A merger or acquisition is often one of the biggest transactions a business can complete. When a company opts to acquire another company or arrange to combine organizations, this effort can lead to rapid growth, access to valuable intellectual property resources and other benefits for both organizations.
However, mergers and acquisitions sometimes face pushback from regulatory agencies and state officials. For some companies operating in Ohio, a merger or acquisition effort will grind to a sudden halt when the state interferes, possibly by initiating litigation. When might a merger or acquisition trigger state intervention in Ohio?
When the resulting organization may violate antitrust laws
Generally speaking, businesses have to allow reasonable and fair competition. Attempting to monopolize a market is one of the many ways that business could run afoul of Ohio’s antitrust laws. If two companies are the only organizations providing certain goods or services in a region, the combination of the two companies could result in unfair circumstances.
It might become prohibitively difficult for other organizations to compete, or the company could effectively start setting unfair prices because there are no other service providers or retailers directly competing with it. When a merger or acquisition will effectively end competition in one niche of the market, state officials may intervene for the protection of Ohio consumers.
Sometimes, efforts to halt a merger or acquisition will be successful. The companies may not be able to move forward with a transaction that represents months of negotiation and investments. Businesses planning a large merger or acquisition will typically want to protect themselves from the possibility of the state interfering in major transactions.
Structuring the resulting combined or expanded company carefully or committing to specific business practices that will ensure that there is still fair opportunity for new competitors are both ways to reduce the scrutiny that emerge or acquisition may face. Clear documentation of the company’s negotiations and plans for after the merger or acquisition can also help defuse tensions around the transaction.
Approaching the process carefully and being ready for a possible challenge are both smart moves for businesses aspiring to increase their dominance in an area of the market via an acquisition or merger. Seeking legal guidance is a good way to start.
