Don’t Let Regulation Derail an M&A Deal
M&A transactions require navigating a myriad of regulatory requirements, from antitrust laws to international compliance and government approvals. These regulatory hurdles can pose significant challenges, leading to deal delays or failures.
The regulatory landscape has intensified in recent years, with Bain & Company reporting that at least $361 billion in announced deals were challenged by regulators in 2022–2023, and nearly all required remedies. The European Commission and UK’s Competition and Markets Authority (CMA) caused Microsoft to restructure its $69 billion acquisition of Activision Blizzard, illustrating the scrutiny faced by large deals.
Notable cases include the AT&T–T-Mobile merger in 2011, blocked by the Department of Justice due to competition concerns, costing AT&T a $4 billion settlement as per a Wikipedia article. Another example is Pfizer’s proposed acquisition of Allergan in 2016, thwarted by changes in tax laws, and the initial block of Sprint-T-Mobile’s merger in 2014, later approved after revisions. McKinsey notes that 14% of deals over €1 billion are canceled due to regulatory and compliance issues, with timelines extending by three to six months for scrutinized deals, and more complex deals taking up to two years.
Companies can prepare by conducting thorough regulatory due diligence, engaging regulators early, anticipating and mitigating risks, and being flexible in deal structures. PwC suggests building early strategy around regulatory processes, while AdminControl emphasizes using data room technology for secure information sharing to comply with antitrust regulations. For instance, the FTC’s challenge to Amgen’s $27.8 billion purchase of Horizon Therapeutics was resolved via a consent order after months of delay, highlighting the need for proactive engagement.
By understanding the landscape, conducting due diligence, and managing risks, companies can navigate this maze and increase deal success. As global M&A activity evolves, with increasing scrutiny on ESG and antitrust, preparation will be key.
