The UK is introducing a new far-reaching national security regime which will impact M&A activity in Tech, Energy, Finance and other sectors. Orrick Partner Douglas Lahnborg, on 3 February 2021, hosted a webinar with panellists Niall Mackenzie (Department for Business, Energy & Industrial Strategy), Tim Riisager (Centrica), Alex van Someren (Amadeus Capital Partners) and Tom Tugendhat MP (Chairman of the Foreign Affairs Committee), who shared valuable insights for businesses and their advisors into the National Security and Investment Bill.
Watch a recording of the discussion here and listen to this experienced panel share their views on points such as what businesses should do now if they are concerned that a transaction may fall within the scope of the regime, the timing of the Bill, definition of “national security”, changes to the structuring of transactions, expectations on the newly-created Investment Security Unit and whether this is the first of a suite of legislation and policy that we will see from the government to address national security concerns in transactions involving entities or assets with links to the UK.
Non-compete clauses are commonly included in M&A agreements. Although generally recognized as lawful, non-competes must fulfill certain requirements to comply with antitrust and competition laws. A recent FTC enforcement action further clarifies these requirements for the U.S., and serves as a reminder that U.S. antitrust authorities are actively reviewing these provisions.
In January 2019 NEXUS Gas Transmission LLC entered into a Purchase and Sale Agreement (PSA) to acquire Generation Pipeline LLC, a 23-mile natural gas pipeline in the Toledo, Ohio area, from a group of sellers for $160 million.
In the Complaint and Proposed Consent announced on September 13, 2019, the Federal Trade Commission (FTC) took issue with the non-compete clause in the PSA, which would have prohibited one seller, North Coast Gas Transmission (NCGT), from competing with the Generation Pipeline for three years. NCGT not only holds a minority interest in the Generation Pipeline, but also holds the North Coast Pipeline, a 280-mile natural gas pipeline partially serving the same region. In the FTC’s view, the non-compete clause was effectively an agreement by two competitors to cease competition for a period of time. As a condition to receiving antitrust clearance to proceed with the transaction, the parties were required to amend the PSA to eliminate the non-compete clause, enabling NCGT’s North Coast Pipeline to continue competing with the Generation Pipeline. The parties will also be subject to various reporting and compliance requirements for ten years.
It is important to note that even where a transaction does not itself raise antitrust issues – as here, where the FTC did not find any issues with NEXUS’s acquisition of the Generation Pipeline – the antitrust agencies may nonetheless take issue with the ancillary agreements to a transaction. Here, the FTC looked beyond the competitive implications of the primary transaction and investigated the impact of the non-compete clause. Parties should carefully draft and negotiate all M&A agreement clauses that may impact competition, and consult with antitrust counsel as needed.
Orrick Antitrust associate Elena Kamenir published an article in Competition Policy International covering themes and takeaways from the FTC hearings on the intersection of big data, privacy, and competition. To view the article, please visit here.