Sometimes, a purchaser and seller are so anxious to merge their companies that they take steps to share detailed competitive information and to combine operations prior to the closing on the business transaction. If taken too far, this practice, known as “gun-jumping” or “jumping the gun”, may violate federal anti-trust laws. The government frowns upon and has instituted enforcement actions against companies that it believes have either a) shared sensitive information that could have an unfair impact on competition, such as pricing, or b) integrated the operations of the companies prior to the waiting period required under a federal law known as the “Hart Scott Rodino Act”, which applies to transactions of a certain size. The federal government’s lawsuits, none of which have been decided by a judge, have all settled for substantial monetary fines. Of course, it is always necessary to share certain information when conducting due diligence on a purchase. That is permissible, as long as the information is not used in an anti-competitive way. It is also permissible to plan before the closing for the integration that will occur post-closing. Using the concepts described above as a guide, the purchaser and seller can avoid being accused of jumping the gun.
ABOUT GLENN D. SOLOMON
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Glenn D. Solomon is a principal at Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years. He has extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress.
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