Merger transactions dropped in FY 2020 as COVID-19 pandemic hit the United States.

The number of merger transactions reported to U.S. government agencies continued to rise in fiscal year 2019 (October 1, 2018–September 30, 2019), but showed signs of leveling off according to a Cornerstone Research report released today. Reported transactions reached the highest total in the past 10 fiscal years. However, the pace of growth compared to previous fiscal years has become relatively flat.

A decline in reported transactions does not necessarily translate into reduced enforcement activity.

Merger Transactions

The report, Trends in Merger Investigations and Enforcement at the U.S. Antitrust Agencies: Fiscal Years 2010–2019, analyzes data from the previous 10 annual Hart-Scott-Rodino reports that the Federal Trade Commission and Department of Justice filed jointly to Congress. In addition, the Cornerstone Research report includes 2020 fiscal year data released by the FTC Bureau of Competition’s Premerger Notification Office.

According to the report, companies reported 2,030 merger transactions to the FTC and DOJ in FY 2019, up slightly from 2,028 transactions in the previous fiscal year. The growth rate in FY 2019 was the third lowest in the past 10 fiscal years and substantially below the FY 2011–FY 2018 average growth rate.

COVID-19 Impact

The 2020 fiscal year data showed a drop in reported merger transactions. The largest decline occurred during the third fiscal quarter of 2020 (April to June) as the economic uncertainty surrounding the COVID-19 pandemic increased. There were 263 reported transactions in the third quarter; transactions rebounded in the subsequent quarter to 471.

Agency Investigations

The share of merger transactions that received clearances for investigation decreased in FY 2019, reversing the previous fiscal year’s trend. However, the FTC and DOJ issued more second requests—requirements to provide additional information—as a share of transactions in FY 2019, and the number of second requests increased from 45 to 61, a 10-year high. The majority of second requests involved transactions exceeding $1 billion.

“A decline in reported transactions does not necessarily translate into reduced enforcement activity,” said Bob Majure, a Cornerstone Research vice president. “It will be interesting to see if the number of second requests in FY 2020 remains historically high or follows the overall drop in the number of transactions.”

Agency Challenges

The agencies challenged 38 mergers in FY 2019, one fewer than in FY 2018. Only 47% of the agencies’ challenges resolved in FY 2019 resulted in consent orders/decrees, the lowest percentage since FY 2010. The agencies initiated five court proceedings, and state attorneys general initiated one court proceeding. Merging parties prevailed in all three court proceedings that went to trial.

Additional Highlights

• The cross-industry Enforcement Rate Indicator (ERI) increased between FY 2018 and FY 2019, driven by increases in the ERIs in the manufacturing, health services, pharmaceuticals, and retail trade sectors. ERI is calculated as the number of second requests divided by the number of transactions for a given sector and time period.
• Manufacturing accounted for the largest share of reported transactions (17.9%), clearances (24.9%), and second requests (34.4%) in FY 2019. This sector has had the largest average share of transactions, clearances, and second requests for the previous nine fiscal years.
• The DOJ continued to convert a higher proportion of clearances into second requests than the FTC. The FY 2019 cross-industry average late-stage ERI was 35.2% at the DOJ and 20.1% at the FTC.
• The share of second requests issued for transactions valued between $500 million and $1 billion was above the FY 2010–FY 2018 historical average, while the share of transactions valued at more than $1 billion remained at the historical average.

 Read the Report: Trends in Merger Investigations and Enforcement at the U.S. Antitrust Agencies: Fiscal Years 2010–2019,