Regulators want to analyze the complex competition matrix early. A buyer’s failure to consider antitrust issues early in the M&A due diligence cycle can result in delays, hefty breakup fees or deal abandonment. Both sides of qualifying deals of more than $126m must independently provide the Federal Trade Commission (FTC) and the Department of Justice Antitrust Division with a competition assessment and synergy analysis, if prepared, and other upfront details before a deal can proceed.1
Forward thinking investors, however, can take control of the deal narrative with an approach that blends business strategy diligence with economic antitrust scenario modeling to uncover synergies and divestment scenarios. This approach can help buyers not only avoid deals being blocked but also accelerate the strategic plan during M&A integration, helping to build shareholder value.
Persistent regulatory scrutiny comes as the US M&A climate appears to be warming. The EY-Parthenon Deal Barometer projects a 10% increase in US M&A activity in 2025; deals are likely among US hospitals, doctor practices, post-acute, home health, ambulatory surgery and pharmacies.2 Of the 1,735 deals that met the HSR reporting threshold in 2023, 73 were in health care and of those, six were flagged for a second review, an EY-Parthenon analysis shows.3 However, the number of deals likely subject to secondary review at the federal level understates the issue since US health systems are overwhelmingly not for profit and these organizations’ deals need to navigate state reviews.
Regulators may block a transaction if it could incentivize the merged enterprise to raise prices or lessen quality for patients and members. Regarding labor, regulators also can block deals that decrease salaries or quality of care delivery. However, in the evolving landscape for health care M&A, economic antitrust considerations can be an opportunity for health care leaders to be prepared for likely regulatory negotiations and respond quickly to regulators’ red flags.