VIEWPOINTS: M&A Transactions Face Heightened Government Scrutiny

In the latest signal of the antitrust regulation’s renewed teeth, the Senate confirmed Jonathan Kanter to lead the U.S. Department of Justice’s antitrust division. The Biden Administration’s push for a more muscular antitrust policy has already generated costly consequences for the M&A market. 

Most strikingly so far, Aon Plc and Willis Towers Watson Plc terminated their multi-billion merger over the summer, which had aspired to create the largest insurance broker in the world. Valued at $80 billion, the deal fell apart mere weeks after the Justice Department sued to block the deal due to antitrust concerns. This came at a high price for Aon, which owes a $1 billion termination fee. 

The Justice Department’s action was in contrast to the more lenient stance adopted by European regulators, who had approved previously the deal between the two London-based companies after they agreed to divest certain assets. In what has been hailed as a win for the Biden Administration, the two companies ultimately agreed to abandon their efforts to fight the Justice Department’s suit. 

This may further cool the M&A market as larger firms potentially face similar government scrutiny. While the deal was touted in the joint press release as “natural next step in our journey to better serve our clients” that would “drive innovation more quickly and deliver more value,” US regulators disagreed, arguing that the combination of the two giants would quash competition, thereby harming consumers in the end. 

This termination comes with a whooping price tag: according to the Willis Towers Watson 8-K filing from March 2020, “In the event the Business Combination Agreement is terminated in connection with certain circumstances related to the failure to receive the antitrust and competition clearances that are conditions to closing, Aon would be obligated to pay a fee of $1 billion.” 

According to Matterhorn’s M&A database, which harnesses both AI and attorneys to digest the granular deal points of publicly announced transactions, Willis Towers Watson was advised by law firms Weil, Gotshal & Manges LLP and Skadden, Arps, Slate, Meagher & Flom LLP, and financial advisor Goldman Sachs & Co. LLC. Aon Plc was advised by law firms Latham & Watkins LLP and Freshfields Bruckhaus Deringer LLP, and financial advisor Credit Suisse Securities LLC. And the federal government is not the only force pressing for stricter regulation — states have likewise filed lawsuits against Facebook and Google. As the M&A market’s blockbuster deals combine companies, they face increasing governmental scrutiny ahead.