Merging with or acquiring another business can be a critical step in any company’s growth. However, they are complex and intricate processes that don’t just happen overnight. It can take considerable planning, valuation and negotiation to get to the point where a merger or acquisition can be considered and/or approved. Even at this point, there is the potential for the deal to be denied if the Federal Trade Commission believes it could violate antitrust laws that prevent monopolies.
Most mergers do not raise any red flags. According to the Department of Justice and the FTC, just 5 percent of merger filings present competitive issues. However, this does not mean Ohio business owners should ignore the potential for a merger to be a competitive threat.
If your business is looking to merge with another business, the FTC will review the merger filing to determine if the resulting company will significantly change market dynamics. If the merger eliminates competition or makes one company so large that it essentially controls the marketplace, the FTC could determine the merger would create a monopoly.
Monopolies are prohibited by antitrust laws because they compromise the competitive market structure. Without competition, companies can raise prices and provide lower-quality goods and services to the detriment of consumers.
Considering all that is at stake when it comes to mergers, it can be crucial that business owners understand what they can do to avoid or minimize compliance issues. Understanding the best practices used by the FTC to review mergers and preparing to address competitive concerns that may arise can be essential and effective ways to avoid problematic aspects of a merger.
Discussing these legal elements with your attorney, as well as other potential issues that may come up in business mergers, can help you be prepared and focus on doing what’s best for your company.