Some businesses start small and slowly grow over time. Other companies establish a toehold and grow by conducting transactions with other organizations. Mergers and acquisitions are business transactions that take months to complete and often involve millions of dollars in capital transfers. They can drastically alter what a company does or how it provides goods and services to the public.
A successful merger or acquisition can lead to massive growth for the companies involved. Access to resources from either company and the combination of two organizations’ market shares can have a profound, positive impact on the resulting organization. In theory, any businesses, including those in the same industry and those who do completely disparate work, might eventually decide to merge. Companies acquire other businesses for their talent, their brands and their intellectual property.
The executives and shareholders at those companies typically have control over the process. However, federal regulators may sometimes intervene in a merger or acquisition. The chances of that occurring, particularly in the technology sector, may be higher now than before thanks to new federal rules.
Mergers are now subject to more scrutiny
The Federal Trade Commission (FTC) often looks at large business transactions like mergers and acquisitions to determine if they may lead to violations of federal antitrust laws. Some major transactions in the last decade have raised questions about highly concentrated markets and antitrust rules. Highly concentrated markets are industries already dominated by a few key players.
Now, the FTC has the authority to look more closely at any mergers or acquisitions taking place within highly concentrated markets. The FTC can work with the Justice Department to review and sometimes prevent proposed mergers and acquisitions. Although these new standards aim to prevent large businesses from establishing monopolies in certain sectors or over certain types of products, they pose major challenges for growing businesses.
The new rules might mean that it will take far longer for technology businesses and those operating in adjacent industries to complete a proposed merger or acquisition. In some cases, the FTC might even intervene to prevent the transaction from occurring. Tracking changes to federal regulatory practices, and seeking legal guidance when necessary, may benefit those operating businesses and preparing to make major moves.