For his latest column in Reuters’ Practical Law, Senior M&A Partner Frank Aquila authored “Antitrust Considerations in Shareholder Activism,” discussing how boards should factor increasing antitrust scrutiny from policymakers and regulators into their shareholder activism response.
Frank suggests that boards pay special attention to issues that antitrust regulators, policymakers and activists are focused on, including board composition and director appointments, M&A transactions and ESG-related initiatives.
Board composition
With activists increasingly looking to gain board seats, boards should keep in mind the Department of Justice’s treatment of interlocking directorates under Section 8 of the Clayton Act, which prohibits individuals from serving on boards or as officers of competing companies. In light of this development, boards should be mindful of potential interlocks between their own nominees as well as activist-proposed nominees.
M&A-related activities
Although activist demands concerning M&A transactions are down in 2023, antitrust regulators have developed new guidelines around vertical mergers and enhanced scrutiny of mergers and acquisitions under existing policy statements and laws. If there is an uptick in M&A-related activist demands, boards should consider heightened antitrust scrutiny when evaluating and responding to the campaign.
ESG initiatives
With an increasing number of companies pursuing ESG-related initiatives, state AGs from 14 states have questioned whether net-zero alliances should be subject to antitrust law. Conversely, European regulators have adopted measures to facilitate coordination on ESG initiatives, demonstrating the growing polarization on ESG policies from regulators, policymakers and investors.
Read “Antitrust Considerations in Shareholder Activism.”