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Why would a proposed merger or acquisition be blocked?

If you own a business, you have a number of difficult decisions to make on a regular basis. You are frequently going to be the final word in hiring and firing decisions, budgetary concerns and partnerships with other companies.

However, there situations in which you are not going to be the one who approves or denies an act that could affect your company’s future. For instance, if you want to participate in a merger or acquisition with another company that is valued at over $78.2 million, the Federal Trade Commission and the Department of Justice will actually make the decision on whether that can happen or not.

These agencies can decide to block a proposed merger or acquisition for a number of reasons, including:

  1. The resulting entity encourages one or more companies to raise prices.
  2. The deal would reduce innovation in the marketplace.
  3. The merger would change a firm’s behavior in a way that causes harm to consumers.

In other words, the FTC and DOJ can block mergers that have the potential to be anticompetitive or create a monopoly.

However, your hands are not exactly tied when it comes to having a transaction under review. If you are involved in a high-value merger, there are ways you can affect the federal government’s decision. Most importantly, you can provide evidence regarding business decisions, industry conditions and pricing practices that support the transaction.

Even if you aren’t going to have your merger reviewed by federal government agencies, you still must use caution with regard to any transaction that results in the formation or dissolution of a business entity. In order to avoid costly mistakes and protect the future of your business, it can be a good idea to consult an attorney to discuss any legal ramifications or obstacles you may be able to anticipate and avoid.

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