Michael Jahnke Explains Impact of Hart-Scott-Rodino Overhaul on Private Equity and Energy
| The Deal
Loeb & Loeb partner Michael W. Jahnke, Co-chair of the firm's Antitrust Practice, recently gave Sarah Hashim-Waris of The Deal his thoughts on the impact of the August 2011 overhaul of rules under the Hart-Scott-Rodino (HSR) Act. HSR allows the Federal Trade Commission and the Department of Justice to analyze the potential competitive effects of a proposed transaction and to initiate an investigation, by requiring a filing and waiting period that may also enable a pre-closing challenge. The recent sweeping changes made by the FTC and DOJ include new reporting burdens for private equity funds, other investment fund families, limited partnerships and other partnerships or LLCs that are managed by another entity - such as a general partner of a fund or oil and gas "MLP" - that does not have HSR "control" and has previously escaped detailed scrutiny on that basis. Traditionally these structures have been able to take a narrow view of HSR and report only for what is directly controlled by the buyer, such as its portfolio companies. Going forward these structures need to take a much broader view and consider data derived from a complex web of "associates" under "common management" with the buyer, such as sister funds managed by the same general partner, portfolio companies in those sister funds, subsidiaries and even minority investments of all these entities.
Mr. Jahnke advised that standard deal timelines and related contractual provisions may no longer be adequate to accommodate expanded compliance burdens for these buying entities, which increase the time needed to prepare many filings. Because in a time of unprecedented market volatility, the ability to minimize delays in securing necessary regulatory approvals like HSR can be especially important, this places a premium on advance preparation and development of "best practices" for efficiently managing the new burdens. He noted that that the industries most affected by these new rules include not only private equity and energy (especially the oil and gas sector), but also foreign manufacturers, including foreign operations of U.S. companies, which for the first time will be required to provide detailed revenue reporting for direct shipments to U.S. customers.
Click here to listen to the entire interview.