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The federal government's role in mergers

Mid-sized to large businesses in the Irvine area may at some point decide it in the business's best interest to acquire or merge with another firm. Doing so, as many business executive know, is not simply a matter of signing a contract or two.

Instead, it involves a lengthy and multi-faceted corporate law process, and sometimes that process includes a thorough review by government officials to make sure that proposed merger or acquisition is not going to unfairly hinder free trade and competition.

Not all mergers require a review by the federal government, as a proposed merger has to be of a minimum size and scope before the government will get concerned about its possible impact on free trade. For those deals that have to be filed, usually all parties to the merger have to provide financial and other data, possibly to both the Federal Trade Commission and the Department of Justice. The agencies coordinate, and one or the other agency takes over the review of the proposed deal.

The parties to the merger then have to wait, usually 30 days but in some cases only 15 days, while the government reviews the proposed transaction to ensure it will not run afoul of the government's prohibitions on anti-competitive business behavior.

The government can end the waiting period early and approve the transaction or, on the other hand, ask for more information, which extends the waiting period. Since the government's request for additional information can even include sworn testimony, the waiting period can get extended for weeks or even months.

Ultimately, the federal government can choose to either let the waiting period expire and thereby let the deal go forward or can choose to formally challenge the merger in court. A negotiated agreement with the parties to the merger is another possibility.

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