Designing Hell or High Water Clauses for Foreign Investment Clearances
Hell or high water clauses for foreign investment clearances must bound divestiture obligations with strict asset schedules and reverse termination fees.
Voluntary Notice
Meaning
Formal submissions made by parties in a transaction to a regulatory body even when the deal does not meet the legal requirements for a mandatory filing allow for a proactive review of potential antitrust or national security concerns. A voluntary notice provides a layer of legal certainty by inviting the government to clear the deal before it closes. It is often used in sensitive industries where the risk of a post-closing investigation and a forced divestiture is high.
Strategic Benefit
Filing early can prevent a sudden intervention by regulators that might derail the financing or the integration of the two companies. By submitting a voluntary notice, the parties take control of the timeline and can address any concerns in an orderly fashion. This move signals to the market that the companies are confident in the legality of their combination.
Review Process
The government evaluates the submission using the same criteria as a mandatory filing but often with a more cooperative tone. A voluntary notice starts a clock for a set period during which the authority must either raise an objection or grant a safe harbor. This safe harbor protects the transaction from being challenged on the same grounds in the future.
Risk Mitigation
Companies weigh the cost of the filing against the potential loss of the entire investment if the deal is later found to be unlawful. The voluntary notice is a common tool for private equity firms and international conglomerates entering new markets with complex regulatory environments. It acts as a final check that ensures the path to closing is clear of political or legal obstacles.
This process provides peace of mind for the board of directors when they are voting on a high-stakes international acquisition.