Hart Scott Rodino: 2011 Amendments to the Rules Forms and - - PowerPoint PPT Presentation

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Hart‐Scott‐Rodino: 2011 Amendments to the Rules Forms and Instructions the Rules, Forms and Instructions

Navigating Complex Regulatory Requirements For Premerger Notifications

TUES DAY, S EPTEMBER 20, 2011

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

K th E W l h Att F d l T d C i i W hi t D C Kathryn E. Walsh, Attorney, Federal Trade Commission, Washington, D.C. Karen Berg, Attorney, Federal Trade Commission, Washington, D.C. Ellen M. Jakovic, Partner, Kirkland & Ellis, Washington, D.C. Mary K Marks of Counsel Greenberg & Traurig New Y

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Mary K. Marks, of Counsel, Greenberg & Traurig, New Y

• rk

Bruce J. Prager, Partner, Latham & Watkins, New Y

• rk

S teven J. Cernak, General Motors Company, Detroit

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4

Introduction

h h h l d i ifi l

• The changes to the HSR Rules and Form significantly

reduce burden for most filers

• New information will provide the agencies with a much

more accurate understanding of the competitive impact of transactions

• Application will evolve via informal interpretation

5

Associates

6

Before you identify Associates

• 1. Identify the Acquiring Entity
• 2. Identify the UPE and all controlled entities
• 2. Identify the UPE and all controlled entities
• 3. Then begin the Associate analysis

Identifying Associates

• S

tructure charts

• for all fund groups that share an investment

manager/ GP/ MM manager/ GP/ MM

• Organizational documents
• LLC or LP Agreements

LLC or LP Agreements

• Investment Management Agreement
• required for individuals
• Websites
• Ask questions

8

Collecting Associates’ Investment Information

• Quarterly financial statements that list investments

(not industries) ( )

• Quarterly S

EC filings bl l d d

• Non-publicly traded investments
• Associates with restrictions on information sharing

9

Reporting for Associates

• Entities with overlaps only
• Minority holdings – name and percentage held (Item

6( )(ii)) 6(c)(ii))

• NAICS
• r Industries

All j t l

• All, or j ust overlaps
• $10 million threshold

C t ll d titi hi i f ti (It

• Controlled entities – geographic information (Item

7(d))

• NAICS Overlaps No minimum amount
• NAICS

, Overlaps, No minimum amount

Tracking Associate Industries or NAICS

• Investment Groups
• Corporate Groups
• Track Industries
• Identify/ assign 6 digit NAICS
• Be ready to report geographic information

11

Associates – from the Company Perspective

• Aimed at private equity funds and other entities that
• ften use limited partnerships
• Unlikely to effect most industrial companies, given

definitions of “ control” and “ management”

• S

till, good to check your client’s ownership structure – and might need to do so for Russian or other filings anyway anyway

12

Item 4

13

The New Item 4(d) – Transaction Analyses

• Item 4(c) already requires the parties to search directors’ and officers’

files for analyses of the transaction with respect to competition.

• Item 4(d) requires three additional types of transaction analyses – but

does not require the parties to search files beyond those of the 4(c) does not require the parties to search files beyond those of the 4(c) directors and officers.

• Most informal interpretations for Item 4(c) also apply to Item 4(d). For

p ( ) pp y ( ) example:

• Parties must submit only the final version of a document presented

to the Board or officers; and to the Board or officers; and

• Parties need not submit documents relating to exempt portions of

the transaction.

14

Item 4(d)(i) – the CIM

4(d)(i) requests the Confidential Information Memorandum (CIM) or 4(d)(i) requests the Confidential Information Memorandum (CIM) or the document(s) serving the purpose of a CIM

• Note that in many cases, CIMs that mention, e.g., competition, competitors,

markets and market shares have already been submitted as Item 4(c) documents markets, and market shares have already been submitted as Item 4(c) documents. Now the CIM must be submitted regardless of whether it has 4(c) content.

• The seller need only submit the CIM that was given to the buyer in the transaction

– not other versions that may have been given to other potential buyers not other versions that may have been given to other potential buyers.

• If there is no formal CIM for the transaction, the question is whether there is a

single document (or at most a couple of documents) that served the same purpose – not a broader group of documents and presentations that together serve the g p p g purpose of a CIM.

• If a deal dies, is resurrected, and has a new CIM put together for the new

iteration, only the second CIM should be submitted with Item 4(d).

• However, the original CIM may also need to be submitted with Item 4(c).

15

Item 4(d)(ii) – Bankers’ Books

• Item 4(d)(ii) requests all bankers’ books or other

consultants’ 4(c)-type analyses of the transaction prepared within one year of the filing. prepared within one year of the filing.

• Note that in many cases, bankers’ books that mention,

e.g., competition, competitors, markets, and market g , p , p , , shares have already been submitted as Item 4(c)

• documents. This item is intended expressly to capture

documents that staff believes always should have been documents that staff believes always should have been supplied as 4(c) but were not for some reason.

• No search of lawyers’ , bankers’ , or other consultants’ files

is required.

16

Item 4(d)(iii) – Synergies and Efficiencies

• Item 4(d)(iii) requests all documents evaluating synergies
• r efficiencies.
• Note that synergies and efficiencies analyses were not

required even by informal interpretations of Item 4(c). It 4(d)(iii) d t i l d l f h d t

• Item 4(d)(iii) documents may include analyses of headcount

reductions, financial synergies, facility consolidations and

• ther business aspects not directly related to competitive

i i activity.

17

Item 4 Financial Reports

• The new Item 4 will require only the name and CIK (S

EC Central Index Key) number for entities within the ultimate Central Index Key) number for entities within the ultimate parent’s control that file with the S EC (rather than active links to filings).

• Item 4 will also no longer require regularly prepared balance

sheets for non-S EC-filing entities within the group. sheets for non S EC filing entities within the group.

18

Item 4(d) – from the Company’s Perspective

• For CIM and banker pitches ((i) and (ii)), you were probably

turning them in anyway under 4(c)

• Or you should have been

O you s ould ave bee

• Remember, limited to this transaction and officers and

directors, like 4(c) S j t li htl b d t t th l

• S
• j ust slightly broaden your request to the same people
• S

ynergy documents (iii) seem unnecessary in almost all filings, so why include them?

• But information likely to be in CIM or 4(c) documents

anyway

• Again limited to 4(c) criteria
• Again, limited to 4(c) criteria

19

Item 5

20

Item 5 – Overview of Changes

• Only most recent year revenues are required
• Revenues of foreign-manufactured products sold

Revenues of foreign manufactured products sold into U.S . must be included Double counting of manufacturing and

• Double-counting of manufacturing and

wholesale/ retail revenues is eliminated

21

Item 5 – Most Recent Year Revenues

• Report only most recent year revenues by NAICS

code

• revenues for manufactured products reported by

10-digit NAICS product code f f i i d i

• revenues for non-manufacturing industries

reported by 6-digit NAICS industry code B ti li i t d

• Base year reporting eliminated
• No need to report products added/ deleted
• S

ignificant burden reduction

22

Item 5 – Foreign-Manufactured Products

• Products manufactured outside of the U.S

. and sold into the U.S . are reported in 10-digit NAICS product codes codes

• Pre-HS

R Form changes, foreign-manufactured products sold directly into the U S were not products sold directly into the U.S . were not reflected in Item 5

• Potentially relevant to competitive analysis

Potentially relevant to competitive analysis

23

Item 5 – Double-Counting Eliminated

• Manufacturers (whether domestic or foreign) report revenues

from sales of manufactured products only in 10-digit NAICS codes, even if products are sold from establishment separate from manufacturing facility

• do not report subsequent wholesale/ retail sale by

controlled entity controlled entity

• pre-HS

R Form changes, manufacturers would report under both manufacturing and wholesale/ retail codes if product sold from separate establishment

• Contract manufactured products (manufactured by third

parties for sale by reporting person) continue to be reported parties for sale by reporting person) continue to be reported under wholesale/ retail codes

24

Item 5 – Reporting Tips

• The following revenues are not included in Item 5:
• products manufactured outside of the U.S

. and sold ex-U.S . to a third party distributor who later sells into the U.S .

• components manufactured outside of the U.S

. and sold to a U.S . entity included within the reporting person for incorporation into finished product p

• report revenues only for sales of finished products (in 10-

digit NAICS code), not components Th f ll i lik l ill b id d l “ i i t th U S ” f

• The following likely will be considered sales “ in or into the U.S

.” for purposes of Item 5:

• sales to a U.S

. customer through a third-party distributor

• bligated to resell to the U.S

. customer (even if title and risk of loss pass outside of U.S .)

25

Item 5 – Reporting Tips (cont’d)

• sales to a foreign subsidiary of a U.S

. customer where, based on the knowledge and belief of the reporting person, the foreign subsidiary will transfer/ resell the products to the U.S . customer

• sales of manufactured products specifically designed for

the U S market the U.S . market

• Fact-specific analysis – contact PNO for guidance

26

Item 5 – Compliance

• Identify all products reporting person manufactured abroad and sold

into the U.S . in the most recent year

• finance department or finance officer at foreign subsidiary
• prior HS

R Form (check wholesale/ retail codes)

• website (general description of business/ products)
• annual reports (sales into U.S

./ North America)

• double check vs. your understanding of client’s business
• Report sales of products manufactured by reporting person only in
• Report sales of products manufactured by reporting person only in

manufacturing codes (whether manufactured in U.S . or abroad)

• if sell to wholesaler included within reporting person, report at

transfer price (if not readily available use sales price) transfer price (if not readily available, use sales price)

27

Item 5 – Compliance (cont’d)

• if sell directly to customers not included within reporting

person, report at sales price

• review existing wholesale/ retail NAICS

codes to eliminate review existing wholesale/ retail NAICS codes to eliminate double-counting

• Report sales of products manufactured by third parties and

sold by reporting person in U.S . only in wholesale/ retail codes

• Refer to most recent NAICS

code manuals available on Census Bureau website: Bureau website:

• Nort h American Indust ry Classificat ion S

yst em –Unit ed S t at es

• Numerical List of Manufact ured and Mineral Product s

28

Item 5 – Compliance (cont’d)

• Refer to new Item 5 tip sheet available on PNO

website

• Do the best you can – Item 5 can be complicated
• footnote anything that is unusual or needs

l i ( i l i explanation (e.g., estimates, sales price vs. transfer price) lt PNO f dditi l id

• consult PNO for additional guidance

19510737.1

29

Item 5 – from the Company’s Perspective

• Great to get rid of base year and 5(b)(ii)
• If you were relying on NAICS

information submitted to Census, th 10 di it d US f t d h dd b d then 10 digit and non-US manufactured changes add burden

• But evidently few of you were doing so – thanks a lot!
• For in-house or outside counsel of frequent filers, good idea to

track down this data now

• Remember, unlikely to be with CFO but instead much

lower in organization

30

Contact Information

Kathryn E. Walsh Federal Trade Commission 202-326-2977

kwalsh@ftc.gov

Bruce Prager Latham & Watkins 212.906.1272 bruce.prager@ lw.com Karen Berg Federal Trade Commission 202-326-2960 Steven J. Cernak General Motors Company

313 667 7743

202-326-2960

kberg@ftc.gov

Mary K. Marks

313-667-7743 steven.j.cernak@gm.com

Ellen M. Jakovic y Greenberg Traurig 212.801.9200 marksm@ gtlaw.com Kirkland & Ellis 202-879-5915 ellen.jakovic@ kirkland.com