The United States Department of Justice and Federal Trade Commission have proposed updates to their joint Merger Guidelines, which aim to identify potentially illegal mergers based on various criteria. The guidelines emphasize the strict enforcement of antitrust policies against private equity firms, big tech companies, and managed service providers. The guidelines include 13 different guidelines, some relevant to tech companies and MSPs, such as mergers not entrenching or extending a dominant position and examining a pattern or strategy of growth through acquisition.
Guideline 7 of the Merger Guidelines draft, warns against dominant firms acquiring smaller firms to reinforce entry barriers during technological transitions.
Guideline 9 examines a pattern or strategy of growth through acquisition by examining the firm’s history and current or future strategic incentives. As a result, some of the biggest MSPs, such as IBM and Accenture, may face litigation for frequently acquiring smaller firms.
The guidelines will be open to public comment until September 18, 2023.
Why do we care?
MSPs should comment and seek clarification on any existing language that jeopardizes or muddies the waters for existing MSP partnerships and upcoming deals.
The ambiguity surrounding unlawful serial acquisitions raises questions for MSPs, particularly regarding the similarity of acquired companies’ products and services, the number of acquisitions needed to comprise a series, and the impact of global mergers and acquisitions on federal litigation.
As the generative AI market matures, larger tech companies and MSPs may seek M&A opportunities with smaller AI firms. Still, they will likely face more significant regulatory scrutiny than in past tech acquisitions.