Challenges from the government
The FTC and the Justice Department can sue to block a deal they believe would substantially lessen competition, usually after an investigation that may include a second request. The FTC also has an in-house administrative process, though whether it uses that route or litigates a merger challenge entirely in federal court has shifted with agency policy. State attorneys general can bring their own suits, sometimes alongside the federal agencies and sometimes on their own. Many government challenges end with a negotiated remedy, such as a divestiture, while others are litigated or lead the parties to abandon the deal. Merger agreements often address this risk through provisions on how hard the buyer must work for clearance and what happens if the deal falls apart.
Challenges from shareholders
Target shareholders often challenge a deal by claiming the directors breached their fiduciary duties in approving it, or that the disclosures sent to shareholders were incomplete. These suits may seek to delay a vote, push for a higher price, or recover damages after closing. In some transactions, shareholders who oppose the deal can ask a court to appraise the fair value of their shares instead of accepting the merger price. The applicable standards depend heavily on the state of incorporation, and Delaware law governs many companies. A well-documented board process, including how conflicts were handled and how alternatives were considered, is usually the company's strongest protection.
Private suits and preparation
Competitors, customers, and suppliers can also bring private antitrust suits challenging a merger, though such cases are less common than government challenges. For companies planning a deal, we assess the risk of a challenge early, review internal documents that discuss competitive effects, and shape the board process and disclosures with likely challenges in mind. For shareholders or third parties concerned about a deal, we review the transaction, the public filings, and the options and timing available. Bring the merger agreement, the proxy or other disclosure materials, and any demand or complaint you have received.
