Stroock Special Bulletin
"FTC Issues Final Rules Regarding HSR Premerger Notification"
Significant amendments to the Hart-Scott-Rodino ("HSR") premerger notification rules (the "Rules") and the premerger notification and report form (collectively, the "Amendments") have been promulgated by the Federal Trade Commission ("FTC") and will become effective August 18, 2011. The Amendments are part of the FTC's attempt to eliminate overly burdensome reporting requirements. However, although the Amendments eliminate certain categories of information that the FTC believes have become unnecessary, new reporting obligations could prove to be more burdensome to certain HSR filers with broad investment portfolios, particularly private equity firms, hedge funds and some limited partnerships.
Notably, these Amendments add to the Rules the concept of "associates" of the filing entity—entities that are under common management or control with the acquiring person—and impose a burden on the acquiring person to report not only the holdings of the entity actually involved in the transaction, but those holdings of the acquiring person's "associates" which, to the acquiring person's knowledge or belief, generate revenues in the same industry code as the acquired entity or assets. For example, a private equity fund making an HSR filing will have to report all of its sister funds and potentially all of their holdings, in its HSR filing.
Sizeable investment firms will find, at least initially, that they have the logistical burden of having to obtain and organize far more detailed information about the holdings of all members of their investment family than they have in the past in order to prepare the HSR filing. It will likely be advisable in most cases for these companies to implement a system to track regularly the sources of their holdings' revenues by industry code to avoid the delay inherent in gathering this information at the time that it is needed for an HSR filing.
This Stroock Special Bulletin highlights some of the new reporting requirements created by the Amendments.