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A Fresh Take

Insights on M&A, litigation, and corporate governance in the US.

| 12 minutes read

8th Annual Berkeley Spring Forum on M&A and the Boardroom

Thank you to the over 200 in-person and several hundred virtual attendees at the 8th Annual Berkeley Spring Forum on M&A and the Boardroom hosted by Ethan Klingsberg of Freshfields and Professor Steven Davidoff Solomon of the Berkeley Center for Law & Business.  Here’s this year’s wrap-up:

FTC Commissioner Phillips calls it as he sees it: What is really going on with merger review at the FTC and what will be the effects? 

After being introduced by Jan Rybnicek (an antitrust partner at Freshfields who formerly was a senior counsel to an influential FTC Commissioner), FTC Commissioner Noah Phillips delivered an energized speech on the state of merger clearance activities at today’s FTC. 

Commissioner Phillips lambasted recent activity at the FTC as amounting to a “repeal” of the efficiencies of the HSR process and the implementation of impediments that in some cases are “bonkers crazy.”  

His speech focused on how the new direction at the FTC has heightened uncertainties and costs and, most significantly, disproportionately imposed these uncertainties and costs on smaller companies. 

He supported his thesis by outlining the impacts of the suspension of early termination, the policy of prior approvals for deals that fall below the HSR threshold for buyers (including divestiture buyers) that enter into consent decrees, and the use of warning letters about post-consummation investigations.

He explained how small M&A targets are going to be the ones that pay the price for the new “prior approval” policy that would require clearances for deals below the HSR threshold following a consent decree. Moreover, entrance by buyers into consent decrees now comes with a cost that will dissuade buyers from taking advantage of the consent decree process, but meanwhile only the wealthiest of buyers will be able to afford going through the litigation process needed to prevail in many instances without a consent decree.

He lashed out at the “close at your own risk” letters as embodying the worst of government interference – constituting either a misrepresentation of the degree of actual risk or an indicator of a wasteful, never-ending investigation even though insufficient issues exist to merit blocking the merger from being consummated.

As further evidence of how the additional costs of these new approaches are falling on smaller players, he cited evidence that, even though M&A activity is down, the deep-pocketed buyers doing deals with values in excess of $10bn are more active than ever.

In closing, Commissioner Phillips criticized the nature of the evidence-gathering process at recent antitrust hearings by the Biden Administration and called for more rigorous economic analysis and more transparency about the effects of Commission decisions.

During the follow-up Q&A, the Commissioner discussed the bipartisan decisions to block the Lockheed-Aerojet and NVIDIA-Arm mergers.  He helpfully traced the bases for the Commission’s decisions to block these mergers to traditional vertical merger considerations and the aversion that the Commission has to behavioral remedies. 

In response to further Q&A, he gave an assessment of recent legislative initiatives in Europe and the US Congress and ways in which they are likely to be misguided. 

A video of the remarks by Jan and the Commissioner can be found here.

UK CMA General Counsel Sarah Cardell (subsequently promoted and now serving as interim CEO of the CMA) justifies and explains the CMA’s expansive and aggressive role in reviewing mergers even when a merger’s UK connections may not appear material to the overall transaction

Sarah Cardell, General Counsel for the UK’s Competition and Markets Authority, and Rod Carlton, one of the many partners in Freshfields’ market-leading CMA practice in London, engaged in a fireside chat focusing on the approaches taken by the CMA to reviewing mergers. 

Sarah elaborated at length on the interpretation of the CMA’s two tests for determining whether it has jurisdiction over a particular deal: the turnover test and the share of supply test.  Sarah discussed how the turnover test looks at whether the target company has turnover in the UK of at least 70 million pounds, while the share of supply test looks at whether the merging companies together have a share of supply amounting to 25% of the marketplace.  Sarah noted, to the surprise of many in the audience, that the share of supply test is framed quite broadly and does not require a company to have any revenue in the UK to justify jurisdiction by the CMA

Sarah then sought to clarify confusion in the market about when to expect review by the CMA. She explained how, even though the merger review regime in the UK is voluntary, the CMA regularly will choose to exercise its broad “call-in power” to review deals on its own initiative.  In addition, she discussed how proposed legislation will likely further expand the CMA’s jurisdiction by requiring review of so-called “killer” acquisitions (where one of the parties has UK turnover of 350 million pounds or more and a share of supply of 33% or more).  

Sarah then answered questions about the approach of the CMA to protecting innovation in “dynamic digital markets” and the extent to which the CMA is striving toward transparency and consistency with antitrust agencies in other countries. 

Sarah and Rod then discussed what the CMA is focused on during its reviews of acquisitions of nascent competitors and their impacts on innovation. Sarah made clear that the CMA has cleared the acquisition of numerous innovative competitors, but that the CMA is aggressively focusing on reviewing these types of acquisitions. She offered up a helpful elaboration on the key variables in these reviews, including an explanation of the importance of “market contextual factors” and the ways that the review is impacted by the contents of the internal documents of the parties about the rationale for the transaction.

She ended with a review of the state of cooperation by the CMA with the EC and the US agencies.

A video of the session with Rod and Sarah can be found here.

Those on the front lines share their views on how they are managing the new world of antitrust review of mergers

A panel consisting of Sarah Cardell of the CMA, Jan Rybnicek of Freshfields, Jeremiah Gordon, the General Counsel & Chief Compliance Officer at CapitalG (a private equity fund owned by Alphabet), and Kristen Limarzi of Gibson Dunn then discussed the impact on M&A practice of the current approaches of antitrust agencies globally to merger reviews.

Jeremiah discussed how the periods between signing and closing have become more protracted and are now presenting challenges for targets that have needs for capital infusions during these long interim periods and for flexibility to run their businesses in ways that customary interim operating covenants do not permit.

Kirsten commented that she is increasingly advising clients on not only the likelihood of a second request, but strategies for litigating against the US agencies to obtain clearance.  While no board of directors likes to hear that their merger will be likely to clear only if there is a victory before a US federal judge in a litigation against a US antitrust agency, the panel observed that boards and corporate development teams are increasingly realizing that litigation may well be the price that must be paid to get deals done in 2022 and they are moving forward with M&A projects on the understanding that they have a strong case and set of antitrust litigation resources lined up to do battle. The panel discussed how they expect more merger parties to invest in the litigation resources to fight the US agencies and how the US agencies may not be able to sustain a winning record in the courts if they continue to advocate for aggressive and novel theories of competitive concerns. The view of the panel was that the federal judges in the US generally adhere to more traditional and conservative views on antitrust enforcement than the current leadership at the US agencies. 

The panelists concluded by exchanging views on the value of engaging with regulators at different stages and by discussing the different ways in which there has been growing detail in regulatory covenants in merger agreements.

Peter Harrell, a top national security official from the White House, and Aimen Mir, former head of CFIUS, weigh in on where national security regulation is going and how it will be impacting M&A and investment activity in the near-term

Professor Frank Partnoy of Berkeley Law moderated a dialogue between Peter Harrell, Special Assistant to the President of the United States overseeing key national security matters, and Freshfields partner Aimen Mir, who served for many years as the official overseeing the CFIUS process. 

They discussed at length the interplay among sanctions on Russia and Russian entities and persons, supply chain disruptions, and national security considerations, and the way this interplay is impacting the national security review of M&A and investment activities. 

Then, after discussing how to take advantage of the Biden Administration’s “open door policy” for businesses, Peter and Aimen offered several items of specific advice for corporations.  First, they discussed ways in which companies, given the evolving nature of Russian sanctions, have to be very careful when receiving investments and capital from investors with a nexus to Ukraine or Russia, even if they are not explicitly sanctioned entities.  Second, they discussed how the US government will look at not only who the investor or buyer is, but also what assets are the subject of the investment or acquisition to evaluate the national security risks  – in other words, there is no free pass from scrutiny by the US national security regimes these days just because the investor or buyer is from a friendly nation.  Third, they commented that the current White House is especially focused on preserving and bolstering US capabilities to produce semiconductors and in a few other key areas linked to technology and life sciences.

The panelists closed the discussion by parsing out the ways that the US government’s protection of national security interests has been remarkably consistent over the Obama, Trump and Biden Administrations.

SEC Commissioners and Silicon Valley insiders debate transformation of the disclosure obligations of pre-IPO companies and revisiting the dilution of the triggers for having to become an SEC registrant 

Sarah Solum, head of Freshfields’ US Capital Markets practice, led a discussion with former SEC Commissioner Robert Jackson and a panel of Silicon Valley insiders about the recent calls by SEC Commissioner Allison Lee for greater disclosure and transparency by pre-IPO companies.

Commissioner Lee’s call for a new transparency and disclosure was premised on her belief that there is an increasingly large number of companies with important impacts on everyday life in the United States – especially tech and life sciences companies – that are remaining private for extended periods and therefore not sharing critical information about their financial condition, operations or performance with markets and investors.  This syndrome is a result of the availability of late-stage financing, reforms of SEC rules over the last decade that eviscerated the triggers for requirements to become an SEC registrant, and the use of alternative outlets for liquidity (such as periodic cash-outs of employees’ equity awards by these pre-IPO companies and the availability of “private” secondary markets).  Commissioner Lee’s position is that unacceptable risks arise from such a lack of transparency by important companies.

The panel debated what metric, if any, makes sense to use to trigger having to become an SEC registrant. Former SEC Commissioner Robert Jackson held firmly that there is no single metric that merits a mandate to become an SEC registrant. He dismissed criteria such as the number of stockholders and size of the company. Yet, he advocated for exploring the adoption of a policy of accelerating the IPO timeline when a company is important to the economy.

Jen Yeh, Vice President and General Counsel of Checkr, a pre-IPO company that has changed the way many in the business world conduct background checks, argued that it is misguided to believe that companies are refusing to go public even though their businesses have matured to the point that they would trade and operate successfully in the public spotlight.  She explained how many companies, even those important to the economy, need more time to build out their strategic plan and infrastructure before becoming SEC registrants.

Adam Eltoukhy, Vice President and General Counsel of Samsara, one of the IPO success stories of the past year, argued forcefully that a company and its employees need to be the ones to decide when is the right time to go public. He elaborated about key factors in this calculus, including the status of the internal build-out of a company’s infrastructure, the capital needs and allocation plans of the company and, most importantly, the ability of the management team to compile relatively reliable internal forecasts.  

Scott James, General Counsel of DCVC, a longtime investor in a spectrum of successful pre-IPO companies, presented the case that the SEC needs to permit companies to focus on growth and strategy before forcing them to engage in more disclosure and subjecting themselves to more regulatory scrutiny.

Adam Eltoukhy and Jen Yeh then weighed in persuasively about the tension that going public and the consequent focus on near-term profitability can have with the approaches of mission-driven companies.  Sarah then discussed her success with bringing large, for-profit companies public as “public benefit corporations.”

A video of this engaging discussion led by Sarah can be found here.

Vice Chancellor Will offers up valuable guidance on the risks of de-SPACs, personal liability for executive officers, Section 220 demands for books and records, drafting board minutes, and preparation of board packages about M&A projects 

An enlightening fireside chat between Vice Chancellor Lori Will of the Delaware Court of Chancery and Freshfields litigation partner Mary Eaton offered up useful guidance about de-SPAC-related claims, the exposure of executive officers to non-exculpated fiduciary duty claims, the ongoing rise and evolving nature of Section 220 demands, and the optimal approach to preparing company board minutes.

The Vice Chancellor outlined how traditional Delaware concepts about structural conflicts within a board and executive team and material omissions from proxy statement disclosure formed the foundation for her recent Multiplan decision where the court applied “entire fairness” scrutiny to a de-SPAC transaction and identified potential material omissions from the proxy statement.

The Vice Chancellor and Mary then provided helpful guidance on the ways that executive officers can find themselves subject to non-exculpated claims for breaches of duties in connection with mergers and how these claims will be impacted by amendments to Section 102(b)(7) of the Delaware General Corporation Law that are likely to be adopted this summer.

On the topic of Section 220 demands, the Vice Chancellor was clear that the battleground is no longer the entitlement to production of books and records – that is well-settled at this point – but the scope of what must be produced.  The board package of materials relating to an M&A transaction that is the subject of a Section 220 demand, including the minutes and final banker book, are most likely to have to be disclosed and therefore counsel needs to curate this package carefully at the time it is created – i.e., at the time of the board’s deliberations about and approval of the transaction, not later in the game. The Vice Chancellor and Mary discussed how it is advisable for the minutes to cover all key facts, discussions and deliberations (including those that occurred outside formal Board meetings) in sufficient detail; otherwise, the Section 220 demand may require production of text messages, emails, personal notes and other materials beyond the core board materials. 

Mary then engaged in an intriguing discussion with the Vice Chancellor about the production of privileged materials in response to Section 220 demands. Vice Chancellor Will elaborated on how the Chancery Court and caselaw, such as Garner, disfavor privilege redactions in board minutes. She and Mary talked about how it is often advisable for counsel to draft privileged information in minutes in a way that reveals no more information than would otherwise be disclosed in a privilege log. Counsel need though to carefully weigh the extent to which the omission from minutes of details about privileged information will be harmful to the ability of the directors to show that they fulfilled their duty of care by relying in good faith on outside counsel’s specific advice.

The discussion concluded by addressing the evolving issue of permissible waivers of rights of stockholders under Delaware corporate law. The Vice Chancellor stated that a waiver of Section 220 rights is possible in theory, but she stressed that the proper means for obtaining such a waiver remains an open question.

A video of the discussion between Mary and the Vice Chancellor can be found here.


united states, corporate governance, delaware law, venture capital, corporate, capital markets and securities, cfius, m&a, private equity, antitrust and competition