The M&A Lawyer

February 2021 ▪ Volume 25 ▪ Issue 2

PLAYING MONOPOLY consummated seven years earlier. The par- WITH THE FTC: ties settle for hundreds of millions of dol- LAWYER lars or the court grants disgorgement. “PLEASE, PASS GO: Here, the FTC says it can recover “ill- WE’LL COLLECT THE gotten gains” from alleged anticompeti- MONEY FROM YOU tive practices, e.g., maintaining monopo- (MUCH) LATER” listic prices, under Section 13(b) of the FTC Act, that would not have occurred but By Larissa C. Bergin for the deal closing.1 This section of the Larissa Bergin is a partner in the Act does not specifically allow for mon- Washington, D.C. office of Jones Day. etary remedies. It does not outline how Contact: [email protected]. such remedies should be calculated. It also According to the Federal Trade Com- has no statute of limitations. And, there is mission (“FTC”), it can, without any stat- no latches or waiver argument available ute of limitations, seek millions of dollars despite the FTC’s failure to take advantage in equitable relief back as far as the time of the HSR waiting period. The only basis of deal consummation for anticompetitive for the FTC’s current interpretation and price increases, even if it previously chose use of Section 13(b) is judicial interpreta- not to investigate or challenge your deal The M&A tion from the 1980s. Although the FTC has (and collected your filing fee). By means of example: IN THIS ISSUE: Company A and B execute a purchase Playing Monopoly With the FTC: “Please, Pass Go: We’ll Collect and sale agreement, the deal value re- the Money from You (Much) quires a Hart-Scott-Rodino Act (“HSR Later” 1 Act”) filing. The 30-day waiting period Contested Virtual Shareholder expires without any indication from the Meetings: A New Frontier 10 FTC that there are concerns about the SEC Division of Corporation Finance Issues SPAC Disclosure transaction. The parties close. Five years Guidance 18 later, the FTC investigates the transaction Tech M&A in 2021: Moving from and finds the transaction anticompetitive. Strength to Greater Strength? 20 It files a complaint, eight years after the Antitrust M&A Suggestions For the 117th Congress 22 deal is consummated, seeking divestment From the Editor 27 of the assets necessary to restore competition. It also seeks a permanent injunction, preventing similar behavior in the future and disgorgement of alleged ill- gotten gains from monopolistic pricing in federal district court under the FTC Act (“Act”) Section 13(b), since the deal was

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made infrequent use of its Section 13(b) authority about to violate, any law that the FTC enforces, to obtain monetary remedies in mergers, the fate for example, Clayton Act Section 7.2 Clayton Act of the agency’s expansive interpretation of its Section 7 prohibits mergers and acquisitions that authority now lies in the hands of the Supreme substantially lessen competition. Section 13(b) Court. does not explicitly permit a court to grant equitable remedies or penalties; instead it explicitly Federal Agencies, Like the FTC, Must Rely on Congressional Intent to Obtain authorizes only TROs and preliminary injunc- Equitable Relief tions, which the FTC interprets to mean broad equitable relief. Section 13(b) is not constrained by Federal agencies do not have inherent equita- a statute of limitations. When the FTC challenges ble powers. That is, they cannot order a party to consummated transactions, it typically does so provide equitable monetary relief, such as dis- under its Section 13(b) authority, alleging viola- gorgement and restitution. Federal agencies, like tions of Section 7 of the Clayton Act (if the deal the FTC, must go to federal court for such relief. is reportable under the HSR Act) and/or a viola- Courts can grant equitable relief to federal agen- 3 cies if Congress does so by statute. The FTC relies tion of Section 5 of the FTC Act. Neither of these on the FTC Act for its authority. As discussed statutes independently and speciﬁcally provides below, certain sections of the FTC Act explicitly the FTC equitable monetary relief, absent an provide that the FTC may seek injunctions, other administrative proceeding or a trial in federal equitable relief, and penalties. Most of these pro- court.4 The FTC must rely on Section 13(b) for visions have procedural safeguards and are bound such relief. by a statute of limitations. Therefore, defendants have questioned whether Section 13(b) empowers the FTC to seek tem- courts have authority to order equitable remedies, porary restraining orders (“TROs”) and prelimi- for any period of time, when the FTC seeks an nary injunctions if a company is violating, or is injunction under Section 13(b). The Supreme

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Court just heard oral argument on this exact issue amended the Act in 1973. It gave the FTC the in AMG Capital Management, LLC v. FTC and authority to pursue equitable remedies, including the Supreme Court’s decision will impact the “mandatory injunctions and such other and fur- FTC’s powers to address consummated mergers. ther equitable relief as [courts] deem appropri- If it goes against the FTC, the AMG Capital case ate,” from those violating the FTC’s administra- likely will not affect the FTC’s authority to seek tive orders in federal court.6 By way of example, an order unwinding a consummated transaction, when merging parties agree to make a divestiture but it may reduce the FTC’s leverage with parties in order to consummate a main transaction, the by threatening monetary relief. FTC typically requires that the parties agree to a Decision & Order that sets forth the conditions of Statutory Background the settlement. The FTC can pursue monetary In 1914, Congress enacted the FTC Act, creat- relief for violations of its orders. ing the agency.5 The FTC’s goal: to protect Injunctive Relief: The 1973 amendment also consumers. Specifically, to protect consumers added Section 13(b) of the Act, which provides from unfair or deceptive acts or practices, and to the FTC the authority to seek injunctive relief in protect consumers from unfair methods of federal court if the defendant “is violating, or is competition. The Act provides methods by which about to violate” the Act.7 The injunction provides the FTC can enforce the statutes, rules, and the FTC the opportunity to mitigate any ad- regulations it oversees. This includes an adminis- ditional consumer harm while its administrative trative pathway, in addition to standing to bring proceeding is taking place. Section 13(b) also claims in federal court. Depending on the method provides that, “in proper cases,” the court may is- by which the FTC brings its claims, it can seek a sue a permanent injunction.8 Section 13(b) does variety of remedies including an injunction, not explicitly provide for monetary remedies, in disgorgement, restitution, and at times, penalties. any form, including equitable ones, and it has no The FTC did not always have as much latitude statute of limitations. when it was created. In its infancy, the Act only The 1975 Amendments provided for the FTC to exercise its authority in an administrative proceeding. At the time, the Two years later, in 1975, Congress amended FTC had to bring its case before an administra- the Act again. tive law judge (“ALJ”), and the ALJ had to issue Rule Promulgation: The amendment codified an Initial Decision after an evidentiary hearing. the FTC’s authority to promulgate its own rules. The Commissioners then reviewed the Initial De- cision and could issue a final Decision and Order. Penalties: Section 5(m) permits the FTC to The FTC did not have an avenue to pursue its case seek penalties, in addition to equitable relief, in in federal court. federal court, if the FTC establishes that a viola- tor had “actual knowledge or knowledge fairly The 1973 Amendments implied on the basis of objective circumstances” Monetary Equitable Relief for Violations of that his/her conduct violated a promulgated rule.9 FTC Administrative Orders: Congress first Moreover, the FTC could seek penalties if a party

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knowingly violates a cease-and-desist order fol- in Section 13(b) for some time; however, only lowing an administrative proceeding, even if he/ recently have courts questioned, and even cur- she/it was not a party to the original proceeding.10 tailed, the FTC’s authority. The attack has been twofold: 1) the FTC should not be able to obtain Additional Remedies: Under Section 19, Con- monetary remedies under Section 13(b) because gress granted the FTC the authority to seek relief Congress does not explicitly call for it in the stat- in federal court “to redress injury to consumers” ute, and 2) even if the FTC can obtain monetary 11 from certain past misconduct. The amendment remedies, the FTC cannot seek an injunction and authorizes the federal courts to grant “rescission remedies for behaviors that have occurred in the or reformation of contracts, the refund of money past and have now ceased. These arguments or return of property, the payment of damages, recently have gained traction, resulting in rever- and public notification . . . .”12 However, the sals in judicial precedent in circuit courts. FTC can only obtain these remedies under two circumstances. Rather than initiate an administra- “Is Violating, or Is About to Violate” tive proceeding, the FTC can go directly to federal One of the first major threats to the FTC’s use court when a party has violated an FTC rule. The of Section 13(b) arose out of its case against Shire amendment also provides that the FTC can seek ViroPharma (“Shire”).14 Shire manufactured remedies if the FTC has previously issued a Vancocin, a drug used to treat a life-threatening cease-and-desist order to the defendant after an gastrointestinal infection. According to the FTC, administrative proceeding and then proves in Shire filed 43 meritless citizen petition filings court that a “reasonable man would have known with the U.S. Food and Drug Administration under the circumstances” that the defendant’s (“FDA”) and instituted three federal court pro- conduct “was dishonest or fraudulent.”13 The FTC ceedings to forestall entry of a generic version of must operate quickly under this provision in or- Vancocin from March 2006 to April 2012. Nearly der to avail itself of these remedies given the short five years later, in February 2017, the FTC filed statute of limitations: the administrative proceed- suit in the U.S. District Court for the District of ing must begin within three years of the violation, Delaware alleging a violation of FTC Act Section and the Section 19 action within one year of the 5 (unfair methods of competition) and seeking final cease-and-desist order. remedies under Section 13(b). The FTC sought a permanent injunction and restitution and/or dis- In sum, the FTC can seek equitable monetary gorgement of Shire’s allegedly unlawful profits. remedies for a violation of an administrative or- Shire sought a dismissal, alleging that Section der or rule, but there is no statute that explicitly 13(b) only allows the FTC to obtain an injunction authorizes monetary remedies when it seeks an if a party “is violating” or “is about to violate” the injunction to enforce other antitrust laws, includ- law, neither of which fit the facts. It no longer had ing the Clayton Act. any open petitions to the FDA or active matters in federal court.15 The district court granted Shire’s Chipping Away at Section 13(b) motion to dismiss, finding it did not meet Section Defendants have alleged that the FTC has 13(b) requirements, and the Third Circuit panel improperly taken advantage of the authority it has affirmed.

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The FTC conceded that Shire’s allegedly ille- dies, including disgorgement and restitution, are gal conduct stopped in 2012, and Shire even had at its disposal.17 divested Vancocin before the FTC filed its lawsuit. A specter of change arose in December 2018 However, the FTC asserted that Shire was “about when the Ninth Circuit issued its opinion in FTC to violate” the law because its past conduct in- v. AMG Capital Management, LLC (“AMG”), a volving Vancocin made it more likely that the consumer protection case.18 The court upheld company would repeat the conduct in the future longstanding precedent, finding that Section 13(b) with respect to an unrelated drug. The Third “empowers district courts to grant any ancillary Circuit disagreed, holding that the FTC cannot relief necessary to accomplish complete justice, succeed under Section 13(b) with merely “a viola- including restitution.”19 However, Judge Diar- tion in the distant past and a vague and general- muid O’Scannlain issued a special concurrence to ized likelihood of recurrent conduct.”16 Continu- the majority opinion requesting the court to hear ing to operate the business with similar products the case en banc and overturn prior circuit is not sufficient for the FTC to meet its pleading jurisprudence. Judge O’Scannlain reasoned that burden under Section 13(b). the forward-looking nature of Section 13(b), to prevent ongoing or imminent violations, would Defining the Scope of Equitable Relief not adequately be addressed by “depriv[ing] a Provided for by an “Injunction” defendant of ‘unjust gains from past Recently, some defendants have also success- violations.’ ’’20 He also found that other Sections fully argued that the FTC is not entitled to mon- within the Act, such as Section 19, which specifi- etary remedies under Section 13(b). As noted cally allow the FTC to obtain monetary judge- above, Section 13(b) does not refer explicitly to ments for past conduct, suggested that Congress the FTC’s authority to seek any monetary did not intend to empower the FTC to obtain remedies. It simply states that the FTC can seek a monetary remedies under Section 13(b).21 To hold preliminary injunction or “in proper cases,” a per- otherwise may, to Judge O’Scannlain, be akin to manent injunction. Absent longstanding judicial granting the FTC penalties, rather than interpretation, the Court would not have the restitution.22 authority to exercise its equitable powers on the About eight months later, the Seventh Circuit FTC’s behalf as the statute currently reads. reversed decades of precedent in FTC v. Credit Rather than discuss the history of the courts of Bureau Center, LLC (“Credit Bureau”).23 Despite equity, which may not be very interesting to some, the “injunctive language” in Section 13(b), the suffice it to say that there is a long line of cases court could not find the implicit grant of equitable supporting the argument that if a court in equity monetary relief. Similar to Judge O’Scannlain, can grant an injunction, it can also award mon- the court noted that the language of Section 13(b) etary relief. Accordingly, courts have held that pertains to ongoing or imminent future conduct, monetary equitable remedies are available under finding that “[r]equiring ongoing imminent harm Section 13(b) because, once the court finds that it matches the forward-facing nature of can grant an injunction, then all equitable reme- injunctions.”24 In contrast, restitution is a “rem-

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edy for past actions.”25 The court also could not is “a separation of powers case,” in which the presume that the word “injunction” was meant “Executive Branch of an independent agency uniformly throughout the Act when other refer- [wants] to do good things, and sometimes [their] ences to remedies specifically provide for both statutory authority is borderline . . . The problem injunctions and “such other further equitable is—is [sic] it results in a transfer of power from relief as [a court] deem[s] appropriate”26 or “such Congress to the Executive Branch to decide relief as the court finds necessary . . . , [includ- whether to exercise this new authority. That’s a ing] the refund of money or return of property.”27 particular concern, at least for me, with independent agencies.” In Justice Kavanaugh’s words, “it In July 2020, the U.S. Supreme Court consoli- seems the problem you have is the text.” Although dated, and agreed to hear, appeals in both cases, other Justices expressed concern that the FTC but on November 9, 2020, the Supreme Court may lose its deterrent effect, Justice Kavanaugh vacated its prior grant of the Federal Trade Com- simply inquired, “why isn’t the answer here for mission’s petition for certiorari in Credit Bureau. the Agency to seek this new authority from Con- Before drawing any conclusions, it is worth gress for us to maintain a principle of separation considering that Justice Barrett was on the Sev- of powers?” Notably, Joseph Simons, Chairman enth Circuit when Credit Bureau was decided. of the FTC, asked Congress to do just that prior She was not on the panel, but Justice Barrett did to oral argument, signaling the FTC’s concern on not dissent when she was required to review the how the Court may decide AMG, and the current overturned precedent. Therefore, the Supreme status of Shire in the Third Circuit.28 Court may have vacated the decision to avoid any conflict of interest, rather than imply how it would Your Transaction, Re-Reviewed by the decide AMG. FTC, With a Hefty Price Tag

The Court heard oral argument for AMG on The vast majority of cases brought under Sec- January 13, 2021. It will likely be months until tion 13(b), including Credit Bureau and AMG, are the Court issues a decision; the majority of deci- consumer protection cases, but the threat of the sions from the Supreme Court’s 2020-2021 term FTC applying Section 13(b) to transactions is will likely be released in June. Although it is pos- real: The FTC has doubled the number of compe- sible to “over analyze” questions in oral argu- tition cases brought under the same statute in the ments, several justices alluded to the possibility last decade, coinciding with the FTC’s revocation that the FTC may be overreaching its authority by of its 2003 Policy Statement on Monetary Equita- seeking monetary remedies under Section 13(b). ble Remedies in Competition Cases (“Policy Speciﬁcally, some of the Justices did not ﬁnd the Statement”) in 2012.29 The purpose of the Policy existence of a grant of other forms of equitable Statement was to identify the “appropriate cir- relief in the text of Section 13(b). For example, cumstances” in which the FTC would seek mon- Justice Kavanaugh and Justice Roberts focused etary equitable remedies in competition cases pur- on the difference between the powers held by suant to Section 13(b) of the Act. The Statement Article III courts as compared to Article I execu- read that the FTC would seek such relief in “ex- tive agencies. Justice Kavanaugh stated that this ceptional” circumstances.30

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However, the FTC may have found the Policy that Hearst Trust failed to substantially Statement to be suffocating its agenda. Indeed, it comply with the notification requirements revoked the Policy Statement because “the practi- under a subsection of the HSR Act. It fur- cal effect of the Policy Statement was to create an ther alleged that the transactions in question overly restrictive view of the Commission’s op- would substantially lessen competition tions for equitable remedies.”31 Its hands were under Section 7 of the Clayton Act. The artificially tied, and the FTC wanted to loosen the FTC sought divestiture, disgorgement, and reins to crack down on anticompetitive behavior any monetary relief available under the that may not otherwise stop absent a form of relief HSR Act. that would impact stakeholder behavior. E In FTC v. Mallinckrodt Ard Inc.,34 the FTC Absent new self-restraint or a decision by the alleged that Mallinckrodt violated Section 5 Supreme Court that Section 13(b) does not proof the Act and Section 2 of the Sherman Act vide for monetary remedies, the FTC continues to by maintaining a monopoly unlawfully have authority to challenge, or threaten to chal- through the acquisition of the rights of a lenge, consummated transactions under the competing product in development, while statute. Moreover, although Shire is not before raising the price of the product within its the Court, it raises questions as to whether the existing portfolio. The FTC sought divesti- FTC will be able to pursue consummated mergers ture and equitable monetary relief. at all under Section 13(b). Once consummated, is Shire Hearst Trust there still an “ongoing” or “imminent” violation? Under , only would have a clear showing of ongoing conduct out of the four The FTC may argue that ongoing price increases cases above. Failure to meet substantial compli- are an ongoing violation, but what if the defendant ance under the HSR Act is a continuing violation, reverts back to original prices or argues that the in which fines are assessed each day. The other input costs have increased? The FTC has used three matters may not be considered ongoing Section 13(b) to obtain monetary remedies in since the transactions were consummated. The consummated mergers in the following examples: FTC would likely allege that the monopolistic E In FTC v. Ovation Pharm., Inc.,32 the FTC prices would be a violation sufficient for Section challenged defendant’s acquisition of a 13(b), presuming that the parties do not lower competing branded drug approved for the prices prior to the FTC filing something in federal same indication as a drug in the defendant’s court, but that is a question for another day. existing portfolio. Upon acquisition, defen- The most obvious impact of a Supreme Court dant allegedly raised the price of its existing decision against the FTC in AMG would be cur- drug nearly 1,300 percent, and then set the tailing the amount of remedies the FTC can price of the acquired drug to match. The obtain. The FTC would have to rely on other laws FTC alleged violations of Section 7 of the that provided monetary remedies (if one fits the Clayton Act and Section 5 of the Act, seek- facts), and those statutes have statutes of limita- ing divestment and disgorgement. tions or limited applicability. In the Mallinckrodt E In FTC v. Hearst Trust,33 the FTC alleged matter, for example, the FTC filed its complaint

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in 2017; however, the acquisition in question not necessarily reflect views or opinions of the closed in 2013. If the FTC could no longer obtain law firm with which she is associated. disgorgement under Section 13(b), it may only be able to seek a portion of the monetary remedies ENDNOTES: that it could obtain under Section 13(b) because it may be restricted by a statute of limitations of less 115 U.S.C. § 53(b). than four years. Indeed, the FTC is aware that “in 2See 15 U.S.C. § 53(b) (permitting the FTC certain circumstances, obstacles, such as statutes to seek preliminary and permanent injunctions in of limitations, prohibitions against suits by indi- federal court to restrain violations of any statute overseen by the FTC). rect purchasers, or standing requirements, may 3See 15 U.S.C. § 21 (allowing the FTC to hinder the filing of a treble damages suit [brought enforce Section 7 via an administrative process); by a private plaintiff]” and as a result, the FTC is id. § 45(b) (allowing the FTC to pursue violations taking upon itself the duty to “seek monetary rem- of Section 5 of the FTC Act administratively). edies ‘because other remedies are likely to fail to 4“Under Section 5(b) of the FTC Act, the accomplish fully the purposes of the antitrust Commission can initiate an administrative pro- laws.’ ”35 The FTC also claims that the specter of ceeding to halt unfair or deceptive practices, unfair methods of competition, or violations of monetary remedies has a “deterrent effect,” dis- other laws enforced through the FTC Act. Gener- couraging violations before they occur. In prac- ally, only injunctive relief is available through tice, the FTC might lose some leverage to obtain Section 5(b), and only through a final order—pre- settlements such as divestitures in consummated liminary injunctions are not available, and monetary relief cannot be awarded under current mergers because it no longer has the threat of practice, except in a settlement.” Chopra, R. and monetary remedies. Levine, S, “The Case for Resurrecting the FTC Act’s Penalty Offense Authority,” at 12 (Nov. 3, The most unsettling cases, although rare, are 2020). those in which a deal was reportable, no investiga- 5Federal Trade Commission Act (“Act”), 15 tion ensued, and yet the FTC, many years later, U.S.C. §§ 41 et seq. raises concerns that the deal should have never 615 U.S.C. § 45(l). been permitted to close. Although consummated 7Id. § 53(b). deals are reviewable, parties should be permitted 8“Proper” may read a bit ambiguously; how- to have some level of expectation that a review ever, the FTC has said that a proper case is one in under the HSR Act will not be revisited absent which there is a violation of a rule or statute enforced by the FTC, other than the Act itself, or extraordinary circumstances, and certainly not any conduct previously declared unfair or decep- result in monetary remedies. Challenges to con- tive by the FTC in an administrative proceeding. summated transactions, particularly those that 9Id. § 45(m)(1)(A). seek monetary remedies, diminish the value of 10Id. § 45(m)(1)(B). that stability and may, in some cases, distort busi- 11See 15 U.S.C. § 57b. ness decisions 12Id. The views and opinions set forth herein are the 13Id. personal views or opinions of the author; they do 14Federal Trade Commission v. Shire Viro-

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Pharma, Inc., 917 F.3d 147, 2019-1 Trade Cas. junctive relief looks to the future and is designed (CCH) ¶ 80681 (3d Cir. 2019). to deter . . . .”). 15Shire also alleged that its petitioning activ- 25Id. ity was immune from antitrust challenges under 2615 U.S.C. § 45(l). the Noerr-Pennington doctrine. Id. at 153. 2715 U.S.C. § 57b(b). 16Id. at 159. 28Questions for the Record from the Honor- 17See, e.g., Porter v. Warner Holding Co., 328 able David N. Cicilline, Chairman, Subcommit- U.S. 395, 66 S. Ct. 1086, 90 L. Ed. 1332 (1946) tee on Antitrust, Commercial and Administrative (holding that a reference to “permanent or tempo- Law of the Committee on the Judiciary, Joseph rary injunction, restraining order, or other order” Simons (June 2019) (Simons asked for Congress permitted district courts to use “all inherent equi- to “clarify Section 13(b) to reafﬁrm the Commis- table powers,” including monetary remedies such sion’s longstanding authority to secure all types as restitution). of equitable relief, including restitution and 18Federal Trade Commission v. AMG Capital disgorgement. In addition, Congress should revise Management, LLC, 910 F.3d 417, 2018-2 Trade Section 13(b) to clarify that the Commission may Cas. (CCH) ¶ 80595 (9th Cir. 2018), cert. sue in federal court to obtain equitable relief even granted, 141 S. Ct. 194, 207 L. Ed. 2d 1118 if conduct is no longer ongoing or impending (2020). when the suit is ﬁled.”). 19Id. at 426 (9th Cir. 2018). 29Policy Statement on Monetary Equitable 20 Remedies in Competition Cases, 68 Fed. Reg. Id. at 432 (citing F.T.C. v. Commerce Planet, 45,820 (Aug. 4, 2003). Inc., 815 F.3d 593, 599 (9th Cir. 2016), for additional opinion, see, 642 Fed. Appx. 680, 2016-1 30The FTC must show that the violation in Trade Cas. (CCH) ¶ 79526 (9th Cir. 2016)) question is “clear;” that the basis upon which the (emphasis added). FTC calculated the amount of relief is “reason- 21 able;” and there is a “value” to seeking such relief Id. at 431. over other forms of relief, i.e., simply an injunc- 22Id. at 433 (referring to the Supreme Court’s tion, as permitted under the statute. most recent decision in Kokesh v. S.E.C., 137 S. 31Statement of the Commission, Effecting the Ct. 1635, 198 L. Ed. 2d 86, Fed. Sec. L. Rep. Withdrawal of the Commission’s Policy State- (CCH) P 99733 (2017)). The import of the Kokesh ment on Monetary Equitable Remedies in Com- decision is beyond the scope of this article, how- petition Cases (July 31, 2012), 77 Fed. Reg. ever, the Court described three characteristics that 47,070 (Aug. 7, 2012). can be used to ascertain if disgorgement is a 32 penalty. No. 08-6379 (D. Minn. Dec. 16, 2008). 33 23Federal Trade Commission v. Credit Bureau No. 1:01-cv-00734 (D.D.C. Apr. 4, 2001). Center, LLC, 937 F.3d 764, 2019-2 Trade Cas. 34No. 1:17-cv-00120 (D.D.C. Jan. 25, 2017). (CCH) ¶ 80883 (7th Cir. 2019) (rejected by, Fed- 35Antitrust Modernization Commission, Re- eral Trade Commission v. Zurixx, LLC, 441 F. port and Recommendations, at 95-96 (April Supp. 3d 1216, 2020-1 Trade Cas. (CCH) ¶ 2007). 81123 (D. Utah 2020)) and cert. granted, 141 S. Ct. 194, 207 L. Ed. 2d 1118 (2020), vacated, 2020 WL 6551765 (U.S. 2020) and cert. denied, 141 S. Ct. 195, 207 L. Ed. 2d 1118 (2020). 24Id. at 779. (citing 11A CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 2942, at 47 (3d ed. 2013) (“[I]n-

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CONTESTED VIRTUAL been on the increase. The use of hybrid1 or virtual- SHAREHOLDER only annual shareholder meetings more than doubled from 93 meetings in 2014 to 187 meet- MEETINGS: A NEW ings in 2016, and has steadily increased to 236, FRONTIER 285, and 326 meetings in 2017, 2018, and 2019 respectively.2 This steady rise became a torrent in By Igor Kirman, Sabastian Niles and Natalie Wong 2020, as companies turned to hybrid or, more frequently, virtual-only annual shareholder meet- Igor Kirman and Sabastian Niles are partners, and Natalie Wong is an associate, in the ings due to the COVID-19 pandemic, shelter-in- corporate department of Wachtell, Lipton, Rosen place regulations and public health & Katz. The authors are grateful for the helpful considerations. Broadridge reported hosting close review of their colleague, Elina Tetelbaum. Contact: [email protected] or to 1,500 virtual-only and hybrid shareholder [email protected] or meetings on its platform during the 2020 proxy [email protected]. season.3 Even prior to the COVID-19 pandemic envi- Yet companies have traditionally been reluctant ronment, virtual shareholder meetings, also to use VSMs for contested proxy fights, involving known as VSMs, had been on the rise in recent multiple proxy cards and competing director proxy seasons as public companies sought to slates, due to the extra complexity and high stakes increase the attendance of their investor base, of such meetings, which present a slew of legal decrease administrative costs of holding a physi- risks that are absent from non-contested cal meeting and embrace the use of technology in situations. Another challenge has been, until engaging with investors. VSMs, like in-person recently, the absence of a commercial platform shareholder meetings, occur in settings that can for implementing contested VSMs. But, being as be placed on a spectrum from least contested to necessity is often the mother of invention, the most contested: ranging from routine pandemic led some companies, starting with management-only proposals on the ballot, to Rule TEGNA Inc. in April 2020, to conduct their 14a-8 shareholder proposals in which proponents contested VSMs virtually. Given that the year solicit using the company’s proxy cards, to ahead will likely see an elevated number of VSMs withhold-the-vote campaigns against the compa- and an increase in shareholder activism, we ny’s recommended director slate, to full-fledged expect that the need to conduct proxy fights on proxy contests in which companies and dissident digital platforms will continue. Looking beyond shareholders battle over which directors will be 2021, when it is hoped safety concerns will elected to the board. This last context—the fully diminish and companies could return to the an- contested VSM—is the focus of this article. nual meeting choices they had pre-pandemic, the From the first major use of virtual capabilities questions—and opportunities—raised by VSMs at an annual meeting in 2009, by Intel Corpora- will remain. This article discusses some of the tion, using technology pioneered by Broadridge benefits and considerations involved in conduct- Financial Solutions, the number of VSMs has ing contested shareholder meetings virtually.

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Virtual Shareholder Meetings: The Rise cautioned that the VSM may restrict the full of the Machines shareholder participation that an in-person meeting would otherwise afford. There is a growing The concept, legal groundwork and technology suspicion that the VSM format permits the Board to host virtual shareholder meetings have existed and management to “cherry pick” and reword in- for several years, beginning with Delaware nocuous questions and comments, gives them amending its business corporation laws to permit discretion over which questions to answer, and such meetings in 2000. Most states now permit restricts follow-up comments by limiting each virtual-only or hybrid meetings. At least 33 states shareholder to one question.8 There has been permit virtual-only meetings and 45 states permit meaningful pushback against these suspicions as 4 hybrid meetings. well, and a number of institutional and retail In 2020, a major evolution in the regulatory investors are supportive of the opportunities that a well-run and fair VSM could provide. The framework for VSMs occurred as a result of the Council of Institutional Investors, among several pandemic. Much of this was done in “real time” other interest groups that prefer in-person atten- as pandemic concerns and shelter-in-place orders dance, has publicly expressed that the near- were being promulgated just as the annual spring universal VSMs conducted during the 2020 proxy proxy season was getting under way. Delaware season were a “poor substitute for in-person took the lead and issued an emergency order in shareholder meetings, notwithstanding the poten- April 2020 that allowed companies to change tial for virtual technology to expand scheduled in-person meetings to VSMs without participation.”9 Proxy advisory firms ISS and having to re-notice such meetings so long as the Glass Lewis have also cautioned that VSMs need company filed the notice of change with the SEC to be conducted in a way that allows for compara- and posted a copy on its website.5 A number of ble rights and opportunities for shareholders to other states followed,6 and the staff of the SEC is- participate electronically as they would have dur- sued guidance in April 2020 permitting issuers to ing an in-person meeting, and institutional inves- change the format of their shareholder meetings tors such as BlackRock and State Street, among to a virtual-only meeting or hybrid meeting with- others, have expressed similar views.10 out mailing additional solicitations if they issued a press release announcing such change, filed the Companies and investors also now recognize press release as definitive additional soliciting that by providing for virtual attendance, what material with the SEC, and took all reasonable would typically be a physical meeting attended, necessary steps to inform other intermediaries and at most, by employees, union representatives market participants of such change.7 where applicable, a handful of local retail holders, localized interest groups and proponents of Shareholder Reactions shareholder proposals (where applicable), the While the VSM has been seen as a welcome meeting may become a virtual forum akin to an- technological development by many companies, other “investor day,” where analysts and other a growing group of institutional shareholders, institutional investor representatives focus the proxy advisory firms and activists alike have dialogue on the company’s business and financial

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performance. This business focus is often appar- through a contested election, compared to six ent as part of a general “Q&A” session at the end proxy contests and four board seats won in 2019.12 of the VSM. It remains less common for compa- In addition to the TEGNA proxy contest, which nies to provide a “Q&A” session after each pro- TEGNA won, other notable contests included the posal, or two “Q&A” sessions for proposal and partially successful attempt by Senator Invest- non-proposal matters. Whether companies and ment Group and Cannae Holdings to replace the shareholders prefer a more robust discussion of entire board of CoreLogic (they ended up replac- business issues, rather than the items relating to ing a minority of the board); Starboard’s control corporate governance and shareholder proposals, slate at GCP Applied Technologies that was varies based on the circumstances. backed by GCP’s largest investor and periodic activist 40 North; and GameStop’s loss of two Finally, activist investors and proponents of director seats to nominees advanced by Hestia shareholder proposals in particular have some- Capital Partners and Permit Capital Enterprise times asserted that during VSMs, their live partici- Fund. These contests hold several lessons and pation may be limited, their questions risk being observations for the future use of VSMs in con- ignored, and that their engagement rate would be tested situations much higher in an in-person meeting.11 Compa- nies have generally disputed these assertions and Attendance and Shareholder Access have pointed to ways in which they have tried to One significant benefit of VSMs is that they replicate, as much as possible, the engagement of make it easier for all constituents, including an in-person, given the constraints of a digital shareholders, to attend the meeting by allowing platform. them to do so from their homes, without the need Contested Virtual Shareholder Meetings to travel to what is often an out-of-state location. In the 2020 proxy season, Broadridge reported an Contested meetings, due to their high stakes average of 146 attendees for VSMs with share- and adversarial nature, have traditionally been holder proposals and 37 attendees for VSMs with- fraught with the potential for every action by the out,13 both significant increases in number from company to be examined and potentially chal- in-person meetings. These also translate to a lenged in court. As a result, even as some compa- greater amount of questions asked and answered, nies migrated to virtual-only annual meetings, and to a lesser extent, a larger number of votes prior to 2020 none chose to do so for proxy received at the meeting itself. In this regard, a contests—whether in connection with an unsolic- case can be made that VSMs contribute to share- ited takeover effort, activism, or other situations holder access and engagement. In particular, es- involving competing proxy cards. In 2020, how- pecially with the rise of index funds that hold ma- ever, a number of companies, led initially by jor positions in most publicly-traded companies, TEGNA Inc., faced proxy contests and had no especially companies in the S&P 500, VSMs en- choice but to conduct contested VSMs in light of able index funds that would normally not be well the COVID-19 pandemic. In all, there were 13 positioned to attend many in-person meetings in proxy contests that went to a shareholder vote in their portfolio to have a more practical opportu- the 2020 proxy season and 25 board seats won nity to do so.

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Design and Technical Considerations participate in, and vote at such meeting” and, with respect to Rule 14a-8 shareholder proposals, en- Key features of the VSM platform in a con- courages issuers to “provide shareholder propo- tested situation should include the registration of nents or their representatives with the ability to shareholders and permitted guests of the company present their proposals through alternative means, and the dissident in advance of the virtual meet- such as by phone.”14 ing (including the ability to submit evidence needed to establish the identity of the foregoing), When TEGNA hosted the first contested VSM as well as the ability of shareholders to inspect in April 2020, it faced technical obstacles, in large the company’s shareholder list online and vote by part because Broadridge and other VSM platform ballot. In addition, the dissident in a proxy fight providers had yet to develop contested VSM should be given the opportunity to present their platforms. TEGNA eventually had to develop and nomination or proposal unless the company and customize its own contested VSM platform in the dissident agree to waive such opportunity and collaboration with third party service providers, be given the opportunity to ask questions like while managing the considerations listed below. other shareholders during the meeting itself. In Since then, at least one commercial provider, implementing VSM procedures in a legally pro- Corporate Election Services (“CES”), has tected and compliant manner, Delaware compa- emerged to provide a contested commercial plat- nies may rely on DGCL § 211(a), which provides form and Broadridge is working on its own. At that a company may conduct a VSM “subject to the moment, the Broadridge platform reportedly such guidelines and procedures as the board of will include a call center equipped to handle directors may adopt.” In response to the management and dissident voting instructions, COVID-19 pandemic, most of the other states with live operators taking instructions from share- granted issuers temporary relief through execu- holders during the contested VSM. Broadridge tive orders or emergency legislation to allow will then provide voting reports to the inspector VSMs, with conditions substantially similar to of elections after the conclusion of the contested the requirements set forth in DGCL § 211(a). That VSM. Since such a delay may prove to be unat- said, not all of these orders or legislation are per- tractive in contested situations, we expect that manent, and some have expired (and need to be companies will seek alternatives until Broadridge renewed to apply), so a non-Delaware company is able to automate the tabulation of votes in will need to check the applicable state corporate contested VSM, something which it says it is also statute, as well as its organizational documents, working on.15 Due consideration must also be to determine whether a virtual-only VSM is given to technical difficulties that may interrupt permitted (and what the applicable requirements the VSM or prevent it from starting, and the and parameters are). On a federal level, an issuer company should adopt a contingency plan and be should also take into consideration the guidance able to communicate this plan in advance. In ad- issued by the staff of the SEC, which requires is- dition, it is possible that hackers may attempt to suers to “disclose clear directions as to the logisti- hijack or disrupt a VSM, as has occurred in other cal details of the ‘virtual’ or ‘hybrid’ meeting, contexts. Companies should clearly communicate including how shareholders can remotely access, how shareholders can seek technical support

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where they have individual technical issues in ac- shareholder, (iii) requiring that questions be cessing the VSM. In addition, companies need to submitted in writing and in advance and not in be prepared for the possibility of full-scale techni- real time during the meeting (eliminating the abil- cal failures that may occasion a need to postpone ity of the shareholder to respond to or follow up or adjourn the meeting. Companies should consult on management’s responses) and/or (iv) giving with their organizational documents and ap- management the ability to “group” questions by plicable state law in this regard, and try to antici- topic and rephrase in their own discretion. In gen- pate (and possibly disclose) these possibilities in eral, having too many restrictions in contested advance. Even though in theory video could be situations is risky and could open companies to available for VSMs, and the demand for this is challenge by the dissident or other shareholders. growing, almost all companies that have held In the interests of full and fair disclosure, a grow- contested VSMs have made them audio-only to ing number of companies undertake to post the minimize data usage and the possibility of techni- transcript of the VSM and/or unanswered ques- cal failures. Finally, in the event that an adjourn- tions (in some cases, together with responses) on ment needs to take place, companies need to their website after the VSM. Most companies in consider in advance whether they will be able to contested proxy situations give dissidents the delay or reconvene the VSM. When planning right to speak live for a short period of time, and meetings on a commercial platform, the plat- typically have the dissident call in to make a pre- forms—and associated staff—book up, so a compared speech, all by advance agreement. Ulti- pany seeking a last-minute adjournment may ﬁnd mately, companies will need to balance sharehold- that it has no slots available. Companies that ers’ desire for enhanced participation in a VSM believe this to be a possibility may need to reserve with the need to keep the meeting orderly and commercial platforms for backup plans. Compa- moving on time, but where possible should seek nies should consult state laws as to how notice of to consider and accommodate reasonable requests a reconvened meeting should be disseminated. from the dissident.

Dissident’s Right to Speak; Questions Cross-Functional Planning and Support and Answers Planning and implementing an effective con- A key consideration for companies using a tested VSM requires the cooperation of a multi- virtual platform for contested VSMs is how best disciplinary task force, including in-house to permit dissidents, or other shareholders, the information-technology and legal personnel and ability to make their views known on such a third-party experts and advisors such as outside platform, whether it be through an allotted amount counsel, proxy solicitors and public-relations of time to speak, or through the “Q&A” session. advisors. The critical importance of conducting As noted above, we have seen some companies dry runs, testing the platform and making any adopt some (if not all) of the following restric- necessary adjustments prior to the VSM webcast tions in contested VSMs (similar to restrictions cannot be overstated. Without sufﬁcient trial and adopted at in-person contested meetings): (i) only error, companies run the risk of technological permitting shareholders of record to submit ques- failures or human error derailing the VSM, which tions, (ii) limiting questions to one question per is especially a signiﬁcant risk to run in a contested

14 K 2021 Thomson Reuters The M&A Lawyer February 2021 | Volume 25 | Issue 2 election. The use of a commercial platform should Communication Between the Company alleviate some of the technical needs, but testing and the Dissident remains a necessity even with a commercial As with a physical meeting, representatives of platform. Companies should also consider updat- the company and the dissident should communi- ing corporate governance documents to authorize cate prior to the VSM, including as to how the virtual meetings, updating annual meeting rules, VSM will be conducted and the handling of agendas and proxy materials, and otherwise requested accommodations that may be sought by working with their VSM task-force to execute a the dissident. In fact, such communications are VSM in compliance with state law and best even more important in the VSM context, espe- practices. cially since dissidents may be suspicious of Physical Contested Meeting Parallels company motives since virtual platforms under a company’s control are less well-understood than Veterans of proxy ﬁghts and activism cam- physical meeting spaces and procedures. It is paigns will be familiar with dynamics unique to prudent to begin such discussions a little earlier proxy ﬁghts, such as “war rooms,” in-person than for physical meetings, given the novelty (for delivery of voted proxies to the inspector of elec- now) and complexity of the issues to be discussed. tions by each side’s proxy solicitor, “snake pits” Sometimes, the parties will enter into agreements and real-time, high-pressure communication and for the conduct of the meeting. As discussed more consultation by representatives of the two sides fully below, it also may make sense to involve the with each other. inspector of elections in some of these discus- Many of these concepts remain relevant in the sions, so that both parties understand the rules and virtual realm but require adaption—for example, mechanisms (including, while not legally re- since there are not separate “war rooms” set up quired, prudent backup plans) for submitting alongside in-person presence for both parties to votes. observe the contested meeting and communicate Role of the Inspector of Elections with the inspector of elections in real time, alternative means of communications for both parties Since the inspector is not physically present to are needed. If a dissident wishes to have the op- receive proxies from the two sides in the proxy portunity to address shareholders at the meeting, contest (or attending shareholders), advance a separate phone line may be made available to coordination with the inspector is needed to enable this, to be activated during the period when determine the process for submitting all proxies such remarks are scheduled. If each side’s team and ballots before the polls close. Where the par- members are not physically together for a con- ties use a commercial platform like CES, the tested VSM and related webcast, they will need platform is designed to take care of the com- to use phone lines (or other means, such as Zoom munication with the inspector of elections; thus, a conferences, text messaging or other communica- shareholder voting at the meeting presses a but- tion platforms) to communicate amongst them- ton on the website, and the platform communi- selves during the VSM and discuss various ques- cates that vote to the inspector of elections. tions or issues that may arise. However, the shareholder seeking to vote at the

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meeting itself (as opposed to prior to the meeting) multiple accounts. Advance registration require- still needs to obtain a legal proxy to do so and ments for a VSM setting may also add a timing upload that to the platform in advance. Where the consideration. As the United States is seeing more parties are not using a ready-made product like early “mail in” voting (which can be analogized CES, arrangements must be made directly with to pre-VSM proxy voting), the question of the inspector of elections. The company and the whether VSMs will encourage a move in the op- dissident might agree that the inspector of elec- posite direction—towards more voting on “elections may receive each side’s master ballots by tion day”—is still an open one. email, to be held in escrow until the polls open on the meeting date, and that the inspector of elec- One knock-on effect of this potential trend is tions may accept all other proxies by email until that more “election day” voting may reduce the polls close. In any event, it is crucial that the advance visibility into the likelihood of share- procedures to be used are properly documented holder approval or rejection of a particular matter. and aligned on between the parties, given the pos- Having shareholders more able and likely to vote sibility of either party challenging the prelimi- at an annual meeting can reduce both sides’ visi- nary voting results. bility into voting results, which is particularly Inching Toward a “Universal Ballot”? critical if the contest seems close and the parties are considering settlement. Of course, this uncer- “Attendance” at a VSM, even if remotely, tainty will arise only if shareholders choose to permits shareholders the flexibility of voting for both management and dissident nominees. The vote in meaningful numbers at the VSM itself, SEC’s “bona fide nominee” rule effectively means which remains an open question. that shareholders largely vote on either the com- Conclusion pany’s or the dissident’s proxy card, but cannot “mix and match” votes unless they vote on a bal- As we head towards the 2021 proxy season and lot that is provided at the meeting (which includes beyond, whether contested VSMs will become a all nominees) and have the legal authority to do permanent fixture in the public company share- so. Under the corporate laws of most states, holder engagement landscape will depend not including Delaware, for a meeting held solely in only on the perceptions of various stakeholders— a physical location, voting by ballot at the meet- the institutional investors, proxy advisory firms, ing requires in-person attendance by the share- activist investors, and the board and management holder of record or a proxy holder for such itself—but also on the state of commercially- shareholder. Since it is easier to attend a VSM, available technology and platforms to host these more shareholders can attend and vote by ballot, meetings, as well as how companies are able to which allows them to “split the ballot.” But vot- manage risks. The experiences of the 2020 proxy ing by ballot at the meeting under current SEC season have shown some of the key consider- and state law frameworks is still more cumber- ations—both positive and negative—involved in some than voting by proxy due to the administra- hosting contested VSMs on a virtual platform. It tive burden and execution risks of obtaining legal has also shown that with a bit of diligence and proxies, especially when ownership is split across care, such meetings can be handled effectively.

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ENDNOTES: facing shareholders in person about poor governance practices. The ISS 2019 Update concluded 1A hybrid virtual meeting gives shareholders that there does not seem to be a link between the option to attend and vote virtually, unlike an governance structure and company meeting for- in-person meeting with live streaming (in which mat, and that companies with virtual-only meet- only in-person attendees can vote). ings appear no more likely to have poor gover- 2Broadridge Financial Solutions, Virtual nance practices. The ISS 2019 Update further Shareholder Meetings: 2020 Mid-Year Facts and observed that dissent levels on key voting items Figures, available at https://www.broadridge.co do not appear to vary materially for both physical m/_assets/pdf/broadridge-am_00315_br_20- and virtual meeting shareholders. 203401-bfs-vsm_brochure_082520.pdf. 9Council of Institutional Investors et. al., 3Broadridge Financial Solutions and Pricewa- Virtual and Hybrid Meetings: Concerns from terhouseCoopers LLP, ProxyPulse: 2020 Proxy 2020 Proxy Season (July 6, 2020) available at htt Season Review, October 2020, available at http ps://www.cii.org/files/issues_and_advocacy/corr s://www.pwc.com/us/en/governance-insights-cen espondence/2020/Virtual%20Meetings%20Letter ter/publications/assets/pwc-and-broadridge- %20_%20Corrected%20Copy_.pdf. 2020-proxy-season-review.pdf. 10See Council of Institutional Investors, Cor- 4Rutgers Center for Corporate Law and Gov- porate Governance Policies (Updated September ernance Council of Institutional Investors Society 22, 2020), available at https://www.cii.org/files/p for Corporate Governance, Report of the 2020 olicies/09_22_20_corp_gov_policies.pdf (“Com- Multi-Stakeholder Working Group on Practices panies incorporating virtual technology into their for Virtual Shareholder Meetings (December 10, shareowner meeting should use it as a tool for 2020) at p.4 and Appendix C, available at https:// broadening, not limiting, shareowner meeting cclg.rutgers.edu/wp-content/uploads/VSM-Worki participation. With this objective in mind, a ng-Group-Report-12_10_2020.pdf. virtual option, if used, should facilitate the op- 5State of Delaware, Executive Department, portunity for remote attendees to participate in Tenth Modification of the Declaration of a State the meeting to the same degree as in-person of Emergency for the State of Delaware due to a attendees.”) See also BlackRock Investment Public Health Threat (April 6, 2020). Stewardship, Proxy Voting Guidelines for U.S. Securities effective as of January 2021, available 6 These include New York, Massachusetts and at https://www.blackrock.com/corporate/literatur California. See State of New York, Continuing e/fact-sheet/blk-responsible-investment-guidelin Temporary Suspension and Modifications of Law es-us.pdf (“We expect shareholders to have a Relating to the Disaster Emergency, Exec. Order meaningful opportunity to participate in the meet- No. 202.8 (Mar. 20, 2020); Commonwealth of ing and interact with the board and management Massachusetts, Order Regarding the Conduct of in these virtual settings; companies should facili- Shareholder Meetings by Public Companies, tate open dialogue and allow shareholders to COVID-19 Order No. 19 (Mar. 30, 2020); Execu- voice concerns and provide feedback without tive Dep’t of State of California, Executive Order undue censorship.”); State Street Global Advi- N-40-20 (Mar. 30, 2020). sors, Proxy Season Review (Q2 2020), available 7U.S. Securities and Exchange Commission, at https://www.ssga.com/library-content/product Staff Guidance for Conducting Shareholder Meet- s/esg/asset-stewardship-report-q2-2020.pdf. ings in Light of COVID-19 Concerns (Updated (“When conducting an AGM virtually, we expect Apr. 7, 2020). companies to preserve all of the rights and op- 8A September 2019 report from Institutional portunities afforded to shareholders in a physical Shareholder Services (the “ISS 2019 Update”) meeting.”) undertook to evaluate whether companies shifted 11In one extreme such assertion, for example, to virtual-only meetings in an effort to discourage prominent shareholder “gadfly” activist John

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Chevedden alleged in a voluntary filing with the disclosures around conflicts of interest and the SEC with respect to a company that management differing economic interests of SPAC sponsors, cut his remote connection as his shareholder pro- directors, officers and their affiliates (collectively, posal was being read. Goodyear Tire & Rubber Company Shareholder Alert, voluntary submis- “SPAC Insiders”) as compared to the interests of sion by John Chevedden pursuant to Rule 14a- the SPAC’s public shareholders. 6(g)(1) promulgated under the Securities Ex- change Act of 1934, filed with the SEC on April IPO Disclosure Considerations 7, 2020. In an effort to elicit better disclosures when a 12FactSet; Activist Insight. SPAC goes public, the guidance poses questions 13Supra note 1. For example, the TEGNA for SPACs to address in the IPO registration state- contested virtual meeting had over 100 attendees. ment on the following topics of concern to the 14Supra note 7. Staff: 15The Independent Steering Committee of Broadridge Newsletter, January 2021, Volume 16, E conflicts of interests—especially on the part available at https://www.broadridge.com/resourc e/news-from-the-independent-steering-committe of the SPAC Insiders, with regard to fidu- e-of-broadridge#article3. ciary and contractual relationships they have with entities other than the SPAC and SEC DIVISION OF competition for business combination opportunities, and the potential for conflicts in CORPORATION FINANCE the business combination transaction itself; ISSUES SPAC E the limited time that a SPAC has to complete DISCLOSURE GUIDANCE a business transaction and its impact— including the financial incentives of the By Mark S. Bergman, John C. Kennedy, Raphael M. Russo, and David Curtiss SPAC Insiders to complete a transaction, their influence over the approval of any Mark Bergman is a partner in the London office of Paul, Weiss, Rifkind, Wharton & Garrison transaction, the ability to amend governing LLP. John Kennedy and Raphael Russo are documents to facilitate a transaction, the partners, and David Curtiss is counsel, in Paul ability to extend the timeline to complete a Weiss’New York office. This is adapted from a transaction, and the prior SPAC-success piece that originally appeared on the Columbia Law School Blue Sky Blog. track record of the sponsors, directors and Contact: [email protected] or officers; [email protected] or [email protected] or E the compensation and role of the underwrit- [email protected]. ers—including any deferral of underwriting The Staff of the Division of Corporation Fi- compensation until completion of the busi- nance recently issued CF Disclosure Guidance: ness transaction, what additional services Topic 11—Special Purpose Acquisition the underwriters may be providing, any Companies.1 This guidance highlights disclosure conflict of interest the underwriters may considerations for SPACs at both the IPO and have (especially if providing additional ser- business combination stages, with a focus on vices given deferred IPO underwriting com-

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pensation), and the timing, conditionality participate, or have an interest, in the financ- and manner (i.e., cash or other considering, and the terms, and potential dilutive ef- ation) of the payment of compensation to fect, of any forward purchase agreement the underwriters; (including whether the commitments are irrevocable). E the economic terms of SPAC Insider invest- ments—including the securities ownership Business Combination Disclosure of SPAC Insiders and the prices at which Considerations they acquired those securities (and the The guidance also poses specific questions for terms, amount and impact of any concurrent SPACs to address in the business combination offering in which they may be participat- context to elicit clearer disclosure in the business ing), and any conflicts of interest arising combination filing with the SEC on the following from their securities ownership, compensa- topics: tion arrangements and relationships with af- filiated entities that may create a financial E additional financing—whether additional incentive to complete a business transaction financing is necessary to complete the busi- even if not in the best interest of other pub- ness combination, how the terms of any lic shareholders—the Staff specifically asks financing may impact public shareholders, SPACs to clearly disclose that “if the SPAC and, if the additional financing involves the fails to complete a business combination issuance of securities, the material terms of transaction, some of all of the sponsors,’ such securities, including how the pricing directors,’ and officers’ and their affiliates’ and terms compare to, and differ from, the securities would have no value and the IPO, the financing’s impact on the capital sponsors, directors, officers and their affili- structure and if convertible securities are to ates may incur a substantial loss on their be issued, the terms of conversion and the investment”; and impact on beneficial ownership of the combined company, and whether the SPAC E the terms of SPAC issuances to its sponsor Insiders are participating in the financing; and others in private financings—including how, if applicable, the terms of different E interests of SPAC Insiders in evaluating the classes of securities compare to the rights, transaction and other opportunities— terms and risks of public securities offered including detailed information regarding the in the IPO, the impact of any of these offer- identification and evaluation of the proposed ings (especially of convertible securities) transaction, detailed information regarding on the SPAC’s capital structure, whether the the negotiations over the nature and amount SPAC will seek additional funding and how of consideration, the material factors con- the price and terms of any securities the sidered by the board in its approval of the SPAC may issue in the future could com- transaction, how the board evaluated the pare to the securities offered to the public in interests of the SPAC Insiders, whether the IPO and whether the SPAC Insiders may there are any conflicts of interest of the

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SPAC Insiders and how the SPAC ad- McCrath, a partner in the San Francisco office of dressed these conflicts, any interest the Morrison & Foerster LLP and co-chair of Mor- SPAC Insiders have in the target company rison & Foerster’s Global Corporate Department, (including the timing and acquisition cost about his firm’s most recent Tech M&A Leaders’ thereof), detailed information on how the Survey. Its findings suggest a substantial tech SPAC Insiders will benefit (including quan- M&A boom could occur in 2021, building on last tifying any compensation payments or in- year’s already-strong performance. vestment returns), and the total percentage The Survey, conducted in December 2020 and ownership interest the SPAC Insiders may whose 89 respondents were primarily U.S.-based hold after the combination (including after investment bankers (39%) or C-level/M&A ex- the exercise of warrants and conversion of ecutives (39%), found that its participants greatly convertible debt); and expect a wave of tech M&A deals. Two-thirds of E underwriters services and fees—including respondents (66%) anticipate a rise in tech acqui- disclosure of all services and the timing, sition activity, the largest percentage to predict conditionality (i.e., contingency) and man- that since the firm’s April 2014 survey. Only ner (i.e., cash or other consideration) of the about 6% said they believed tech M&A activity payment of compensation to the underwrit- would decrease in 2021. ers, and any conflict of interest the under- “We should continue to see a lot of consolida- writers may have (especially if providing tion in the semiconductor space, in the fintech additional services given deferred IPO un- space,” McCrath said. “There’s a large crop of derwriting compensation). private companies in the AI and security space that I believe will also be part of ongoing M&A ENDNOTES: activity. I think we’ll continue to see a lot of cross-border activity—there are hints of more of 1 Available here: https://www.sec.gov/corpfi that as we go forward this year.” n/disclosure-special-purpose-acquisition-compan ies. A tech M&A boom this year will be owed in great part to 2020, when the sector proved invalu- TECH M&A IN 2021: able during the COVID-19 crisis. For example, MOVING FROM STRENGTH someone who had never heard of Zoom in 2019 TO GREATER STRENGTH? was using it as a lifeline for work a year later. “There was a real tech resilience in the face of the Technology was among the saving graces of pandemic,” McCrath said. Where retail, for ex- 2020, whether the sector’s performance in equi- ample, was hard hit, “there was a lot of strength ties or M&A. This year could see even more of in tech that was focused on security measures, the same, at least in regard to tech company around home offices, having employees deploy acquisitions. remotely.”

In late January, The M&A Lawyer spoke to Eric A solid majority (61%) of respondents said

20 K 2021 Thomson Reuters The M&A Lawyer February 2021 | Volume 25 | Issue 2 they believed that private equity spending on tech less. As Morrison & Foerster noted, “the vaguely targets would increase in 2021, nearly double the optimistic outlook comes on the back of a tough number who said that in the 2019 survey (as Mor- year for selling assets to sponsors. Leveraged rison & Foerster noted, PE spending on tech buyout firms paid a median 2.9x trailing revenue targets rose to $108 billion last year, a perfor- for their tech acquisitions in 2020, the lowest mance boosted by $27 billion reported in Decem- since 2016.” ber 2020 alone). There was consensus, however, that competi- And roughly 66% of respondents said tech tion would push up pricing on PE acquisitions. purchases by special purpose acquisition compa- About 63% of respondents expect contested deals nies (aka “blank check companies”) would also among PE firms to increase M&A prices, and increase. As in other sectors, SPACs emerged 61% said the drive to beat other strategic acquir- from seemingly out of nowhere last year to be- ers could propel multiples in 2021. come a significant buyer, with 35 acquisitions of tech targets reported. By contrast, there were only And many (69%) respondents said there would six SPAC tech purchases in 2018. be a favorable exit environment for PE assets in the next three years. About 64% of respondents “The numbers say it all,” McCrath said. Earlier said they expected strategic acquirers to deliver in the previous decade, SPACs “had been a flavor, such exits this year, along with bankruptcies but not necessarily the focus of a lot of attention.” (61%) and secondary sales (54%) also expanding. That changed dramatically in 2020. A selling company’s bankers and lawyers were now almost The survey also assessed how the pandemic required to consider SPACs as one option, due to had affected tech dealmaking over the past year. the huge uptick in volume. That trend is likely to Asked which impacts of COVID they had encoun- continue, in the short-to-medium-term at least. tered in at least one M&A deal they had worked “Momentum builds on momentum. [SPACs] will on, roughly 53% of respondents said due dili- likely be bigger this year because of their greater gence had been delayed, 39% said the buyer exposure and the greater sense of them being postponed negotiations, 27% said that a buyer something to look at.” ended or suspended negotiations and had yet to resume them, and 26% said that a buyer renegoti- More Deals, Lesser Valuations? ated the deal price. Only 9%, however, said the The survey found that the outlook for deal buyer terminated its acquisition agreement. valuations, however, is less bullish than for deal McCrath said that “there was a little bit of a activity. Only about 35% of respondents said they learning curve in the first couple of months [of anticipated an increase in valuations for sales of the pandemic], as people figured out how to set privately-held tech companies in 2021. up their specific comfort zones.” In terms of due In particular, survey respondents were divided diligence, “there was a greater focus, I believe, on on whether PE firms would pay higher or lower bringing in legal specialists who could assess and multiples for tech companies in 2021. Roughly help do penetration tests on target companies in 39% expect them to pay more, while 28% predict M&A diligence. That was naturally increasing in

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any event, but in this past year there’s been a lot losses; witnessed the promise of public and non- of focus on that, in terms of better assessing risks public investigations while being inspired by the associated with target companies.” tenacity of the Division’s staff; and engaged antitrust thought leaders with whom I agree and ANTITRUST M&A many with whom I vigorously disagree. This work has challenged me in important ways. On SUGGESTIONS FOR THE some matters, I have reassessed certain intel- 117TH CONGRESS lectual priors and re-considered arguments that I once thought out of the question. I have retreated By Makan Delrahim to first principles to explain why some fashion- Makan Delrahim, Assistant Attorney General for able policies would be bad for consumers. I have the Antitrust Division at the Department of stretched to consider whether worthy welfare Justice, left his position upon the start of the Biden administration. This is excerpted and goals could be achieved by better means. Most adapted from his final address, delivered on consequentially, I have asked and empowered the January 19, 2021 at a virtual event hosted by men and women of the Antitrust Division to ap- Duke University. proach problems both big and small differently, Today is my last day as the Senate-confirmed and they have had the grace and intellectual rigor Assistant Attorney General of the Antitrust Divi- to consider those directives. sion at the Justice Department . . . Some of you The transition of power is an important op- may have read that I started my career as a patent portunity to share lessons and insights because, lawyer. When I pivoted to antitrust, it was more regardless of politics, I root for the success of this of an esoteric specialty. While John D. Rock- great institution and for its forthcoming stewards. efeller and Standard Oil have rightly earned their In addition to being available to them in any way places in American business history, few had a that I can, I want to share some of my considered true appreciation for antitrust as a discipline that conclusions with the public—a testimony of a polices the industrial relations of firms for the bet- kind to the policymakers in Congress and both terment of consumers broadly defined. Today, domestic and international antitrust enforcers antitrust is at the forefront. Spurred by the social, who will lead through the next few years. I hope political, and economic crises of our time, today these suggestions will make enforcement more we are all participants in a spirited public discus- administrable, empower consumers, and offer sion about the goals and limits of antitrust. In increased clarity to businesses, both established many ways, 2020 was an inflection point in that and the ever-important start-up. conversation—and perhaps a signal that we have pivoted from discussion to action . . . I offer two major theses. First, antitrust enforcers and policymakers can continue to do more to Undoubtedly, I have had a unique perch from accomplish reliably the results that our traditional which to participate in and observe this critical effects-based analysis dictate. Thoughtful legisla- period. Over the last three and a half years, I have tive changes can effectuate these goals. wrestled with difficult civil and criminal enforcement decisions; overseen victories and painful Second, some of the current debate about online

22 K 2021 Thomson Reuters The M&A Lawyer February 2021 | Volume 25 | Issue 2 platforms and digital markets is focused on prin- signed into law, several important antitrust re- ciples that are foundational to trust in a market- forms that will strengthen the Division’s enforce- based economy. ment efforts.

Policy solutions have ranged from direct I am most proud that Congress saw the need command-and-control regulation by creating yet for additional resources for the Antitrust Division. another regulatory agency to oversee the digital Despite rising costs, shrinking headcount, and technology industry, to wholesale calls for more resource-intensive investigations, funding breakup of companies with a certain size, to more effectively has decreased each year for at least 10 laissez-faire self-regulation by industry itself. The years. The recent omnibus appropriations bill events of recent days have laid bare the extraordi- contained the first enhancement to our budget in nary influence of tech giants in matters of public more than 10 years. This represents one of the policy. But if we don’t find a way to harness that most important pieces of support for the antitrust market power into partnership with democratic mission: it will allow us to hire additional staff policy-making, we risk devastating outcomes for that we need to effectively enforce the laws. I our civil democratic society . . . hope that the new Congress also will pass biparti- san legislation to bring merger filing fees current Legislative Reforms with inflation, and consider allocating further Congress serves two important roles: oversight increases to the Division’s enforcement budgets. and law-making. Rooted in the separation of pow- These latest developments enhance the Divi- ers, our system works best when checks and bal- sion’s ability to carry out our mission, but more ances are robust. While the executive and judicial should be done. Congress would be well suited to branches have been active, the public is best served when Congress uses the power allotted to consider immediately some simple legislative it by the framers. As the first article of the Consti- reforms to improve the predictability and effi- tution, its importance can’t be overstated. ciency of antitrust enforcement to make consumers better off and protect free markets. Undoubtedly, one of the more consequential events that coincided with my tenure as AAG was I offer recommendations for Congress to con- the 116th Congress in both chambers using its sider this term. oversight, including subpoena, power to investi- Burden-Shifting Legislation on gate market power in digital markets. That work Excessive Consolidation culminated in a body of public record and the is- First, Congress should pass legislation to intro- suance of the House report summarizing the duce bright line rules and alter the burdens of Antitrust Subcommittee’s findings and proof in civil merger cases in order to effectively recommendations. While I believe some of its combat certain excessive market concentration. suggested reforms require further consideration, This recommendation is grounded in the Divi- several are quite sensible. sion’s actual experience investigating and chal- On the legislative front, I was extremely lenging the Sabre/Farelogix and Visa/Plaid merg- pleased that Congress passed, and the President ers in court.

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Indeed, we at the Division have studied and main unchanged, facilitating administrability and have drafted burden-shifting legislation to ad- predictability. vance consideration of this issue.1 The goal here is to create a bright-line rule for The proposed legislation would amend the merging parties and for courts, allowing for better Clayton Act to address acquisitions of nascent business planning by private parties and better lit- competitors by dominant ﬁrms. igation planning by federal antitrust enforcers.

Specifically, I propose that for firms with more Clarifying the Reach of Ohio et al. v. than 50% market share in any defined market, American Express (2018) there should be a presumption that further acqui- Second, I urge Congress to provide much- sitions in that same market are anticompetitive, needed clarity on the reach of the Supreme which can be rebutted by the merging companies Court’s 2018 decision in Ohio et al. v. American if they can show by a preponderance of the evi- Express. The law that has developed as a result dence that: creates confusion and may result in uncertainty E the parties combined post-transaction would and unnecessary litigation for businesses. not be able to exercise market power; or The issue on appeal was how to prove Section E the anticompetitive effects of the transac- 1 liability for two-sided “transaction” platforms tion are insubstantial, or outweighed by the like credit cards, where merchants and store own- procompetitive benefits of the transaction. ers are on one side of a platform run by American Express, and customers are on the other. Credit The presumption should apply regardless of the cards, of course, are just one type of two-sided size of target company, helping to address situa- transaction platform. Under the majority opinion, tions in which dominant firms engage in acquisitions of smaller firms to maintain and solidify certain digital platforms may qualify as two-sided their market power, not by superior business acu- as well. men, but by acquisition. The Solicitor General’s brief explained that to Under this proposal, the Government still show behavior is illegal, plaintiffs should have to would bear the burden of: prove harm to only one side of the platform. If the platform wants to rely on offsetting benefits E defining the market in which there may be a on the other side, the defendant should bear the substantial lessening of competition; burden of proof. Instead, the Court’s opinion requires the plaintiffs to not only show harm, but E proffering the merged firm’s shares in that to somehow preemptively disprove that there are market; and benefits anywhere else on the platform. E rebutting cognizable, merger-specific pro- The American Express decision, in my view, competitive efficiencies. obfuscated the legal standard in rule of reason The existing legal standards on these topics cases. Among other things, it incorrectly raised (e.g., market definition, efficiencies) would re- the standard for plaintiffs to prove antitrust cases

24 K 2021 Thomson Reuters The M&A Lawyer February 2021 | Volume 25 | Issue 2 by paving the way for defendants and courts to however, that with the new salary structure, wrongly assert that every market is a two-sided Congress demand performance accountability by platform. This is a classic example of bad cases requiring that employees who are rated in the bot- leading to bad law. In only two years, we already tom 5% each year are dismissed. have seen unbridled defense arguments and con- International Attaches in Beijing and fused decisions by the lower courts, including in Brussels the Division’s case to block Sabre’s acquisition of Farelogix. For these reasons, among others, the Congress should authorize the placement of opinion has been criticized and recognized as antitrust experts at the U.S. Mission in Beijing creating a significant barrier to antitrust enforce- and the U.S. Mission to the European Union in ment against platforms. Brussels. In an inter-related world, antitrust enforcement increasingly is an international Legislation should codify the approach to two- endeavor. Today, there are nearly 140 antitrust sided markets as reflected in the Department’s agencies across the globe. The Department of briefs and largely adopted by Justice Breyer in Justice spends considerable resources engaging his dissent. Specifically, Congress should consider with our enforcement partners on cartel, merger, allowing a plaintiff to establish a prima facie and conduct enforcement almost on a daily basis. violation by proving harm on only one side of a Given the importance of China and the E.U. to multi-sided platform, and importantly, allowing the global economy and to the United States, it procompetitive benefits on either side of the mar- would benefit both U.S. enforcers and the United ket, but place the burden of showing such benefits States economy for the Department of Justice to on the defendant . . . have permanent attachés to focus on competition issues in those two regions. This also can be Modernized Pay Scale for Federal achieved through personnel details to the two Antitrust Agencies regions through an agreement with the Office of Congress should consider a modernized pay the United States Trade Representative, which al- scale for the attorneys and economists of the ready has a presence in each other’s missions. federal antitrust agencies. This pay scale does not Specialty Antitrust Courts need to be bespoke, but modeled after one already used at the Securities and Exchange Commission. Finally, Congress should consider and imple- The simple truth is that there is great competition ment a pilot for a specialized antitrust court to for the technical expertise of antitrust attorneys hear government enforcement actions, a view and industrial organization economists at the echoed by one of my predecessors turned legend- antitrust agencies. ary professor and Court of Appeals Judge, the Honorable Douglas H. Ginsburg.2 Such a change, in my view, is well-justified and would ensure that the agencies are able to both When the government brings an enforcement retain and recruit top talent, especially as they action to stop an anticompetitive merger or rem- compete with a handful of dominant technology edy anticompetitive conduct, we sometimes have firms in the same talent pool. I would suggest, been confronted by generalist judges who lack

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experience with antitrust law or economics. Some petition, or to tend to create a monopoly,” insert- have even voiced discomfort with the idea of ing the following: “The United States or the deciding a case because antitrust law often deals Federal Trade Commission may initiate a proceeding to enjoin a transaction prohibited by this in the counterfactual—the “but for” world—such section. In such a proceeding, it shall be presumed that courts must make informed predictions about that the effect of a transaction may be substan- the future. As a result, antitrust enforcers devote tially to lessen competition, or to tend to create a significant resources to educating courts, an monopoly, if a) The transaction would combine persons that compete in the same market, such exercise that is sometimes wasteful, may lead to that the elimination of competition by agreement trial delays, and is ill-suited for rapidly evolving between them would constitute a violation of any industries like the technology sector. Even compa- of the antitrust laws; and b) Any party to the trans- nies find it difficult to police their conduct and action has a pre-transaction share of the market that is greater than 50%. The defendants may M&A strategies in this framework, thereby under- rebut this presumption only if they demonstrate mining the deterrence goals of antitrust by a preponderance of the evidence that a) The enforcement. combined parties’ post-transaction would not be able to exercise market power; or b) The anticom- For that reason, a specialty district court where petitive effects of the transaction are insubstantial, the government can bring civil antitrust cases may or are clearly outweighed by the procompetitive benefits of the transaction in the relevant market. be a solution. This court would be modeled on This presumption shall not limit any other pre- Foreign Intelligence Surveillance Act, or FISA, sumption courts have created or used or may cre- with current Article III judges selected by the ate or use in resolving cases under this section.”). Chief Justice of the United States among inter- 2 Ginsburg, Douglas H. and Wright, Joshua ested and experienced district court judges across D., Antitrust Courts: Specialists Versus General- ists (July 3, 2013). Fordham International Law the country who can develop antitrust expertise Journal, Vol. 36, No. 4, pp. 788-811, May 2013, and help expedite antitrust cases. Yet unlike FISA George Mason Law & Economics Research Paper courts, proceedings and decisions should be open No. 13-42, available at https://ssrn.com/abstract= to the public. 2289488 (last accessed January 19, 2021).

Above all, these reforms are legislative solutions that could improve predictability for enforcers and businesses, and reduce waste, while expanding transparency and avoiding error costs.

ENDNOTES:

1 Department of Justice Legislative Proposal Amending Section 7 of the Clayton Act,15 U.S.C.A. § 18 (Section 7 of the Clayton Act, 15 U.S.C.A. § 18, is amended as follows: (1) After the second paragraph, ending “the effect of such acquisition, of such stocks or assets, or of the use of such stock by the voting or granting of proxies or otherwise, may be substantially to lessen com-

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FROM THE EDITOR changes in merger guidelines, increased antitrust enforcement funding and a push for more retro- A New Antitrust Regime Starts to Take spective scrutiny of mergers. Shape As of press time for this issue, President Biden As for Delrahim, he left his position on Janu- had yet to announce his nomination to head the ary 19. His tenure surprised critics at times: his Department of Justice’s Antitrust Division. Ongo- division’s AT&T and Visa cases were fairly ag- ing speculation over the most likely candidates gressive enforcement actions that unlikely would suggests that dealmakers, particularly in the have occurred in either of the Bush administra- technology sector, should prepare to contend with tions, for example. Yet his division also allowed a more activist federal regulator. But they may the T-Mobile/ Sprint merger that the Obama also have relatively merger-sympathetic officials administration had opposed. in the DOJ’s top spots. In his farewell speech, excerpted elsewhere in As per Reuters, two former Obama administra- this issue, Delrahim offered antitrust-related sug- tion officials are among the front-runners to gestions to the Democratic-controlled 117th replace Makan Delrahim as Assistant Attorney Congress. These included “legislation to intro- General. These are Renata Hesse, a former Act- duce bright line rules and alter the burdens of ing AAG and currently a partner at Sullivan & proof in civil merger cases in order to effectively Cromwell, where she helped to advise Amazon combat certain excessive market concentration,” on its acquisition of Whole Foods, among other a recommendation “grounded in the Division’s deals. And Juan Arteaga, former Deputy Assistant actual experience investigating and challenging Attorney General at the DOJ, and currently a the Sabre/Farelogix and Visa/Plaid mergers in partner at Crowell & Moring. Arteaga aided in court.” He also called for specialized antitrust the investigation and trial that resulted the rejec- courts as a remedy for the status quo, in which tion of the DOJ’s challenge to AT&T’s acquisi- “antitrust enforcers devote significant resources tion of Time Warner, the first litigated vertical to educating courts, an exercise that is sometimes merger challenge in half a century. Progressive wasteful, may lead to trial delays, and is ill-suited groups have reportedly advocated for Jonathan for rapidly evolving industries like the technol- Kanter, known for his criticism of Big Tech ogy sector. Even companies find it difficult to po- companies. Former FTC Commissioner Terrell lice their conduct and M&A strategies in this McSweeny is also in the mix. framework, thereby undermining the deterrence goals of antitrust enforcement.” Market observers cited reports that during the Biden transition, his team allegedly discussed its Chris O’Leary antitrust policy priorities, with an emphasis on Managing Editor regulators bringing cases “even if you’re going to lose,” as per Reuters. Topics discussed during the transition also included, reportedly, prospective

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EDITORIAL BOARD

CHAIRMAN: CATHERINE J. DARGAN PHILIP RICHTER PAUL T. SCHNELL Covington & Burling LLP Fried Frank Harris Shriver & Skadden, Arps, Slate, Meagher & Washington, DC Jacobson Flom LLP New York, NY New York, NY STEPHEN I. GLOVER MANAGING EDITOR: Gibson, Dunn & Crutcher LLP MICHAEL S. RINGLER CHRIS O’LEARY Washington, DC Skadden, Arps, Slate, Meagher & Flom LLP BOARD OF EDITORS: EDWARD D. HERLIHY Palo Alto, CA SCOTT A. BARSHAY Wachtell, Lipton, Rosen & Katz Paul, Weiss, Rifkind, Wharton & New York, NY EVAN ROSEN Garrison LLP Davis Polk & Wardwell LLP New York, NY PETER D. LYONS New York, NY Freshﬁelds Bruckhaus Deringer BERNARD S. BLACK LLP JEFFREY J. ROSEN Northwestern University School New York, NY Debevoise & Plimpton LLP of Law New York, NY Evanston, IL DIDIER MARTIN Bredin Prat FAIZA J. SAEED DENNIS J. BLOCK Paris, France Cravath, Swaine & Moore LLP Greenberg Traurig New York, NY New York, NY FRANCISCO ANTUNES MACIEL MUSSNICH PAUL SHIM ANDREW E. BOGEN Barbosa, Mussnich & Aragão Cleary Gottlieb Steen & Hamilton Gibson, Dunn & Crutcher LLP Advogados, LLP Los Angeles, CA Rio de Janeiro, Brasil New York, NY

GEORGE A. CASEY MARIO A. PONCE ECKART WILCKE Shearman & Sterling LLP Simpson Thacher & Bartlett LLP Hogan Lovells New York, NY New York, NY Frankfurt, Germany

H. RODGIN COHEN PHILLIP A. PROGER GREGORY P. WILLIAMS Sullivan & Cromwell Jones Day Richards, Layton & Finger New York, NY Washington, DC Wilmington, DE

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