Firms attracting antitrust scrutiny are abandoning deals at their highest rate in years, as the Biden administration’s enforcers appear committed to a policy that pushes for more lawsuits and fewer settlements. The first half of 2024 saw six significant merger inquiries end with the Federal Trade Commission (FTC) or Department of Justice (DOJ) announcing that the parties had nixed proposed transactions—a figure that surpasses yearly totals from the previous decade, according to a report from Dechert LLP.
This rise in deal abandonments coincides with a notable decline in settlements and negotiated fixes, traditionally a key feature of antitrust enforcement. Some prominent firms including WillScot Holdings Corp. and McGrath RentCorp recently called off a planned merger on September 18 following a potential challenge from the FTC. Jonathan Kanter, the DOJ’s antitrust head, reported that more than 20 potential deals had been abandoned in response to inquiries from his division, underscoring a new norm where ‘fewer problematic deals come in front of us,’ he said in a recent speech.
Kanter and FTC Chair Lina Khan have expressed skepticism about whether settlements or consent decrees can effectively alleviate competition concerns. Since 2023, the two agencies have announced just three settlements, a stark contrast to the annual average of 20.4 from 2016-2020, according to Dechert.
Dealmakers are increasingly factoring in the possibility of lengthy reviews and litigation in their contracts. Despite companies approaching regulators with possible solutions before filing, macroeconomic factors—like high-interest rates and volatile capital markets—are exerting a more notable impact on deal volumes, which have dropped by 19% in the US and over 25% in Europe in 2023 compared to the previous year.
US antitrust enforcers’ aversion to settlements has combined with a focus on areas previously neglected, such as labor, potential competition, and vertical mergers. This approach has led to mixed outcomes, including ongoing legal battles like the FTC’s challenge against Kroger Co.’s $24.6 billion purchase of Albertsons Cos. Inc. and the DOJ’s attempt to force Live Nation Entertainment Inc. to divest Ticketmaster.
The Biden administration’s pro-litigation strategy has shaped a more black-and-white choice for parties: face litigation or abandon the merger. Recently, Amazon.com Inc., Qualcomm Inc., and Novant Health Inc. have all abandoned their proposed deals amid antitrust concerns. However, high-profile settlements, such as the FTC’s agreement with Amgen Inc. over its $28 billion takeover of Horizon Therapeutics Plc, demonstrate that negotiated fixes are still possible, albeit less common.
Critics argue that the heavy enforcement approach is creating an environment where only the largest players can manage the costs of protracted reviews or litigation, leading to a ‘chilling effect’ on smaller deals. The upcoming presidential election could impact this strict enforcement agenda, but M&A lawyers acknowledge that the current administration has significantly changed the landscape of antitrust discussions in the US.
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