Mergers and acquisitions are common in the business world. Particularly in rapidly developing sectors, like technology, startups with cutting-edge concepts often merge with bigger, existing businesses. Other times, power players in an industry acquire companies that have valuable intellectual property or a popular brand.
Mergers and acquisitions are often multi-million-dollar deals that take months to negotiate. All of that work may come to nothing if federal authorities intervene and prevent the transaction. For those in certain industries, the possible scrutiny of federal regulators is likely to be higher now than it was just last year due to updated federal policies.
Certain mergers might trigger antitrust concerns
The acquisition of one business by another or the decision to merge two existing companies can have a major impact on not just those businesses but also an entire industry. The actions of large companies can impact consumers and other businesses as well.
The Justice Department in cooperation with the Federal Trade Commission (FTC) updated the guidelines for mergers in 2023 for the first time since 2010. The goal, as reported by the Justice Department, was to promote competitive markets that are fair and open. The update drew inspiration in part from several major mergers in recent years that have given certain companies too much influence
The new regulatory guidelines specifically target highly concentrated Industries in which a few power players have a large amount of influence. Businesses in the tech industry, as well as e-commerce companies, may find that business transactions could be subject to additional scrutiny by federal regulators. The larger and more complex a business’s operations are, the more likely it is that a conflict of interest that could pose antitrust concerns could occur.
Antitrust laws exist to protect the free market and ensure there are opportunities for all. However, their impact on businesses can sometimes be quite negative. The interference of regulatory officials in business operations could have a major impact on a company’s finances. For this and so many other reasons, remaining well informed about regulatory changes may benefit those in decision making positions at organizations contemplating large transactions.