Need To Know: FTC Adopts New Rules For HSR Filings

The Federal Trade Commission adopted final changes July 7 intended to simplify premerger notification process under the Hart-Scott-Rodino Act. However, the changes call for capturing new information that federal antitrust agencies consider necessary for review of mergers, which means private equity firms and other deal participants will have to report more information.

Of most importance to private equity firms, the final rules call for information about ties between private equity funds and other entities “associated” with the buyer that compete or have equity investments in the same business as the target. This means that if a private equity firm is buying a company in, say, the telecommunications industry, it would have to report—up front—other telecommunications investments made via other funds. Today, the FTC would only require information on the fund acquiring the target, though in its broader review of the deal the FTC would likely look at other investments made in the sector by other funds managed by the same firm. The rule changes intend to get that information from the outset of the review, according to an attorney familiar with the changes.

The rules stem, in part, from the FTC’s scrutiny of the 2007 takeover by The Carlyle Group and Riverstone Holdings of energy company Kinder Morgan Inc. At the time, the FTC said that Carlyle and Riverstone already held significant positions in Magellan Midstream, a competitor of Kinder Morgan. The FTC ultimately approved the $22 billion deal.

The new rules will become effective 30 days after their publication in the Federal Register.

Justice Department Questions SEC Spending

The Justice Department is investigating the Securities and Exchange Commission’s handling of its office expansion following the Dodd-Frank financial reform law, according to The New York Times. The agency’s internal watchdog said the SEC leased $556 million in office space last year using “a deeply flawed and unsound process” that lacked competitive bidding, the Times reported.

The SEC had been trying to find new office space for some 800 new hires to meet its expanded authority under Dodd-Frank, which includes the registration of private equity firms with $150 million or more in assets. The Dodd-Frank law authorized the SEC to double its $1 billion budget over the next few years, although Congress never allocated the funds. Still, the SEC secured 900,000 square feet of office space in Washington, D.C., last summer, the Times reported. The scrutiny could complicate the agency’s effort to get more funds to meet its expanded obligations under Dodd-Frank.

Real Estate Dominates Fundraising

Private equity real estate funds focused on the North American property market secured the majority of the $11.2 billion raised by those with a final close in the second quarter of 2011, sister news service Reuters reported, citing data from research firm Preqin.

Ten funds with a primary focus on the North American property market raised commitments of $8.6 billion, Reuters reported. Among them were Lone Star Real Estate Fund II, which raised $5.5 billion at final close; the Och-Ziff Real Estate Fund II, which raised $840 million; and Pramerica Real Estate Capital I raised $786.5 million. Three Europe-focused funds garnered $1.2 billion.