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Revised HSR Form Adds Significant Reporting Requirements
Tuesday, July 26, 2011

Beginning on August 18, 2011, parties to merger, acquisition and joint venture transactions that are required to file under the Hart-Scott-Rodino Antitrust Improvements Act (“HSR”) must use a new HSR form and provide additional categories of information with the HSR filing. Although the revised HSR form eliminates a few burdensome categories of information companies have been required to submit in premerger filings (i.e., base year revenue data and certain SEC filings), the revised HSR form adds significant new reporting requirements particularly targeting companies managed by persons who do not control them, such as private equity funds, investment funds and master limited partnerships, and companies that engage in manufacturing operations outside the U.S.

The key changes to the HSR reporting requirements include:

1. New information regarding “Associates”

The most significant changes require detailed information regarding “Associates,” which are essentially entities under common management with the acquiring person but not controlled by the acquiring person. The current HSR form requires information regarding the ultimate parent entity of the filing party and all of the entities it controls, directly or indirectly. The revised HSR form expands this obligation by requiring the filer to provide certain information with respect to all Associates (e.g., funds or partnerships, their portfolio investments and all entities controlled by those investments). For example, information will now be required for portfolio companies regarding separate funds that share a common general partner even if those separate funds are not participating in any other way in the transaction.

Furthermore, the new form will require Associates and all entities controlled by Associates to provide the following additional information:

a.   Under Item 6(c)(ii), the acquiring person must identify all of its Associates’ minority investments of 5% or more in companies that either fall into the same industry, or have the same 6-digit North American Industry Classification System (“NAICS”) code, as the target; and

b.   Item 7, which currently requires the parties to identify and provide certain geographic information about the 6-digit NAICS codes in which both the acquiring person and target report, now will be extended to cover Associates of the acquiring person.

For companies with many Associates, this requirement could become burdensome not only due to the number of potential Associates, but because the filer may need to obtain certain information about Associates to which it may not have ready access.

2. New Item 4(d)

The new Item 4(d) requires the submission of additional documents considered useful for the antitrust agencies’ initial substantive competitive analysis of the transaction. New Item 4(d) expressly covers confidential information memoranda, documents prepared by third party advisors that relate to competitive issues and documents analyzing potential synergies and efficiencies of the transaction. In reality, this particular requirement is not truly “new” as most of the documents explicitly required under Item 4(d) have previously been provided voluntarily by most filers in response to Item 4(c). However, there are some nuances regarding third-party advisor documents, including documents gratuitously provided by advisors that were not actually retained, that may necessitate expanded document searches.

3. Increased disclosure for foreign manufacturers

Under current rules, foreign manufacturers need only report and categorize revenues from sales in the U.S. if the goods passed through related U.S. operations of the filer. The new rules require all manufacturers to report revenues from all sales into the U.S. under 10-digit NAICS codes, including direct shipments to U.S. customers from foreign manufacturing operations and shipments from foreign manufacturing facilities to U.S. sales operations. This requirement will increase record-keeping burdens on manufacturers.

Given these new requirements, companies should consider implementing record-keeping practices now to ensure that the information and documents necessary to file under HSR are in order and the necessary data is readily obtainable. Companies should also allow extra time to complete their initial HSR filing under the new rules.

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