The Hart-Scott-Rodino Act (HSR), enacted in 1976, is a federal antitrust statute that requires companies to notify the Federal Trade Commission (FTC) and Department of Justice (DOJ) before completing mergers, acquisitions, and certain other transactions above specified dollar thresholds. The law creates a mandatory waiting period—typically 30 calendar days—during which regulators can review whether the deal raises competitive concerns. If regulators request additional information, the waiting period extends, potentially delaying closing by months.
How It Works
When a transaction meets HSR thresholds (adjusted annually for inflation; currently around $111 million for 2024), both the acquirer and target must submit detailed Hart-Scott-Rodino forms to federal regulators. These filings include information about the companies' business operations, revenue, assets, and the transaction structure. Regulators then have 30 days to investigate. They can issue a "Second Request" for more documents and testimony, which pauses the clock and typically adds 30+ days to the timeline. Parties cannot close the deal until the waiting period expires or regulators clear the transaction.
Why It Matters for Investors
For angel investors and entrepreneurs, HSR affects deal timing and structuring. If your company is being acquired above the threshold, expect regulatory scrutiny and potential delays—sometimes 6-12 months in contested cases. This impacts when you receive proceeds and can reinvest capital. Conversely, if you're investing in a company planning acquisitions, HSR filing costs (typically $100,000+) and timing risks factor into deal economics. Understanding HSR helps you set realistic closing timelines and budget for legal fees.
Example
A mid-market SaaS company valued at $150 million agrees to acquire a competitor for $120 million. Since the deal exceeds HSR thresholds, both companies must file with the FTC and DOJ. If the agencies determine the merger could harm competition in a specific market, they may challenge it or demand divestitures before approval. This review process can delay closing by 4-6 months, affecting the seller's liquidity timeline and the buyer's integration plans.
Key Takeaways
- HSR filing is mandatory for transactions above annual thresholds (generally $111+ million); failure to file can result in substantial penalties
- The process creates a 30-day waiting period minimum, with potential extensions if regulators request additional information
- Budget for professional legal and economic analysis—HSR compliance is complex and requires expert guidance
- Early planning around HSR can improve deal certainty; some structures or divestitures can facilitate faster approval