Court Allows GTCR’s Acquisition of Surmodics to Proceed Despite FTC Challenge

The Northern District of Illinois recently denied the Federal Trade Commission’s (FTC) request (FTC in the matter of GTCR Holdings LLC and Surmodics Inc.) to preliminarily enjoin private equity firm GTCR from acquiring medical device company Surmodics while an administrative proceeding was pending.

A Paul Weiss antitrust article explains that the decision permitted the transaction to move forward, and also provided insight into how courts may weigh real-world mitigation measures in merger disputes.

Judge Jeffrey I. Cummings’ ruling focused on the sufficiency and credibility of the evidence, particularly testimony from business executives and an expert economist, as well as the divestiture agreement proposed by the parties.

The dispute arose when the FTC alleged that GTCR’s proposed acquisition would substantially lessen competition in the market for outsourced hydrophilic coatings for medical devices. GTCR already owned Biocoat, the second-largest provider in this market. The FTC argued that the combined entity would control over half of the relevant market, potentially increasing prices and reducing innovation.

The agency relied on historical revenue figures and asserted the merger would eliminate head-to-head competition between GTCR and Biocoat.

Judge Cummings found several flaws in the FTC’s analysis. He concluded that the relevant market should include in-house production of hydrophilic coatings by device manufacturers, which reduced the parties’ effective market shares.

Additionally, the ruling emphasized that legacy revenue was a poor indicator of current competition. Instead, it relied on new opportunities won in 2024, which revealed a combined share below 30 percent. The proposed divestiture of part of Biocoat’s business to Integer was deemed sufficient to maintain competition, supported by credible testimony regarding the transition services agreement.

Attorneys can view the ruling as illustrative of the importance of carefully defining the relevant market and presenting credible evidence on competition and the effectiveness of divestitures. It also demonstrates that courts may evaluate post-complaint fixes during the liability phase, allowing deal parties to rebut presumptions of anticompetitive effects.

Companies facing similar FTC scrutiny should consider proactive mitigation strategies, the quality of supporting evidence, and market-specific analyses in structuring transactions.