Size of Person Threshold Test (Interpretations 79 - 96)

• Pages: 141-173

141

SIZE OF PERSON THRESHOLD TEST

Size of Person Threshold Test 143

79 Applicable provisions. 7A(a)(2), 801.11.

Issue. What is the size of person test?

Analysis. An acquisition is subject to the HSR Act’s reporting and

waiting period requirements if: (i) it is valued, for HSR purposes, in

excess of $50 million (as adjusted) but not in excess of $200 million (as

adjusted); (ii) it would satisfy the size of person test described in the

HSR Act; and (iii) it is not exempt. See Section 7A(a)(2). If an

acquisition is valued, for HSR purposes, in excess of $200 million (as

adjusted), the size of person test does not apply, and the acquisition is

reportable unless exempt.

Generally, the size of person test would be satisfied if the UPE of

one party (either the acquiring or acquired person) has at least

$10 million (as adjusted) in annual net sales or total assets and the UPE

of the other party has at least $100 million (as adjusted) i n annual net

sales or total assets. If the acquiring person satisfies the $100 million (as

adjusted) prong of the size of person test, and if the acquired person (i.e.,

the UPE of the acquired entity and all controlled entities) is not engaged

in manufacturing, the size of person threshold test would be satisfied

only if the acquired person has at least $10 million (as adjusted) in total

assets, or at least $100 million (as adjusted) in annual net sales. See

Section 7A(a)(2)(B)(ii)(II) and (III).

Section 801.11 describes how to determine, for purposes of the size

of person test, the annual net sales and total assets of the acquiring and

acquired persons. The first task is to determine the identity of the

acquiring and acquired persons—the UPEs of the buyer and the target.

See Ints. 1-21 related to determination of UPEs and HSR control tests. It

is then necessary to determine if such UPEs have regularly prepared

consolidated financial statements that are of a date not more than fifteen

months prior to the possible HSR filing or the consummation of the

transaction at issue. See Sections 801.11(b)(1) and 801.11(b)(2). If so,

each UPE is obligated to use the most recent regularly prepared

consolidated annual statement of income and expense as the source for

its annual net sales and the most recent regularly prepared consolidated

balance sheet as the source for its total assets to determine if the size of

person test is satisfied. See Section 801.11(c). If the financial statements

are not fully consolidated, they must be recomputed to include non-

duplicative annual net sales and total assets of all entities under the

control of the UPE. See Section 801.11(b)(1); Int. 82. There also are