Monthly Archives: May 2022

When a business is being sold, the sellers, regardless of whether it is the Board of Directors of a public company, or a private owner, take into consideration three overarching factors: price, speed, and certainty. In recent years, particularly in light of the Biden Administration’s focus on antitrust enforcement and policy, antitrust clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR”) has become a major risk factor affecting the speed to, and the certainty of, completion of the sale of a business. This post addresses a specific type of merger agreement provision that is designed to eliminate uncertainty arising from the antitrust risk of a given transaction.

To address antitrust risk uncertainty, sellers are increasingly asking buyers to agree to what is euphemistically called a “hell or high water” (“HOHW”) agreement. An HOHW agreement is designed to provide the Seller with certainty that the Buyer is required to complete the transaction come hell or high water, regardless of the position of the DOJ or FTC, and that Buyer is required to comply with its HOHW commitment by the termination date of the agreement (the “End Date”), often a year after the agreement was entered into. The End Date is increasingly important because the average duration of significant U.S. HSR antitrust investigations has increased from approximately seven months in 2011 to approximately one year today. At the same time, the average duration of a significant investigation by the E.U. is now nearly 20 months.

Antitrust Investigation Process

HSR provides for a 30-day initial review period (the “waiting period”) by either the Department of Justice (“DOJ”) or Federal Trade Commission (“FTC”) (the DOJ and FTC are collectively called the “Antitrust Authorities”). At the conclusion of the initial 30-day waiting period, the Antitrust Agencies unilaterally may extend the waiting period for an indefinite time by issuing what is in effect a very broad based subpoena for documents and information that is colloquially called a “second request.” In order to avoid the probable issuance of a second request in deals that raise obvious antitrust issues, antitrust practitioners sometimes volunteer to extend the government’s initial review period by a “pull and refile” approach that permits attempting to persuade the DOJ or FTC of the legality of the transaction without the need for a more extensive investigation. This approach involves the parties withdrawing their HSR filing, providing information to the Antitrust Authorities, and encouraging them to clear the transaction without a further investigation, and then refiling under HSR and restarting the 30-day initial waiting period. However, failure to convince the Antitrust Authorities that a deal presents no problem even after a pull and refile likely will result in issuance of the second request.

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