Effective Deal Communications in an Unprecedented Antitrust Environment

By Jake Yanulis

While rising interest rates and geopolitical complexity continued to hamper dealmaking through the first half of 2023, the federal regulatory review process – reinvigorated under the Biden administration – has emerged as the biggest hurdle to successful transaction communications. Federal authorities formally challenged 10 transactions in 2022, and that momentum has continued in the first half of 2023, with four additional lawsuits filed year-to-date.

At the same time, the “noise” around deals continues to increase, with regulators and policymakers alike issuing scathing warnings directed at deal participants (i.e., private equity firms) and entire industries (e.g., healthcare, pharmaceuticals). In this environment, where new federal guidelines are introduced, regulatory bodies resist entering into settlements and federal agencies claim credit for abandoned transactions, communicators can no longer rely on conventional communications tactics to overcome potential antitrust enforcement.

Though this more aggressive posture of regulatory enforcement has started to show cracks, communications should continue to embrace a few core principles:

Align messaging to the current reality.

By publicly building the case for approval from the initial announcement, including elevated disclosure around the key issues in focus (e.g., pricing power, labor impacts), communications can complement behind-the-scenes efforts to address regulatory concerns. Communications teams must work in sync with antitrust counsel to understand and address the key vulnerabilities facing a specific transaction. The burden on communications is higher than ever, both internally and externally, compelling companies to focus on the upside for all stakeholders as much as long-term value to shareholders.

Prepare for the worst.

The conventional thinking of antitrust review based on market dominance has transformed, with a renewed focus on pricing power/leverage and, most recently, potential impacts to industry labor markets. While it remains to be seen whether the increase in legal challenges translates to successfully blocking transactions, for communicators this fact is largely irrelevant. The economic and corporate reputational cost of protracted legal battles threaten to undermine even the most logical transactions. Scenario planning ahead of a public announcement to account for unplanned events like a formal “Second Request” or public commentary expressing concern is a critical step to protect reputation in the face of regulatory hurdles.

Set expectations internally for a long ride.

Regulatory agencies are not immune to the staffing challenges facing businesses across the nation. The recently proposed changes to the merger review process, and specifically the premerger notification rules under the Hart-Scott-Rodino Act, are likely to further extend the already months-long review process by another two or three months. Communications with employees, customers and other stakeholders should acknowledge from the outset lengthy timing to close, and importantly provide regular updates through the protracted process.