Gun-Jumping Violations in M&A: Avoiding Illegal Pre-Merger Coordination, Drafting Purchase Agreements

Description

In early January 2025, the Federal Trade Commission (FTC) imposed a record $5.6 million civil penalty to settle allegations that three oil and gas companies engaged in illegal pre-merger coordination, also known as "gun-jumping," prior to the closing of their proposed merger. This recent development serves as a reminder to all merging parties of the risks involved in failing to properly navigate pre-merger waiting time periods under the HSR Act.

While certain information can be shared during deal negotiations and in the period between signing and closing, parties with competing products or services should avoid sharing "competitively sensitive information" such as pricing information, strategic plans, future product offerings, and customer-specific information except through a properly structured clean team process. Parties must also carefully negotiate interim operating covenants for all transaction agreements.

Even with a merger agreement in place, the merging parties remain independent companies until closing and must act accordingly. Counsel should closely monitor any interactions between the parties and safeguards should be established to protect the parties prior to regulatory approval and closing.

Listen as our authoritative panel discusses the key antitrust issues that should be considered upfront in any M&A transaction and best practices during due diligence, pre-merger negotiations, and pre-closing planning processes.