Neda Sheridan
Executive Vice President, Corporate Actions at Computershare
The regulatory landscape surrounding mergers and acquisitions (M&A) has been creating headwinds over the past few years globally, with increased scrutiny that impacts deal-making activities, combined with global economic shifts, emerging technologies, and evolving consumer behavior. Computershare convened a panel of experts to explore strategies for navigating this complex regulatory environment, to allow companies to successfully leverage M&A for strategic advantage.
Notably, there has been heightened antitrust examination in the United States, Canada and internationally, particularly concerning larger transactions and the private equity model and especially within the technology and healthcare sectors. Additionally, there is a growing trend of revisiting previously approved deals, as seen with Live Nation, Google/DoubleClick, Mega/WhatsApp/Instagram and others.
On October 10, 2024, the US Federal Trade Commission (FTC) finalized significant updates to the Hart-Scott-Rodino (HSR) Form and Instructions, marking the most substantial changes in nearly five decades. Although the updates are less extensive than initially proposed, they will necessitate more comprehensive preparation for HSR filings, thereby influencing strategic considerations for professionals involved in M&A. These new regulations are set to take effect in early January 2025.
The global M&A landscape has also been experiencing extended timelines for deal approvals, with over 140 evolving antitrust and merger control regimes potentially prolonging the process to 12 to 18 months or more (not including litigation). The increased risk of insider trading has also led to longer negotiation periods, underscoring the need for companies to have robust insider trading policies. Additionally, the longer approval process following the announcement of deals has heightened the risk of cyber breaches, necessitating strong information security measures to safeguard sensitive data.
Foreign Direct Investment
In addition, there has been a proliferation of Foreign Direct Investment (FDI) regimes throughout the world, creating uncertainty in deal making. The Committee on Foreign Investment in the United States (CFIUS) is an interagency committee responsible for reviewing certain transactions involving foreign investment in the United States and certain real estate transactions by foreign entities, to determine the effect of such transactions on the national security of the United States. We anticipate increased regulation around investments made by US persons into other countries, particularly in sectors such as semiconductors, microelectronics, quantum information technologies, and artificial intelligence, with China being a primary country of concern. More than 100 countries have established some form of FDI regulation, encompassing investments in their country from the US, China, and other nations.
Changes in Delaware Law on Authorization of Stock Splits
The Delaware General Corporation Law (DGCL), which regulates corporate law in Delaware, underwent amendments in August 2023 that affect the requirements for shareholder approval. Notably, the amendments removed the necessity for shareholder approval to modify the charter for forward stock splits, including proportional increases in authorized shares. Additionally, for publicly listed companies, the default voting threshold for reverse stock splits and other modifications to authorized shares was reduced to a majority of votes cast rather than a majority of shares outstanding. These changes minimize the influence of abstentions and broker non-votes, thereby simplifying the corporate approval process.
The remainder of Q4 is poised to be a dynamic period in the mergers and acquisition arena, particularly given the prevailing global uncertainties. As we transition into a new year, companies should be prepared and lay the groundwork to facilitate successful mergers and acquisitions that will create growth, innovation, and long-term value.
If you have questions about M&A, please contact me at neda.sheridan@computershare.com.
Computershare is not providing, and does not intend to provide, any legal, tax or investment advice.