Brandon Raphael, Barbara Sicalides, and Joe Farside discuss antitrust issues impacting private equity firms and M&A in general.
In this episode of PE Pathways, Brandon Raphael, a partner from the firm's Private Equity practice, is joined by fellow Partners Barbara Sicalides and Joe Farside from the firm's Antitrust practice group to discuss antitrust issues impacting private equity firms and M&A in general. Key points discussed include antitrust priorities under the new administration, noncompete and restrictive covenants, the antitrust enforcement environment, private equity and antitrust scrutiny, and state-level antitrust enforcement, among other topics.
Since the recording of this podcast, there have been some additional developments related to the direction of the new administration worthy of mention. On March 12, 2025, Abigail Slater was confirmed as assistant attorney general for the Antitrust Division. In addition to her confirmation hearing commitment to the pro-enforcement 2023 Merger Guidelines, Slater, in a March 17, 2025, memo to staff, noted that the agency will prioritize consumer markets: "In an era of rising prices, pocketbook issues are front of mind." In addition to consumer markets, she has identified 5G, artificial intelligence, quantum computing technology, and agriculture as important areas for DOJ attention because those markets could harm small business and farmers. In what could be a hopeful sign for private equity, Slater has also appointed counsel for a large U.S. asset management firm to lead the agency's merger enforcement.
With respect to the Federal Trade Commission (FTC), for the first time in history, the president has terminated the two remaining Democratic commissioners, and the president's nominee, Mark Maedor, awaits senate confirmation. The FTC has asked the Fifth and Eleventh Circuits to stay the two challenges to the worker noncompete ban rule for 120 days in order for the FTC to "reconsider its defense of the challenged rule." The FTC has also announced the formation of a Labor Task Force that will "prioritize rooting out and prosecuting deceptive, unfair, and anticompetitive labor-market practices that harm American workers," including by bringing enforcement actions against inappropriate employee noncompetes. On the merger front, the FTC staff again urged the Indiana Department of Health to deny the pending application to merge two health systems, in part, based on the merger's potentially negative impact on the relevant labor market. The FTC vote to submit the staff comment to the Indiana Department of Health was 4-0, suggesting that the new administration will not simply abandon its concerns regarding U.S. workers.
PE Pathways — Antitrust Insights for Private Equity: Navigating the New Administration's Policies
Speakers: Joe Farside, Brandon Raphael, Barbara Sicalides
Aired: March 26, 2025
Brandon Raphael:
Welcome to PE Pathways, our podcast series where experienced dealmakers share their thoughts on current private equity and M&A trends and developments. Today we are going to discuss antitrust issues currently impacting private equity firms and M&A in general.
My name is Brandon Raphael and I am a partner in the private equity group at Troutman Pepper Locke. And I'm happy to be joined today by my fellow partners, Barbara Sicalides and Joe Farside, both reside in the firm's anti-trust practice group.
Welcome, everyone, and thanks for joining me today. Barbara, with the change of administration earlier this year, the administration has started to plan out its policy and priorities in a number of areas, including with respect to antitrust enforcement. Can you discuss some of your predictions as to the priorities and policies the new administration may pursue?
Barbara Sicalides:
Yep, I certainly can. I would say that a lot of the same priorities are going to continue over to this administration in the sense that big tech was a priority in the prior administration. It will continue to be a priority in this administration. Healthcare was a priority in the earlier administration. It will continue to be a priority in this administration. And this is speaking about the FTC and the DOJ, both organizations' current leadership and proposed leadership in their confirmation hearings and in speeches have made plain that those industries will continue to be important and high-profile, get a great deal of scrutiny from them.
They also have mentioned agriculture. And most recently, this weekend, Chair Ferguson of the FTC made clear that he would be seeking staff review and evaluation vigorously and aggressively with respect to labor markets. Something we didn't think necessarily would be the case in this new administration. Chair Ferguson has made very clear that he will focus on identifying cases where there have been non-competes or no-poach agreements that violate the FTC Act or the Sherman Act. It seems less likely that there would be any new rules developed in that area. But with respect to enforcement actions, Chair Ferguson has put himself on the record that he will be looking for opportunities to enforce the antitrust laws in labor markets.
Brandon Raphael:
The FTC last year, obviously, it should have rolled banning non-competes, which was enjoined in the fall. I think people in the deal world maybe had an assumption that, given the change in administration, that might have signaled the death now to the potential non-compete ban. But it sounds like it's possible that the rule may not come back, but there could be still considerations with regards to non-competes and other restrictive covenants. Are there any insights to offer based on what Chair Ferguson has said around drafting and the terms of restrictive covenants in the context of M&A?
Barbara Sicalides:
It's not entirely clear. He hasn't made his position clear, and it is historically unusual for one of these agreements to constitute an antitrust violation prior to the ban, that is. But he did say that it's important for the pro-competitive justifications for the restraint in the labor market to outweigh any harm that the restraint might cause. And he described that whether or not there is a less anti-competitive means through which the pro-competitive justifications could be achieved.
That formulation of a standard I think gives people an easy way to consider the issue, but it's a little less straightforward when an actual court analyzes these situations. But his test is whether or not there is something that would cause less of a restriction that would achieve the same goal. That's a pretty tough standard, really. Because as you know, many of these non-competes are in place with respect to proprietary information, et cetera. And you could always argue that a confidentiality provision is a less restrictive alternative. It's not clear. But he did say that he would have voted for some of the enforcement actions in the no-poach area if there had been, as he described it, lawful invocation of the agency's enforcement authority. And he said that “if a complaint plausibly alleges anti-competitive effects outweighing pro-competitive justifications, I would vote for it.”
Brandon Raphael:
But in the last year when Chair Ferguson was a member of the FTC, he voted against the rule on the non-compete ban. But he has said that there are instances where enforcement may be appropriate, just selective non-competes.
Barbara Sicalides:
Correct. Or no-poach agreements. I mean, I think historically, antitrust counsel. And I believe this is still the case, right? If you have a non-compete that really prohibits competition from taking place in a market because there are not that many players and the geography that the market is in is fairly narrow, whatever, those are situations where there would always be risk.
The point, I think, of including the fact that he is speaking out so vociferously on this topic is to say, "Well, he has not reversed course on whether he believes a rule like the ban is appropriate." He has made clear that he has instructed the staff to look for situations where enforcement actions are appropriate in the context of non-competes and no-poaches. That just means that when the same rules we've always talked about, which is narrowly tailored and framed to really address the issue at hand and not an effort to expand beyond what the legitimate concern might be of the parties.
Brandon Raphael:
The change in administration also in the deal community seemed to think that we might be returning to a friendlier environment with respect to antitrust enforcement. I know that we're only a few weeks into this administration. Does it seem like that is the case?
Barbara Sicalides:
I don't know if I'd use the term friendlier, but I think that some of the original processes that were in place will sort of be reinstated. Early termination of the waiting period is going to be reinstated, which is, I think, helpful to businesses and the economy in general, because it allows transactions to proceed that don't have any competition issues whatsoever more quickly and with lower costs.
But also, I think that the agencies are less likely to sort of pursue novel theories at every opportunity. For example, I think that they'll be less interested in serial acquisitions just because it's a serial acquisition. I think if there has been a series of acquisitions and there's an HSR filing made and the agency becomes aware of the fact that it's a concentrated market and that there are anti-competitive effects from past acquisitions and/or the current acquisition, I think the agency will look at it. But I don't think it's because it's a theory in the merger guidelines, I think just because they’ll look at deals in the sort of each one as it comes, which I don't know that I'd say that's necessarily friendlier. I think they're going to be very pro-enforcement. I don't think they're going to back away from pursuing transactions that they think are problematic, particularly in the industries we talked about.
Brandon Raphael:
It seemed like in the last administration, there was a perception that private equity was viewed a certain way. You mentioned a few things like serial acquisition, rollups, things like that, that became the targets of some of those novel enforcement theories, and including some very high-profile enforcement actions against particular private equity funds. Is there any takeaway from those enforcement actions or considerations for private equity firms as they continue into the weakening environment that you've noted or expect?
Barbara Sicalides:
I don't think this administration will view PE as a monolith, and I really did feel as though the prior administration did. Obviously, I'm generalizing. But the view that private equity is driven entirely or nearly entirely by increasing margins and at the expense of or with less concern for quality or innovation than non-private equity investors, I don't think this administration will hold that view. I don't think that using expressions like stealth acquisitions – the last administration used the term stealth acquisition for rollups and buying smaller pieces – I don't think this administration has that view and I don't think it will use those types of terms. Certainly, Chair Ferguson has made clear that he doesn't think the fact that a buyer is a private equity entity is really pertinent to whether or not there is a competition issue.
Brandon Raphael:
You mentioned the early termination returning. A few weeks ago, the new HSR rules and filing form took effect. Joe, based on the new rules and the new filing form, do you see any issues that are maybe unique for private equity in terms of what that form asked for and what the new rules dictate be disclosed in reporting a transaction?
Joe Farside:
The new filing process is going to have a major impact on private equity because, if nothing else, of the volume of filings that private equity firms do in their acquisitions and their exits. And while the filing process became somewhat formulaic, especially in purely financial transactions, sponsor transactions, even those filings are going to become more burdensome going forward.
And while filings might have been a one to three-week preparation time, followed by a 30-day waiting period for PE fund to exit an investment, you're now looking at a period of possibly months to prepare the filing. And then you've got to still wait the 30-day waiting period. While early termination is back, it's not going to carry the same benefit as it used to carry when you need all that time to prep and file in the first place. Yes, early termination might be back and that's a benefit to our clients, but it's buttressed by the fat that you have this up-front time to prepare the filing that's going to be more than folks are used to.
Brandon Raphael:
For private equity firms that are making numerous filings, is there any work to be done in advance to try and get ready for that first series of filings under the new rules?
Barbara Sicalides:
Yes is the answer. And I guess the next question is in what ways, right? I mean, having some sort of a – if you don't already have it – establishing a tracking system and regularly updating it for any directors, or officers and directors who serve in management or as directors in other entities. And I use the term director, but it's anyone with the equivalent of a director. Even if it doesn't have a formal board of directors.
And also, the process of providing information about minority holders and limited partnerships is expanded and will include requiring all the DBAs for the minority holders and in limited partnership. So it's important to have all that information collated. It's not sexy work, but it's something that could be done in advance that would expedite the process.
Also, in all deals, identifying early what the transaction rationales will be is important. Because in the new forms, you need to describe the transaction rationales. And if there's any inconsistency between the rationales provided and anything in the documents that are included with the filing, you're supposed to try to explain that inconsistency. Thinking about that early on in a transaction, certainly working with investment committees, et cetera, and understanding a lot of PE firms that I've worked with look at similar kinds of synergies and efficiencies in each of their deals. They may not have the same weight in every deal, but they often look at similar rationales and synergy.
If they can think about those upfront and endeavor to be consistent in the way they use those in their documents as well as in each transaction that will facilitate getting the filing done. There's a lot of components to it that they can pre-prepare for, and we're happy to assist in any way if folks have questions on that.
Brandon Raphael:
You mentioned collating information and disclosure around minority holders and limited partners and things like that. Does that include disclosure upwards from the fund level to the funds investor's minority holders and limited partners or at the acquisition level?
Barbara Sicalides:
It's not that simple. But, yes. I mean, it's basically any 5% or greater rate within the same ownership chain of the buyer.
Brandon Raphael:
One of the, I guess, lasting impressions, it would seem to be of the last administration's policymaking were the change to the merger guidelines, which were changed in 2023. We've lived under those guidelines for a year or two now. Anything that's come out of those that you think is unique or something that's sticking in terms of enforcement theories, remedies, and things like that that you expect to continue?
Barbara Sicalides:
Both Gail Slater and Chair Ferguson, and others who are being suggested for high-level positions in the agencies, they're all pretty uniform in their position that the 2023 merger guidelines will continue to be the guiding enforcement priorities for the agencies going forward in this administration.
During the most recent administration, a number of courts ruled in favor of components of those merger guidelines, including the reduced concentration, market concentration levels that are required for there to be a presumption to the anti-competitive effects of a transaction. I'm not saying that the agency will bring transactions to court just because they trigger those HHI numbers. “HHI,” sorry, is the acronym for the Market Concentration Test that I referenced.
But I am saying that the last administration’s guidelines had a meaningful impact on the way in which transactions are evaluated. And courts have approved a number of elements of those guidelines, including the market concentration tests. Also, some elements related to nation competition or the innovative newcomers to the market.
This administration has said that it will abide by those guidelines, but I don't think they're going to be going out on the limb to take deals just for the sake of trying to make a statement. I think they're going to focus a little bit more on the consumer welfare standard, which is looking to the impact of the transaction on the consumers of the service or product. There are some notable exceptions to that because examining big tech and its impact on freedom of expression. I mean, freedom of expression isn't a typical consumer welfare test. But my view is it is going to have a twist that's a little different from the last administration, but it's still going to have a twist. And you cannot assume that they're going to abandon whole sections of the merger guidelines, and definitely not the labor section because Chair Ferguson has made clear that he isn't going to simply abandon that work.
Brandon Raphael:
One of the industries that you mentioned earlier as being a focus was healthcare. And I think the expectation from everybody is that there's going to be continued scrutiny of private equity investment in healthcare. But one thing that I'd like to hit on, and Joe, I’m interested in your thoughts, is that there's been increased state-level enforcement from an antitrust perspective, especially as it pertains to healthcare. Can you just give us a little background on what that state-level enforcement looks like and what the trends are there?
Joe Farside:
Absolutely. From my perspective, the states are still coming to realize the power available to them under the antitrust laws to investigate and try to remediate or stand in the way of transactions across all industries, not just healthcare. But from a policy perspective, the state level enforcement does seem to focus on healthcare.
We've seen over the years, certain states have had no problem exercising their authority in the antitrust space, states like New York, California, Massachusetts, and Pennsylvania. And then in recent years, we've had attorney generals from several other states, including some very small states, step up and exercise their jurisdiction under state and federal antitrust law to investigate transactions, even transactions that only marginally impacted competition.
Now we see with changes in the federal antitrust attitude, not from a perspective necessarily of more versus less enforcement, but from the perspective of hard and focused in certain industries, the state attorneys general are feeling empowered to take up the cause in other industries that might impact their state disproportionately. And if they have a major player who's merging and is headquartered in their state, they might take an interest not just from the perspective of consumer welfare, but also from the perspective of impacts in the labor market because employment's an important policy in their particular state.
Across the board and across all industries, we're seeing more state AG involvement. What does that mean for PE clients? I think it just means more unpredictability in terms of whether you find yourself answering to an attorney general's office that's not going to have the expertise that the Federal Trade Commission or the U.S. Department of Justice may have in order to put competition-minded folks on the review or have the economic expertise at their disposal that the FTC or DOJ does. And then dealing with that uncertainty is something that you've got to think a little bit about when you're planning your entries or your exits.
Barbara Sicalides:
Also, regardless of the agency that's at issue, some of these statutes or notification requirements in these states allow for – they suspend the transaction. For example, in Illinois, they can issue a subpoena that you have to comply with. And until you comply with it, you cannot proceed with your transaction. And the subpoenas that they issue look remarkably like a Federal Trade Commission or Department of Justice second request. These are very burdensome, very costly, and they add a lot of time to your deal timeline.
Even if everything goes smoothly in the sense of everything gets cleared and all that, each of the states that are putting these in place are doing it slightly differently. And some of them don't seem to be as though they'd be a big obstacle, but others could be. It's important to know before you commit to buy even a practice in a particular state whether or not it's going to trigger a notification and what that means in those particular states and the power those authorities have there.
Brandon Raphael:
Are most of the state statutes pre-merger notification statutes where you need to notify in advance of closing? Or are we seeing attorney generals take action after the closing of a transaction?
Barbara Sicalides:
They can do either. They could definitely take action after closing if their state statute allows them to look at transactions or monopolies or that type of thing. And not all states have that, but many do. But these new statutes, I think there's 13 of them or 14 of them, are pre-merger notification. They require notice before closing.
Brandon Raphael:
And are these just with respect to healthcare investment?
Barbara Sicalides:
Almost all of them are.
Joe Farside:
Yeah. On that note, we have a private equity transaction that relates to a particular state that has one of these pre-closing notice requirements. And the transaction, I would characterize it as a standard bolt-on transaction. But because it's in the healthcare space, it's going to trigger one of these notice requirements and a two-month review period after we're able to supply all of the information called for by the statute. Your standard bolt-on gains, number one, a lot of expense, number two, a lot of delay, and number three, a lot of uncertainty as a result of the statute.
Brandon Raphael:
Interesting. These are all great insights. I guess the last question I have is any parting thoughts or anything else you'd like to share or that you view as important to maybe private equity firms or in the deal world with respect to antitrust in the coming year?
Barbara Sicalides:
The one thing I would add is I think the new administration has already said it would look at remedies more favorably than the most recent administration. So, that's something that parties can plan for. If you know you have a competition issue, you can look at whether there are remedies, particularly divestiture remedies, that should address the competition issue and then try to plan for that process – include it in your deal documentation, find a buyer if you need to divest – sort of do a lot of that work up front to allow the transaction to more smoothly proceed. Whereas during the last most recent administration, we would still work to do that, but we were not hopeful that we would get the opportunity to put in place a remedy without actually going to court.
Brandon Raphael:
Great. Joe?
Joe Farside:
Yeah, there are still some fundamentals of antitrust practice that will apply in ADAR clients despite all the change we've talked about here and those are to engage your antitrust counsel early. No matter what size the deal is, even if it's a deal that you think should not raise concern, get a check on the competitive impacts of a transaction so that you're fully aware. And that's typically not something that's going to require a large investment by antitrust counsel. Antitrust counsel can usually review some documents or interview the CEO of a portfolio company and pretty quickly gain knowledge that will allow him or her to ballpark the chance of the federal government or a state attorney general caring about the transaction.
I think the second point is we always encourage making sure documents are drafted accurately and precisely, and that there's some control around document creation. And even though more documents are going to be required now and it might feel a little bit more daunting to kind of control the document production process, we would still encourage that as a means of good hygiene and set yourself up for success when it comes to antitrust.
Brandon Raphael:
Great. Well, this has been a great discussion on a very timely and interesting topic. Barbara and Joe, thanks to you both for spending some time with me today. And thank you to the audience for listening today. Please keep your eyes open for future episodes of PE Pathways, where we bring experienced dealmakers on to share their thoughts on current private equity and M&A trends and developments. You can find the latest episodes of PE Pathways wherever you get your podcasts. Thanks.
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