Category: Mergers & Acquisitions

Implementation of the Mobility Directive: Significant Changes for Mergers, Divisions and Conversions with the Introduction of a New Dual Regime

On 23 January 2025, Luxembourg enacted a bill implementing the EU Mobility Directive (2019/2121) for cross-border conversions, mergers and divisions, featuring (i) a harmonised legal framework for these transactions across the European Union, and (ii) a distinct set of rules for transactions not covered by the EU special regime.
Transposition of the EU Mobility Directive and Introduction of the EU Special Regime 
The Luxembourg legislator has leveraged all available options under the EU Mobility Directive to create a favourable regime for company mobility within the transposition of the EU special regime. It applies to cross-border operations involving companies based in at least two EU member states, with the Luxembourg company being an SA (société anonyme), SCA (société en commandite par actions), or SARL (société à responsabilité limitée). This regime enhances consistency and clarity in the applicable EU cross-border operations while ensuring adequate protection, including:
Minority Shareholders Rights
Shareholders who voted against the European cross-border transaction may exercise exit rights and claim cash compensation. Those who did not exercise this right can challenge the share exchange ratio.
Information Rights
Rights to information include detailed explanatory reports from the management body for the benefit of employees and shareholders. Additionally, shareholders, creditors and employee representatives may submit comments on the draft terms.
Role of the Luxembourg Notary
The notary scrutinizes the transaction to ensure the legality of the planned cross-border operations.
General Regime Applicable to Domestic Transactions and Cross-Border Transactions Not Covered by the EU Special Regime
The general regime builds on the existing framework and simplifies procedures for conversions, mergers and divisions. Key points include:
Mergers Between Sister Companies
A simplified merger process has been introduced that does not require the issuance of new shares applicable when one party directly or indirectly owns all shares in both companies or when the same parties hold the same proportion of shares in each of the merging companies.
Domestic and Non-EU Cross-Border Mergers and Divisions
Draft Terms
The draft terms and board report need less-detailed information, and the merger or division might be contingent upon a condition precedent.
Independent Expert’s Report
Report is no longer mandatory for single-shareholder companies in case of mergers and divisions.
Non-EU Cross-Border Conversions
Unless there are employees and specific assets involved, only an extraordinary general meeting of the company’s shareholders before a Luxembourg notary is required to approve the conversion. 
When Do the New Regimes Come Into Effect?
The new law will come into force on the first day following the month of its publication in the Luxembourg Official Journal. Once the new provisions come into effect, they will apply to all new restructurings. However, the new rules will not affect ongoing projects where the draft terms were published before the first day of the month following the law’s entry into force.

Competition and Consumer Law Round-Up

What’s Inside This Issue? 
This edition of the K&L Gates Competition & Consumer Law Round-Up provides a summary of recent and significant updates from the Australian Competition and Consumer Commission (ACCC), as well as other noteworthy developments in the competition and consumer law space. 
Enforcement

NDIS Providers Warned Against Misleading Advertising 
Misleading Pricing Alleged Against Woolworths NZ 

Mergers and Acquisitions 

Divestiture Required for Blackstone’s Acquisition of I’rom

Consultations 

Treasury Consults on ACL Reform for AI-Enabled Goods and Services 
Treasury Further Consults on ACL Prohibitions Against Unfair Trading Practices

Noteworthy Developments

Mandatory Merger Clearance Regime to Commence on 1 January 2026
ACCC Releases Sustainability Collaborations Guidelines for Businesses 
ASIC’s Enforcement Priorities Focus on Cost-of-Living Pressure

Click here to view the Round-Up.

RWI in Health Care M&A: Part 2 [Podcast]

In part two of this two-part series, Matt Miller and Andrew Lloyd analyze representations and warranties insurance (RWI) in the health care M&A landscape.
They discuss the process of finding and securing an insurance underwriter, practical tips for structuring and negotiating RWI policies, how to navigate a claim after the policy is in place, and future trends in the RWI market.

Find part one of this series here. 

5 Trends to Watch in 2025: AI and the Israeli Market

Israel’s AI sector emerging as a pillar of the country’s tech ecosystem. Currently, approximately 25% of Israel’s tech startups are dedicated to artificial intelligence, according to The Jerusalem Post, with these companies attracting 47% of the total investments in the tech sector (Startup Nation Finder). This strong presence highlights Israel’s focus on AI-driven innovation and entrepreneurs’ belief in the growth opportunities related to AI. The Israeli AI market is expected to grow at a compound annual growth rate of 28.33% from 2024 through 2030, reaching a value of $4.6 billion by 2030 (Statista). This growth is driven by increasing demand for AI applications across diverse industries such as health care, cybersecurity, and fintech. Government-backed initiatives, including the National AI Program, play a critical role in supporting startups by providing accessible and non-dilutive funding for research and development (R&D) purposes. Despite facing significant challenges since the start of the war in Gaza, Israel has continued to produce cutting-edge technologies that are getting the attention of global markets. Additionally, Israel’s highly skilled workforce and partnerships with academic institutions provide a steady supply of talent to meet the sector’s demands. With innovation, resilience, and collaboration at its core, the Israeli AI landscape is poised to remain a global force in 2025 and beyond.
Mergers and acquisitions to remain a cornerstone of deals. According to IVC Research Center, 47 Israeli AI companies successfully completed exits in 2024, showcasing the global demand for AI-driven innovation. Investors are continually identifying the differences between companies whose foundations were built on AI, versus those leveraging AI to enhance other core elements of their value proposition—sometimes only marginally. Savvy buyers look beyond the “AI label” and seek out companies with genuine, scalable AI solutions rather than superficial integrations, understanding that value lies in robust and transformative applications. AI is also sector agnostic and may disrupt virtually every vertical. From health care and finance to retail and manufacturing and others, numerous industries are increasingly leveraging AI to enhance or even change their core competency to gain competitive advantages. Deals in this space are coming from strategics such as automobile manufacturers, banks, digital marketing companies and life science firms, among others. As AI continues to permeate multiple sectors, Israeli companies are poised to receive increased attention from strategic M&A buyers looking to unlock new technologies and business opportunities in the market.
Intersection of PropTech and AI to further revolutionize the global real estate industry. Israeli innovation is expected to be at the forefront of this trend. According to IVC Research Center, over 70 PropTech companies headquartered in Israel are leveraging AI to develop cutting-edge technologies that are reshaping the industry on a global scale. We anticipate these companies will continue advancing AI-driven tools and third-party solutions to streamline acquisition strategies, enhance underwriting processes, and drive operational efficiencies. By harnessing AI to identify leasing opportunities, forecast rental trends, and optimize costs, Israeli PropTech firms are set to solidify their position as global leaders in real estate innovation in the year ahead.
AI to become increasingly important across global industries. Israeli companies have demonstrated genuine thought/R&D leadership in AI innovation. Some of the AI-centric legal trends that may stand out in 2025 include (1) a greater focus on data rights management as Agentic AI continues to carve new learning standards; (2) regulatory advancements in science, highlighted by two AI-related Nobel Prizes in science, that will likely materialize in the U.S. Food and Drug Administration adopting new rules for AI-driven drug approvals, as well as new AI patenting standards and requirements; (3) greater emphasis on responsible AI usage, particularly around ethics, privacy, and transparency; (4) the adoption of quantum AI across many industries, including in the area of securities trading, which will likely challenge securities regulators to address its implications; and(5) turning to AI-powered LegalTech strategies (both in Israel and in other countries). Israeli entrepreneurs are likely to continue working within each of these industries and help drive the AI transformation wave.
AI-based technology to continue changing how companies handle recruitment and hiring. While targeted advertising enables employers to find strong talent, and AI-assisted resume review facilitates an efficient focus on suitable candidates, the use of AI to identify “ideal” employees and filter out “irrelevant” applicants may actually discriminate (even if unintentionally) against certain groups protected under U.S. law (for example, women, older employees, and/or employees with certain racial profiles). In addition, AI-assisted interview analysis may inadvertently use racial or ethnic bias to eliminate certain candidates. Israeli companies doing business in the United States should not assume their AI-assisted recruitment and hiring tools used in Israel will be permitted to be utilized in the United States. Also, Israeli companies should be mindful of newly enacted legislation in certain U.S. states requiring companies to notify candidates of AI use in hiring, as well as conduct mandatory self-audits of AI-based employee recruitment and hiring systems. AI regulation on the state level in the United States is likely to increase, and Israeli companies that recruit and hire in the United States will be required to balance their use of available technology with applicable U.S. legal constraints.

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.
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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.