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The AMA Handbook of Due Diligence by Andrew J. Sherman, William M. Crilly

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36-06 DUE DILIGENCE HANDBOOK
36-02: Hart-Scott-Rodino Questionnaire (Antitrust Compliance Filings)
[Target Company]
TO:
FROM:
DATE:
RE: Information Required to Evaluate Antitrust Aspects of Proposed Transaction
Following is a listing of certain information we require in order to assess the competitive consequences of
the proposed acquisition, and, if appropriate, to begin preparation of any required Hart-Scott-Rodino filing.
In answering the following questions, please clearly specify whether the information provided relates to the
Target Company, or to both the Target Company and the Acquiror. This information is outlined below.
1. Identify any product/geographic overlaps. It is our understanding that both the Target Company and
Acquiror sell to large customers such as Alpha, Bravo and Charlie similar products throughout the United
States. Please identify the SIC codes in which the revenues from the sale of those products or services are
reported and provide the SIC revenue data for 20__ and for the most recent fiscal year.
2. Market definition. Identify any other products that can be used to perform the same functions as the over-
lap products. (For example, could any alternative or related product be considered a competitive equivalent
of the product?) Would customers be likely to switch to these products in response to a 5% increase in price?
Please be specific.
3. Structure of the relevant market(s). It is our understanding that the following firms design, manufacture and
market products similar to those offered by the Target Company and Acquiror:
Product #1 Product #2
One Industries: 30% One: 42-45%
Two: 20% Two: 13%
Three Corp: 15-20% Three Corp: 12%
Four Partners: 9-10% Four Partners: 7%
Five Ltd: 6-7% Five Ltd: 5%
Please confirm or revise as appropriate the market share estimates above. Also, identify any additional
firms that would be able to begin producing these products within one year without making any significant
sunk (i.e., non-recoverable) costs.
4. Competitive effects.
a. Unilateral effects
1. Is the transaction likely to give the merged firm the ability to raise prices unilaterally?
Yes _____ No _____
2. Are the merging firms particularly close competitors?
Yes _____ No _____
3. What would customers be likely to do in response to an attempted price increase by the merged entity?
4. How easy would it be for other firms to reposition their products to defeat a price increase by the
merged firm?
Easy _____ Difficult _____
776
5. Have there been any monopolization or other antitrust complaints against either of the parties in this
line of business?
Yes _____ No _____
b. Coordinated Effects
1. Will the transaction likely make it easier for the merged firms to coordinate pricing and output with
other firms in the market?
Yes _____ No _____
2. Is the market conducive to such coordination?
Yes _____ No _____
3. Are the products homogeneous or differentiated?
Homogeneous _____ Differentiated _____
4. Are transaction prices hidden or open?
Hidden _____ Open _____
5. How easy would it be for smaller firms to expand their output in response to a price increase by the
leading firms?
6. Is there any history of collusion in this line of business? (For example, have there been any govern-
ment antitrust investigations or enforcement actions or any private suits alleging antitrust violations?)
Yes _____ No _____
c. Innovation
1. Is our understanding that the technology is relatively mature and stable correct?
Yes _____ No _____
2. Are the parties to the transaction unique in any way with respect to innovation?
Yes _____ No _____
5. Entry.
1. Has there been a recent history of actual or attempted entry into the market?
Yes _____ No _____
2. What is the recent history of exit from the market?
3. Is our understanding that demand for the products is increasing correct?
Yes _____ No _____
4. Is there excess capacity in the industry (or, conversely, supply shortages or capacity constraints)?
Yes _____ No _____
5. What post-transaction changes, if any, will be made in the operations and marketing of the companies?
6. Who are the most likely potential entrants?
DUE DILIGENCE HANDBOOK 36-07
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36-02: Har
t-Scott-Rodino Questionnaire (Antitrust Compliance Filings) (Continued)

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