Long Road (Back) to Remedies: U.S. Agencies Re-embrace Negotiated Divestitures in M&A

After an extended hiatus, the U.S. antitrust agencies are back in the formal settlement business. Within days of each other, the DOJ and FTC each cleared its first transaction subject to conditions under the new Administration. These conditional clearances mark a return to former merger enforcement policy: allowing transactions to close with divestitures and without litigation (something both agencies generally declined to do during the Biden Administration). Pending the release of a formal remedy policy promised for later this year, the agencies are signalling a more practical approach to divestitures in line with traditional remedy policies.

Early blueprint for divestiture planning

The settlements entered into by the DOJ and FTC offer a similar roadmap for targeted product divestitures. On 2 June, the DOJ cleared Keysight’s takeover of Spirent Communications plc, subject to divesting Spirent’s high-speed ethernet, network security and channel emulation business lines to VIAVI Solutions Inc. In a press release announcing the settlement, the DOJ stressed the virtues of the consent process—resolving antitrust concerns by “secur[ing] enforceable commitments from the merging parties” that protect competition, promote innovation, and allow “American companies to maintain global leadership.” New Division leadership clearly sees settlement as an effective tool to address competitive harms while enabling pro-growth transactions to proceed.

Just days earlier, the FTC approved Synopsis, Inc.’s $35 billion acquisition of Ansys, Inc., requiring the parties to divest three semiconductor design software tools to Keysight Technologies, Inc. In a statement accompanying the settlement, FTC Chair Andrew Ferguson indicated a renewed willingness to enter into consent decrees when parties offer robust structural remedies. Sounding similar notes as DOJ, Chair Ferguson stressed that settlement allows a transaction’s procompetitive benefits to be realized and “avoid[s] bogging down innovation and interfering with the forces of a free and competitive market” through needless litigation.

Key Takeaways:

For dealmakers mapping out potential remedy options, there are a few common themes:

• Carve-outs: Both remedies were product carve-outs from broader business lines (a sign of more flexible enforcement posture), although the FTC said the carve-outs would create “close to” a standalone business.
• Mix-and-match: In the Synopsis deal, the FTC approved the divestiture of two products from Synopsis and one product from Ansys. Under traditional FTC policy, mix-and-match remedies (which combine assets of both transacting parties in a divestiture package) were a no-go. The FTC historically preferred that any divested business come from only one of the parties to increase the likelihood of successful integration.
• Up-front buyers: In both cases, the FTC and DOJ approved an “up front buyer”—i.e. an identified divestiture buyer and executed divestiture agreement—before entering the settlements. This was the standard approach for many years pre-Biden Administration, which looks to have returned.
• Global coordination: The FTC closely collaborated with authorities in the European Union, United Kingdom, South Korea, and Japan. Likewise, the DOJ collaborated closely with the CMA. China’s approval of both tie-ups remains pending.
• Staying out of the way: One of the primary complaints of the Biden Administration leadership was that clearing deals with targeted divestitures only creates big companies and higher industry concentration. That theory seems to be fading, which bodes well for large portfolio deals. In its statement, the FTC said it is a “cop on the beat” not a central planner. Likewise, DOJ has previously asserted itself as a law enforcement authority, not a regulator.

(Re)Modernised approach to merger assessment

The FTC and DOJ press releases highlight that negotiated settlements allow a transaction’s procompetitive benefits to be realized while addressing anticompetitive concerns and conserving agency resources (by avoiding litigation). This is a clear break from both agencies’ stances against formal remedies under the Biden Administration. FTC Chair Andrew Ferguson explained that behavioral remedies (e.g., non-discrimination or access commitments) will be disfavored, but still might be possible to address agency concerns. Echoing similar sentiments, DOJ Assistant Attorney General Gail Slater has previously stated that “antitrust is a scalpel”, and merging parties should expect remedies requiring “targeted, incisive cuts” of any areas raising competitive concern.

The FTC statement casts M&A as procompetitive by creating incentives for start-ups to innovate in order to position themselves to be acquired by bigger investors (because not every good idea becomes an IPO). This departs from prior agency views that “killer acquisitions” were a leading cause of anticompetitive harm.

Stay tuned

It may be too soon to say that “everything old is new again,” but these early settlements imply a return to traditional remedies policies of the pre-Biden era and greater convergence with other global authorities. As policy pronouncements (and presumably, more consent decrees) take shape, the potential exit ramps for dealmakers in securing clearance will likely become clearer.