HSR Control Tests/Ultimate Parent Entity (Interpretations 1 - 21)

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HSR CONTROL TESTS/ULTIMATE PARENT

ENTITY

HSR Control Tests/Ultimate Parent Entity 3

1 Applicable provisions. 801.1(a)-(c), 801.2(a)-(c).

Issue. How are the acquiring and acquired persons determined?

Analysis. The first step in any HSR assessment is to determine the

acquiring and acquired persons, as well as the acquiring and acquired

entities. T he “acquiring person” is the UPE of the acquiring entity and

includes all entities under the HSR control of the UPE. See

Section 801.1(b) (definition of “control”). The “acquiring entity” is the

entity that is making the acquisition. The “acquired person” is the UPE

of the acquired entity and includes all entities under the HSR control of

the UPE. The “acquired entity” is the entity whose assets, voting

securities, or non-corporate interests will be acquired by the acquiring

entity. See Section 801.1(a) (definition of “person”) and Section 801.2

(definition of acquiring and acquired persons).

It is necessary to determine the acquiring and acquired persons in

order to apply both the size of transaction and size of person tests. For

example, the size of transaction test would be satisfied if the acquiring

person would acquire and hold in excess of $50 million (as adjusted)

worth of voting securities, controlling non-corporate interests, or assets

of the acquired person (and not just of the acquired entity). See Int. 22.

Likewise, if the transaction has an HSR value of $200 million (as

adjusted) or less, the size of person test applies and it would be necessary

to examine the total assets and annual net sales of the acquiring and

acquired persons (and not just of the acquired and acquiring entities) to

determine whether such test would be satisfied. See Int. 79. Finally, it is

also necessary to identify the acquiring and acquired persons when

assessing the applicability of certain exemptions.

Note that “person” is defined as a UPE “and all entities which it

controls directly or indirectly.” See Section 801.1(a)(1). “Entity,”

however, is defined to exclude governments and agencies thereof (unless

engaged in commerce). See Section 801.1(a)(2); Int. 2. Thus, transactions

which involve a government or agency thereof may not involve an

“entity” and may thus not be subject to the HSR Act ’s reporting

requirements. Cf. Section 7A(c)(4) (transfers to or from a federal agency

or a State or a political subdivision thereof are exempt).

A UPE is defined as an entity that is not controlled by any other

entity. See Section 801.1(a)(3). To determine an entity’s UPE, it is

necessary to look upstream to determine which, if any, entity is not

“controlled” by any other entity. It is then necessary to look downstream