEU. 
The proceeding started after a company submitted an application for leniency that disclosed the cartel to benefit from a reduced penalty. 
The leniency applicant provided evidence to ICA about price coordination between the different parties. According to the applicant, this coordination started in 2005 when the parties aligned their list prices and initial discounts. Later, in 2008, they created a shared system within their association to adjust prices when copper costs changed. The system included a common way to calculate copper prices. This made the copper component a fixed price that was the same for all producers in the association. 
2.        Investigation against Booking.​com (Italy) closed for allegedly abusing dominant position. 
On Dec. 17, 2024, ICA closed its investigation against Booking.​com S.r.l. (Italy), Booking.​com B.V., and Booking.​com International B.V. (Booking) for alleged abuse of dominant position after it accepted Booking’s proposed commitments. 
ICA had initiated the proceedings because of Booking’s potentially abusive conduct that allegedly limited Italian hotel facilities’ autonomy to differentiate their rates between Booking.​com and other online sales channels by adhering to certain programs Booking promoted, such as the Partner Preferiti and Preferiti Plus programs, which give search result visibility advantages in exchange for higher commissions, and the so-called Booking Sponsored Benefit, which allows Booking to apply – without the hotels’ consent – a discount to align the offer on its platform with the best among those available online. 
The group submitted a commitment package that would seek to ensure that prices facilities charge on online sales channels, other than booking.​com, would not be taken into account at any stage of its operation and program promotions. In addition, greater transparency around the Preferred Partner, Preferred Plus, and Booking Sponsored Benefit program operations allows facilities to make informed decisions regarding the costs and benefits of participating in them. According to ICA, Booking’s commitments are suitable both for removing competitive concerns and for ensuring the commercial autonomy of Italian hotel facilities. 
3.        ICA imposed penalties exceeding EUR 2 million on Hera S.p.A. and ComoCalor S.p.A. for excessive and unjustified district heating prices. 
Between May and June 2023, ICA initiated three proceedings into the networks of Ferrara (operated by Hera S.p.A.), Como (operated by ComoCalor S.p.A.), and Parma and Piacenza (operated by Iren Energia S.p.A.) to investigate whether and to what extent the three companies had passed on an excessive and unjustified burden to the users of district heating networks between 2021 and 2022, when there had been natural gas price increases. 
On Nov. 26, 2024, ICA stated that the conduct that Hera S.p.A. and ComoCalor S.p.A. engaged in from Jan. 1-Dec. 31, 2022, consisting of applying unjustifiably burdensome prices to district heating users, constitutes abusive conduct of their dominant position. 
ICA imposed a penalty of EUR 1,984,736 on Hera S.p.A. and EUR 286,600 on ComoCalor S.p.A., arguing that the companies prevented consumers from benefiting from available and affordable renewable sources to produce an essential good (heat), and imposed prices that were unfair in relation to costs (including a fair return on investment). 
ICA found no violations related to the Parma and Piacenza networks that Iren Energia S.p.A. operates.
 
European Union 
A.        European Commission 
1.        European Commission fined Pierre Cardin and Ahlers EUR 5.7 million for limiting cross-border clothing sales. 
The European Commission fined Pierre Cardin and its licensee Ahlers EUR 5.7 million for violating EU antitrust rules. Pierre Cardin, a French fashion house, licenses its trademark to third parties for producing and distributing clothing branded with its name. Ahlers was Pierre Cardin’s largest licensee of clothing in the EEA during the relevant period. Between 2008 and 2021, both companies participated in anti-competitive agreements and coordinated practices that safeguarded Ahlers from competition within its licensed EEA area. This included preventing other licensees from selling Pierre Cardin clothing outside their territories or to low-price retailers. The Commission calculated the fines based on the severity, geographic scope, and duration of the infringement, with Pierre Cardin receiving a EUR 2,237,000 fine and Ahlers being fined EUR 3,500,000. 
2.        European Commission approves Nvidia’s acquisition of Run:ai. 
The European Commission has unconditionally approved Nvidia’s below-threshold acquisition of Run:ai, concluding that it raises no competition concerns. This decision follows a referral by the Italian Competition Authority under Article 22 of the EU Merger Regulation (EUMR), which allows member states to request deal reviews that fall below national turnover thresholds, following concerns about Nvidia’s potential “super-dominance” in the advanced GPU market. 
A recent ruling from the European Court of Justice influenced the European Commission’s review; the case invalidated its previous approach to Article 22 EUMR. In its recent assessment, the European Commission determined that the acquisition would not impair competition, as Nvidia would not have the incentive to make its GPUs less compatible with competitors’ software. The European Commission also found Run:ai’s position in the software market for GPU orchestration to be not significant, with sufficient alternative providers available. 
B.        ECJ Decision 
Preliminary CJEU ruling in ongoing proceedings between Tallinna and KIA Auto. 
The Court of Justice of the European Union (CJEU) provided a preliminary ruling on the interpretation of Article 101(1) TFEU (the EU’s cartel prohibition provision), following questions from the Administrative Regional Court of the Republic of Latvia. The case involved Tallinna Kaubamaja Grupp AS and KIA Auto AS, which were fined for a vertical agreement that imposed restrictions on car warranties. The national competition authority determined that this agreement hindered access to the Latvian market for independent repairers and restricted independent spare parts manufacturers. The CJEU stated that Article 101(1) TFEU should be interpreted to mean that a national competition authority does not need to demonstrate the existence of concrete and actual competition-restricting effects when investigating an agreement that imposes restrictions on car warranties. It is sufficient to establish the existence of potential competition-restricting effects, provided they are sufficiently appreciable. Now the proceedings shall resume, and the national court will have to evaluate if the Latvian competition authority’s decision demonstrated sufficiently appreciable effects on competition.
 

Alan W. Hersh, Rebecca Tracy Rotem, Sarah-Michelle Stearns, Miguel Flores Bernés, Hans Urlus, Robert Hardy, Chazz Sutherland, Gillian Sproul, Manish Das, Robert Gago, Filip Drgas, Anna Celejewska-Rajchert​, and Ewa Głowacka also contributed to this article.

Bank M&A Outlook for 2025

Overall M&A activity in 2024 continued to be subdued; however, the fourth quarter, especially after the Trump bump, showed signs of a significant pick up. Our M&A outlook for 2025 suggests the potential for a banner year. Numerous variables could hinder deal activity, but improving economic conditions coupled with enhanced net interest margins (NIMs) from lower short term interest rates and possible tax cuts should improve fundamentals. Moreover, a less hostile regulatory regime should eliminate a risk overhang to earnings.[1] The prospect for a more relaxed antitrust enforcement regime or at least less distrust of business combinations could create significant opportunities for strategic growth and investment.
Positive Factors for Dealmaking in 2025

CEO Confidence and Stock Market Performance. CEO confidence continues to go up, which can give C-suites and boards the necessary conviction to pursue M&A. If economic conditions improve, then capital markets should also strengthen. M&A volume frequently tracks stock market performance. In addition, improved economic conditions and higher trading price multiples could narrow valuation gaps between buyers and sellers that were obstacles to some transactions last year.
Antitrust. Not since Grover Cleveland has a President lost a bid for reelection and then ran again successfully. Thus, while a change in Presidential administration and political party leadership ordinarily brings policy uncertainty, we can look to President Trump’s first term for some guidance – but no guarantees – as to how his administration may govern this time around. This is particularly the case with the current regulatory skepticism, if not hostility, toward M&A. In 2023, President Biden adopted an Executive Order ostensibly designed to promote competition. The effect of that admonition was that regulators touching M&A across his administration, whether as part of an independent agency or otherwise, added criteria for M&A while also slowing the pace of review to allow for greater scrutiny. Bank regulators leaned into this Executive Order. Over the next four years, we generally expect regulators to be more open to structural remedies and less likely to block mergers outright. But caution is warranted. We may see bipartisan scrutiny of certain aspects of banking such as Fintech in light of lingering Synapse concerns. There are also populist views in the Trump administration and Congress that may scrutinize major consolidations or mergers, particularly if they will impact US jobs. The current expectation is also that the recently adopted HSR filing requirements for nonbank acquisitions will remain in effect.
Lower Interest Rates. Acquisition financing should become more attractive if the Federal Reserve moderates its rate cutting, so that long-term rates might stabilize. Because acquisition financing tends to be longer term in duration, long term rates are much more important. If Department of Government Efficiency (DOGE) is truly effective in cutting spending or at least the pace of increased spending, then long-term rates might actually come down. Private equity financing of corporate debt has taken bank market share. This competition has lead to greater availability of deal funding. An open issue is whether private credit will continue to play as large a role in corporate financing if the cost of traditional bank debt goes down.
For bank buyers, the Federal Reserve may maintain the current Fed Funds rate. As a result, NIMs may continue to widen as the yield curve steepens. Short term deposit rates have declined while the bond market expects long term rates to increase from inflationary tariffs, government spending and tax policy. Wider NIMs lead to higher bank valuations.
Tax Policy. If Congress pursues tax cuts, the resulting savings could generate more cash flow to pursue acquisitions and make exit transactions even more attractive to selling shareholders. Another issue to watch is whether the Tax Cuts and Jobs Act (TCJA), which expires at the end of 2025, is extended and/or modified.
Deregulation. Dealmaking could be impacted if the new administration carries out its goal of deregulation, although it is not clear how quickly that impact might be felt. Deregulation is most likely to open M&A doors not just in banking but for fintech, crypto, and financial services generally. The nominations of Scott Bessent for Treasury, Kevin Hassett for the National Economic Council, and Paul Atkins for the Securities and Exchange Commission all indicate a more hospitable banking environment.

While we expect a significant uptick in M&A activity, we may see particular volume from the following:

Private Equity Exits. It has been widely reported that many private equity funds need to sell their interests in portfolio companies in order to wind-up and return profits to their investors. Exit transactions have been delayed for a variety of reasons, including valuation gaps and a lack of sponsor-to-sponsor M&A activity (largely due to the increased cost of capital associated with leveraged acquisitions caused by higher interest rates).
Strategic Divestments. Banks will continue to explore divesting branches, non-core assets and business lines, especially insurance, to simplify their organizations and footprints and possibly to ward off threats from activist shareholders.
Credit Unions. While we have started to see pushback on credit union and bank tie ups from state regulators, it is likely that the NCUA will continue to permit such combinations. The rise in bank stock valuations may add competition in 2025 that was not available for many deals in 2024. Nonetheless, the lack of credit union taxation or comparable tangible equity requirement and risk-based capital rules should enable credit unions to continue to compete effectively for deals.
Higher Long-term Rates. Certain banks continue to suffer AOCI pressure from the run-up in long-term rates that accompanied recent Federal Reserve rate cuts. Increasingly, national banks with less than 2% tangible capital and all banks with poor NIMs may be pushed by their regulators to sell or at least engage in a dilutive capital raise.
Purchase Accounting/Stock Valuations. For over 40 years, economies of scale have led to vibrant annual results for bank M&A transactions. The punishing accounting marks (AOCI, loan mark-to-market and core deposit intangibles) from M&A have held back such pent up need for growth. Buyers need to use stock consideration to replace the capital from purchase accounting. Higher stock prices are allowing more buyers to do so with less dilution to their shareholders.

Countervailing Factors and Uncertainties
Of course, M&A activity in 2025 may fall short of expectations, particularly if economic conditions deteriorate. Various factors that could adversely impact M&A in 2025 include:

Trade Wars / Tariffs. President Trump has made clear his goal to negotiate trade agreements and expressed his willingness to impose tariffs, which would necessarily impact borrowers in affected industries as well as inbound/outbound investment involving certain countries. As with most government policies, tariffs invariably have winners and losers. To the extent tariffs allow businesses to raise prices, the higher returns could impact creditworthiness, while other businesses will suffer if their supply chain falls apart or they are unable to pass along higher costs to consumers. There may also be bipartisan support for some tariffs, particularly on China.
Politics. Uncertainty over important government policies could hold M&A back. There is the constant specter of disfunction in Washington, D.C., and a thin Republican majority. In addition, proposed cuts in government spending—perhaps led by DOGE—could impact the economy. Staffing or other budget cuts at key governmental agencies (e.g., banking regulators) could also delay the ability to consummate M&A transactions.
Near-Term Transition Issues. Compared to his first term, President Trump is acting more quickly in naming key appointees. Nonetheless, the people who need to run the various important government agencies must obtain Senate approval, where a successful confirmation is not guaranteed and there is a backlogged Senate calendar. Delayed appointments may also stall President Trump’s high-priority items such as border security and tax policy.
Inflationary Pressures. Ongoing inflation will impact markets and economic conditions generally. There are also particular government policies under discussion (e.g., immigration) that could contribute to inflationary pressures. If the Federal Reserve reverses recent accommodation, banks may again suffer shrinking NIMs. This would revive the negative spiral of reduced valuations and impact whether there can be a meeting of the minds on price.
State Attorneys General/State Bank Regulators. A more business-friendly antitrust posture from the federal government could be offset by state attorneys general or state level bank regulators. This could be led by more localized concerns about competition or by state officials who see political upside in challenging transactions.
Geopolitical Risks. Numerous geopolitical risks could escalate in 2025, including the spread of war in the Middle East, Europe or elsewhere, acts of terrorism, sanctions, and the worsening of diplomatic and economic relations with certain countries, any of which could adversely affect markets.

[1] Bank Director survey indicated that almost 75% of bankers viewed regulatory risk as one of the top three risk areas. 
Carleton Goss, Michael R. Horne, Lucia Jacangelo, Nathaniel “Nate” Jones, Jay Kestenbaum, Marysia Laskowski, Abigail M. Lyle, Brian R. Marek, Joshua McNulty, Betsy Lee Montague, Alexandra Noetzel, Sumaira Shaikh, Jake Stribling, and Taylor Williams also contributed to this article.

Revitalizing Retail: What Saks Global Means for the Luxury Market and the Future of Department Stores

On December 23, 2024, Hudson’s Bay Company, the parent company of Saks Fifth Avenue, completed its acquisition of Neiman Marcus Group, the parent company of Neiman Marcus and Bergdorf Goodman, for $2.7 billion following years of on-and-off negotiations.
The acquisition combines the luxury retail brands under the newly formed Saks Global, with the goals of creating a US-luxury retail empire and reviving the department store model. Each retailer will continue to serve customers under their individual brands, with consolidation taking place at the executive level under a structure unlike anything else in the industry. The acquisition will impact both customers and vendors of each of the brands, improving the shopping experience and providing a much-needed cash infusion into the Saks brand.
Finally Making Good?
It’s no industry secret that Saks had mounting tensions with its vendors as a result of long delays in making payment and in some cases, no payment at all, to its vendors. Saks Global executives used the announcement of the merger to provide assurances that these vendors will finally be paid. The intent (and hope) is that the financial boost resulting from the merger will stabilize Saks’ cash flow and allow for timely payments to its vendors moving forward. In fact, Saks Global CEO Marc Metrick stated in an interview that the process of working through delayed payments will “begin the first week of January [2025].”
Location, Location, Location?
Under the terms of the merger, Saks Global will operate 38 Saks Fifth Avenue stores, 95 Saks OFF 5TH outlets, 36 Neiman Marcus stores, five Neiman Marcus Last Call stores, and two Bergdorf stores. Although plans for store closures have not been announced, a consolidation of retail space in markets where each brand operated individually pre-merger would not be surprising, as there will be opportunities to optimize store locations and reduce redundancies. As a whole, the fashion industry has witnessed the closure of many brick and mortar retail locations as the department store model has suffered due to high inflation and a shift in consumer shopping habits. Recently in 2023, Saks itself took advantage of certain real estate transactions to better its cash flow and pay back some of its vendors, so it is not out of the question that Saks Global may utilize similar strategies again.
One in the Same?
Industry experts are predicting that, as a result of the merger, Saks Fifth Avenue and Neiman Marcus will restructure their market visibility, relative to one another. With both brands sharing many of the same customers, as well as the same inventory of brands and goods, and with many of their current brick-and-mortar locations being walking distance from each other, there is an expectation that these two primary brands will eventually have to differentiate their positions in the luxury market.
The prediction is that Neiman Marcus will maintain its role as a top tier luxury destination, while Saks will evolve towards a more accessible luxury destination aimed at a younger demographic, which would give Saks Global substantial influence over luxury consumers’ tastes, options, and brand acceptance at various levels of the luxury market, which may lead to a better overall shopping experience for the luxury consumer. But, while consumers may be for the better, the same may not be said for brands that sell to Saks Fifth Avenue, Neiman Marcus, and Bergdorf Goodman, as they may see pressure to reduce their prices on products sold to the now combined brand and provide longer credit terms. As a combined entity, Saks Global’s greater negotiating power could lead to pressure on vendors to meet its supply and demand requirements, especially smaller vendors that rely on wholesaling to Saks and Neiman Marcus. Brands will also now have fewer buyers, as those who formally sold to both Saks and Neiman Marcus individually will now sell to Saks Global.
Conclusion
Now that the merger is complete and Saks Global has been formed, brands that sell to Saks Fifth Avenue and Neiman Marcus may be impacted in several ways depending on the size of the brand and whether it previously sold to both Saks and Neiman Marcus pre-merger. And with Saks Global’s greater negotiating power, brands will need to look at other avenues to protect their interests and bottom lines, such as shop-in-shops, exclusive collaborations, and other strategies to even the playing field. One expected benefit of the merger is that Saks’ vendors can finally expect to be paid, and if what Saks Global executives say comes to fruition, the department store model could be revitalized.
Listen to this article