For companies in financial distress, § 363 of the U.S. Bankruptcy Code is often a preferred tool to effect a sale of a company’s assets or equity interests. Under § 363, a debtor may sell or lease its property outside the ordinary course of business, free and clear of liens, claims and encumbrances. See 11 U.S.C. 363(b),(f). Section 363 sales are often time-sensitive due to deteriorating asset values, but there is no bankruptcy exemption from compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR). Accordingly, developing a strategy to address the requirements of HSR is critically important in any qualifying transaction.
Under § 7 of the Clayton Act, it is unlawful for any person to acquire the assets of another company if the “effect of such acquisition may be substantially to lessen competition.” The primary purpose of HSR is to provide a mechanism for the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) to review potentially anti-competitive transactions before they occur, thereby reducing the costs of unwinding prohibited transactions and avoiding anti-competitive effects. Under HSR’s premerger notification program, certain qualifying acquisitions of voting securities or assets must be reported to the FTC and DOJ, prior to consummation, through the filing of a notification and report form.
