5 Things You May Not Know About Hart-Scott-Rodino, But Probably Should

Deal lawyers generally know that the Hart-Scott-Rodino Act could apply to mergers and asset acquisitions. Many are surprised to learn that it can also apply to other types of transactions, such as certain intellectual property licensing agreements, or even acquisitions of company shares by a company officer or director.

The HSR Act applies to the acquisition of assets, voting securities of corporations, or controlling interests in partnerships, or limited liability companies – if the applicable HSR threshold tests are satisfied and no exemption applies. Whether it has anti-competitive effects is irrelevant.

There are two primary threshold tests which are adjusted annually by the FTC. The size-of-transaction test would currently be satisfied if the transaction has an HSR value in excess of $70.9 million, but it can apply to acquisitions that appear to be valued at significantly less than that figure. The HSR rules include complex aggregation and valuation requirements, and they can sometimes apply even when no voting security is technically acquired. For example, a person who is instrumental in causing a company to redeem certain of its securities could have an HSR filing obligation if he or she would hold a larger percentage of the company’s voting shares following the redemption than before.

Given the complexity of the HSR rules and exemptions, it is prudent to consult with counsel in advance of any acquisition, through any means, of voting securities, assets, or interests in non-corporate entities.