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E-MailAndrew R. Brownstein, Richard K. Kim, Nelson O. Fitts, and Viktor Sapezhnikov are partners at Wachtell, Lipton, Rosen & Katz. This post is based on their Wachtell memorandum.
While M&A activity continues, the pending U.S. federal government shutdown may affect the timetable and process for completing announced transactions. Set forth below is our current understanding of the operations of the agencies most critical to the merger process and certain contingency plans they have made that impact M&A transactions. These operations and plans may change if the shutdown continues for an extended period of time.
SEC Filings and Review
The SEC’s EDGAR filing system will remain operational during the shutdown and will accept filings, including proxy and registration statements, and limited SEC staff will be available to process requests for EDGAR access codes and password resets, answer questions about fee-bearing EDGAR filings and other emergency questions regarding EDGAR submissions. The SEC staff, however, will not provide interpretative advice, issue no-action letters, review filings (including proxy or registration statements) or process requests for effectiveness of registration statements, regardless of when filed.
For proxy statements that are filed in preliminary form, since the SEC will not review the filing, companies may file definitive proxies 10 days after the preliminary was filed. With respect to registration statements, the SEC has provided guidance (available here) to create a process for them to become effective without any action by the SEC. For existing registration statements that are not yet effective, companies may choose to remove the “delaying amendment” by filing an amendment to the registration statement, in which case the registration statement would become effective 20 days thereafter. Similarly, new registration statements may omit the delaying amendment and become effective 20 days after the initial filing. Removing the delaying amendment would not preclude an issuer from later requesting that the SEC accelerate the effectiveness of the registration statement once the shutdown ends. Similarly, once the SEC is operational, the SEC will not be precluded from reviewing an effective registration statement and seeking a stop-order or taking other enforcement action.
Antitrust Filings and Review
Both the FTC and the Antitrust Division of the Department of Justice will accept HSR filings during the shutdown, and statutory waiting periods will continue to run, but the agencies will not grant early termination of any HSR waiting periods while the shutdown persists. Although the FTC is technically “closed” during the shutdown, a small number of its attorneys have been exempted from furlough to perform critical functions, including time-sensitive investigations and ongoing litigation. The Antitrust Division is operating under similar constraints, exempting employees to “prepare cases that must be filed due to Hart-Scott-Rodino or statute of limitations deadlines, only when an extension or waiver cannot be obtained and [Antitrust Division] leadership determines that allowing a proposed merger to go forward without objection would pose a reasonable likelihood of peril to property in which the United States has an immediate interest.” This means the FTC and the DOJ will not allocate deals to one agency or the other, and will not meet with or consider advocacy from parties, until the HSR filings have been submitted and the statutory waiting period begins to run. The agencies are expected to manage transactions posing competitive issues through the “second request” process, which, given staffing constraints, will likely result in delays.
CFIUS Filings and Review
CFIUS’ review of acquisitions and investments by foreign persons in the United States and CFIUS’ acceptance and review of filings, including declarations submitted under the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), are generally suspended during the shutdown. CFIUS will continue to perform certain caretaker functions related to CFIUS-related national security exigencies and reviews that were initiated prior to the enactment of the FIRRMA. For reviews that were initiated after the enactment of FIRRMA, the deadlines (including for notices and declarations) will be tolled.
FCC Filings and Review
Applications for the assignment or transfer of control of FCC licenses will not be reviewed or processed during shutdown—if they are filed during the shutdown, they will be considered accepted only on the business day following the day the FCC returns to normal operations. The FCC has also suspended its review of pending transactions and has suspended its informal 180-day time clock for review of transactions until the business day following the day the FCC returns to normal operations.
Bank Regulatory Filings and Review
Because the federal banking regulators—the Federal Reserve, the OCC, the FDIC and the CFPB—are not dependent on Congressional appropriations for their funding, they remain open and fully operational during the government shutdown.
