Merger Arbitrage, 2nd Edition

Chapter 12Government Involvement

Attitudes of governments and the general public toward business vary around the world. Even in the United States, where a national consensus toward business appears to manifest itself through an ardent free-market rhetoric, the reality is frequently much different and government does, at least in some cases, take a strong interest in merger activities. Its different agencies engage in ways that both help and hamper arbitrageurs in their business. The multitude of federal and state agencies that are involved in the regulation of takeovers is confusing and, worst of all, inconsistent. Different actors have conflicting goals and priorities.

Outside of the United States, government interference in mergers and acquisitions tends to be more prevalent, and the often associated strong anti-business rhetoric reflects social norms.

Government involvement in mergers and acquisition occurs on several levels:

• Direct regulation of the merger process was discussed in Chapter 8.
• Competition regulation seeks to mitigate the impact of mergers on the markets in goods and services.
• National security regulations have become more prominent over the last decade and seem to evolve into protectionist vehicles akin to what health and safety regulations do to free trade.
• Ancilliatory regulations include foreign exchange restrictions. Politics play a role.

Companies take the potential threat of government blocking a planned merger seriously and add lengthy clauses to ...