Economists Lend Insight Into Antitrust Risk

Tue Apr 20 16:24:38 EDT 2004
By Dr. Sumanth Addanki

Sumanth Addanki of NERA Economic Consulting explains how econometric analysis can take some of the guesswork out of assessing antitrust risk

Challenges raised during the regulatory review process can jeopardize an otherwise well-conceived merger or acquisition, forcing the merging parties either to restructure their proposed transaction or even abandon it altogether. In this article, NERA Senior Vice President Dr. Sumanth Addanki discusses ways in which these antitrust risks can be predicted and managed better than ever before. Thanks to the increasing availability of data, as well as advances in econometric techniques and in computing power, questions that were once debated using qualitative information and even pure rhetoric just fifteen years ago can now be answered on the basis of hard statistical evidence. Using real-world examples drawn from his extensive experience, he illustrates the power of econometrics in helping to resolve antitrust issues for his clients, enabling them either to clear challenges or to identify remedies suitable for fixing problems.

Dr. Addanki stresses the impact of econometric analysis early in the pre-deal process in managing the antitrust risk and choosing between alternative potential deals. Business leaders should engage their legal and economic consultants in pre-deal screening early in the planning process so that they may anticipate likely challenges by antitrust enforcement agencies and make strategic adjustments accordingly. By using econometrics to pre-screen proposed transactions, both buyers and sellers can now approach deals with a clear view of the antitrust risks they are likely to face; buyers can evaluate a proposed acquisition before making a first approach to the target, and firms that are trying to sell assets can use econometric analysis to handicap the antitrust risks posed by a variety of alternative buyers.

This article was published in a special April 2004 M&A Guide supplement to International Financial Law Review. A version of this article first appeared in Viewpoint, the Marsh & McLennan Companies Journal, Volume XXXII, Number 2, 2003. MMC owns the copyright for the article.