New HSR Reporting Thresholds for Mergers and Acquisitions

January 31, 2013

The Federal Trade Commission has announced its 2013 adjusted thresholds under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) to be effective February 11, 2013. The purpose of the HSR Act is to provide notice and information to the Federal Trade Commission and the Department of Justice before certain large proposed transactions, namely mergers and acquisitions, are consummated – either by a sale of equity or by a sale of assets.

Reporting under the HSR Act involves disclosure of certain business information, a filing fee of at least $45,000, and may delay the proposed acquisition until the applicable waiting period outlined in the HSR Act is over. Any transaction that does not meet the threshold, however, is not required to report. A submittal under the HSR Act by both parties to the proposed transaction will trigger a 30-day waiting period, during which, the Federal Trade Commission and the Department of Justice will review the transaction.

The HSR Act sets forth certain dollar amounts, below which, a proposed transaction will be exempt from the requirements of the HSR Act. These thresholds, which were the subject of the above-mentioned Federal Trade Commission adjustment, apply principally to two tests:  1) the size of transaction test and 2) the size of person test. The size of transaction test asks whether, as a result of the transaction, the value of the buying party’s interest in the seller’s assets or equity would meet the minimum threshold. The size of person test asks whether the two parties to the transaction have sales or assets above a certain threshold. If a proposed transaction does not meet the requirements of either the size of transaction test or the size of person test, then the transaction is not subject to the HSR Act.

Every year, the Federal Trade Commission adjusts the threshold according to revisions in the country’s gross national product. The new minimum threshold for the size of transaction test is $70.9 million, and any transaction valued under the threshold is not reportable under the HSR Act. Last year’s threshold was $68.2 million. Similarly, the new minimum threshold of sales or assets for the size of person test is $141.8 million for the larger party and $14.2 million for the smaller party, and if the parties do not satisfy these thresholds, then the transaction is not reportable under the HSR Act. Last year’s thresholds for the size of person test were $13.6 million and $136.4 million, respectively.