Antitrust and Regulatory Approval in M&A Deals

Introduction

When Kroger agreed to acquire regional grocer Giant Eagle for $1.65 billion on July 1, 2026, the striking thing was not the price. It was that Kroger was buying a grocer at all. Less than two years earlier, in December 2024, a federal judge had blocked Kroger's $24.6 billion merger with Albertsons on antitrust grounds, killing what would have been the largest supermarket merger in US history. The lesson Kroger clearly absorbed shows up in the Giant Eagle announcement: the companies said upfront they expect to make "limited store divestitures where necessary" to satisfy regulators, and they told investors the deal would not close until 2027.

That gap between signing a deal and actually closing it is the subject of this post. A merger agreement is a promise, not a completed transaction. Before ownership changes hands, competition authorities and, in cross-border cases, foreign-investment screeners get to weigh in, and they have the power to demand changes, extract concessions, or sue to stop the deal entirely. Understanding how antitrust and regulatory approval works is essential for anyone who wants to speak intelligently about M&A in an interview, because "what could stop this deal from closing?" is one of the most common deal questions bankers face. This guide walks through the US regime, the international layer, how regulatory risk gets priced into deal terms, and how to talk about all of it convincingly.

Every significant merger agreement contains conditions to closing, and regulatory clearance is almost always one of them. The parties sign, announce, and then enter a limbo period during which the deal legally exists but cannot be completed until the conditions are met. Antitrust approval is the condition that most often turns that limbo into a multi-quarter wait.

Signing Is Not Closing

The distinction between signing and closing confuses people new to M&A, and it is worth being precise. On the signing date, buyer and seller execute a binding merger agreement, the boards approve, and the deal is announced to the market. On the closing date, the money moves and the target changes hands. In between sits a checklist of conditions: shareholder votes, financing, the absence of a material adverse change, and regulatory approvals. For a good primer on how this fits into the broader deal calendar, see the M&A process timeline from start to finish. Regulatory approval is usually the longest pole in the tent, which is why a deal announced in July can carry an expected close a year or more later.

The Antitrust Question Behind Every Merger

Antitrust law exists to prevent transactions that would substantially lessen competition or tend to create a monopoly. When two competitors combine, regulators ask a simple question with a complicated answer: will customers be worse off because this deal removes a rival from the market? Horizontal mergers between direct competitors draw the most scrutiny, which is why a grocery-on-grocery deal like Kroger and Albertsons attracted a federal lawsuit while many vertical deals sail through. The analysis turns on market definition, market share, and whether new entrants could discipline the combined firm.

Merger control

The body of law and regulatory process that lets governments review, condition, or block mergers and acquisitions before they close. In the US it is enforced by the FTC and DOJ under the Hart-Scott-Rodino Act and the antitrust statutes; other jurisdictions run parallel regimes such as the European Commission and the UK's Competition and Markets Authority.

Regimes differ by jurisdiction, and a global deal often has to clear several at once. The table below summarizes the three most important Western regimes a US candidate should know before comparing them in detail later.

The centerpiece of US merger review is the Hart-Scott-Rodino Antitrust Improvements Act, universally shortened to HSR. It does not decide whether a deal is legal. Instead, it forces the parties to notify the government before closing and to wait, giving regulators a window to investigate deals large enough to matter.

Which Deals Must Be Filed

HSR filing is mandatory when a transaction clears a size threshold that the FTC adjusts every year based on economic growth. For 2026, the size-of-transaction threshold rose to $133.9 million, up from $126.4 million in 2025, with the change taking effect for deals closing on or after February 17, 2026, according to the FTC's 2026 threshold announcement. A deal above the threshold generally must be reported, and the filing carries a fee that scales with deal size, running as high as $2.46 million for the largest transactions. Deals below the threshold usually do not require a filing, though regulators retain the power to challenge anticompetitive transactions of any size after the fact.

FTC vs DOJ and the 30-Day Clock

The US has two antitrust enforcers, and they split the work. Parties file with both the Federal Trade Commission and the Department of Justice, but only one agency reviews any given deal. Through a behind-the-scenes "clearance" process, the two agencies decide who takes it, usually based on industry expertise: the DOJ tends to handle telecom, airlines, and banking, while the FTC often takes retail, healthcare, and consumer goods. Once complete filings are in, a 30-day waiting period begins (15 days for a cash tender offer or a bankruptcy sale), during which the parties cannot close, per the FTC's premerger notification process. If the reviewing agency has no concerns, the period expires and the deal is free to close. Most filings clear this way without incident.

Second Requests: Where Timelines Balloon

The deals that make headlines are the ones that do not clear quietly. If the reviewing agency needs more information, it issues a "second request," a sweeping demand for documents, data, and testimony that can require the parties to produce millions of pages. A second request stops the clock: the deal cannot close until the parties "substantially comply" and then observe a further waiting period, typically another 30 days after compliance. Responding to a second request can take months and cost tens of millions of dollars in legal and economic-expert fees. This single mechanism is the biggest reason a contested deal stretches from a few weeks to well over a year.

Second request

A formal demand from the FTC or DOJ for additional documents and data after an initial HSR filing, issued when the agency wants a deeper look at a deal's competitive effects. It suspends the waiting period, so the merger cannot close until the parties substantially comply and a new clock runs out, which often adds six to twelve months to the timeline.

The sequence from filing to clearance follows a predictable path, even if the duration varies enormously between a routine deal and a contested one.

When regulators identify a competitive problem but do not want to kill a deal outright, they negotiate remedies. A remedy is a concession that removes the anticompetitive harm while letting the rest of the transaction proceed. Buyers accept remedies because a smaller deal is better than no deal, and because refusing often means litigation with a real chance of losing.

Structural Remedies: Selling Stores and Assets

The cleanest fix is a structural remedy, most commonly a divestiture. The merged company sells off the overlapping business, whether that is a set of stores in cities where both parties operate, a factory, a brand, or a licensing right, to a buyer that can keep competing. Structural remedies are regulators' preferred tool because once the asset is sold, the competitive problem is solved without any need for ongoing supervision. In the Kroger and Albertsons case, the companies proposed divesting 579 stores to a wholesale grocer, but the court found the package too small and poorly structured to preserve competition, which helped sink the deal.

Divestiture

A structural remedy in which merging companies sell off specific stores, plants, brands, or business lines to a third party so that a viable competitor survives after the merger. Regulators favor divestitures because they resolve a competition concern permanently, without the ongoing monitoring that behavioral remedies require.

The quality of the divestiture buyer matters as much as the size of the package. Regulators want a buyer with the scale, capital, and expertise to run the assets as a genuine competitor, not a weak player that will limp along and effectively hand the market back to the merged firm.

Behavioral Remedies and Why Regulators Distrust Them

The alternative is a behavioral remedy, a promise about how the combined company will act rather than a sale of assets. A vertically integrated firm might commit to keep supplying rivals on fair terms, or to license technology for a set number of years. Regulators are wary of behavioral remedies because they require ongoing monitoring and are easy to evade. When Microsoft sought approval for its $68.7 billion purchase of Activision Blizzard, it initially offered the UK regulator a ten-year commitment to support cloud-gaming rivals. The CMA rejected it as too hard to police, and Microsoft only won clearance after agreeing to a structural fix: selling the cloud-streaming rights to Ubisoft.

US regulators cannot block a merger by decree. Unlike the European Commission, which can prohibit a deal by administrative decision, the FTC and DOJ must persuade a federal judge to enjoin the transaction. That courtroom requirement shapes everything about how contested deals play out.

When the government sues, the parties face a choice: fight, settle with a remedy, or walk away. The airline sector offers a clean example. In January 2024, a federal court in Massachusetts sided with the DOJ and attorneys general from six states and the District of Columbia and blocked JetBlue's $3.8 billion acquisition of Spirit Airlines, finding it would substantially lessen competition on routes the two carriers both flew. The parties terminated the deal weeks later. The grocery example ran the same way: the FTC and attorneys general from eight states and the District of Columbia sued in early 2024, and in December two courts, a federal judge in Oregon and a state judge in Washington, blocked the Kroger and Albertsons combination within hours of each other.

Because litigation is expensive and public, most deals with real antitrust risk get resolved through remedies before a lawsuit, or are structured from the start to make a challenge less likely. Interviewers love the blocked-deal examples because they force you to reason about market definition and competitive harm rather than just recite a timeline.

Regulatory risk is not just a legal problem; it is an economic one that both sides negotiate over at signing. The seller worries the deal will not close and it will have wasted a year off the market. The buyer worries about how hard it will be forced to fight. The merger agreement allocates this risk through a handful of specialized terms.

Reverse Termination Fees

The most important tool is the reverse termination fee, a payment the buyer owes the seller if the deal collapses for antitrust reasons. It compensates the target for the disruption, lost time, and business damage of a failed deal, and it gives the buyer skin in the game. In the JetBlue and Spirit deal, the merger agreement obligated JetBlue to pay Spirit a reverse termination fee on an antitrust failure, one of several payments Spirit stood to collect. These fees differ from the ordinary break-up fee a seller pays for walking to a better offer, a distinction covered in depth in the guide to break-up fees and termination fees in M&A.

Reverse termination fee

A fee the buyer agrees to pay the seller if a signed merger fails to close for specified reasons, most often failure to obtain antitrust or regulatory approval. It shifts regulatory risk onto the buyer and can run into the hundreds of millions of dollars, giving the acquirer a strong incentive to fight for clearance.

Covenants, Ticking Fees, and Outside Dates

The size of the reverse termination fee tells you how much risk the buyer accepts, but the covenants tell you how hard the buyer must try. A "hell-or-high-water" covenant is the most seller-friendly version: the buyer agrees to do whatever it takes to win approval, including divesting any assets a regulator demands. Most real deals land somewhere softer, with the buyer promising "reasonable best efforts" but carving out limits on how much it must give up. JetBlue, for instance, agreed to seek approval but reserved the right not to take actions that would materially harm the benefits of the deal. Alongside these covenants, buyers sometimes owe a ticking fee, an amount that accrues to the seller for every month the closing drags past a set date, compensating shareholders for the time value of a delayed payout.

Finally, every merger agreement sets an outside date, sometimes called a drop-dead date, the deadline by which the deal must close or either party can walk. On a deal with heavy regulatory risk, the outside date is set far out, often 12 to 18 months, with automatic extensions if regulatory approval is the only outstanding condition. The interplay between the outside date, the reverse termination fee, and the efforts covenant is where lawyers and bankers spend their energy, because together they decide who bears the cost if the government takes its time. These provisions sit alongside other conditions to closing, including the material adverse change clause that lets a buyer walk if the target's business deteriorates.

Regulatory risk is where deal structure meets market strategy: Practice the M&A and deal-process questions interviewers actually ask, with worked answers, start practicing interview questions for free and find your gaps before an interviewer does.

A deal between two American companies with only domestic operations answers to US regulators alone. But most large deals touch multiple countries, and each jurisdiction with meaningful sales or assets may require its own clearance. A single global merger can need approval from a dozen or more authorities, and the deal cannot close until the slowest of them signs off. The cross-border dimension is explored further in the guide to cross-border M&A considerations.

The European Commission: Phase I and Phase II

For deals with significant European turnover, the European Commission runs a two-phase review. Phase I lasts 25 working days from formal filing, extended to 35 if the parties offer remedies, and most deals clear here, according to the European Commission's merger procedures. If serious concerns remain, the Commission opens Phase II, a deep investigation lasting 90 working days that can stretch to 125 with extensions. Crucially, the Commission can prohibit a deal on its own authority, without going to court, which makes European clearance a genuine gating item rather than a formality.

The UK Competition and Markets Authority

Since Brexit, the UK reviews large deals separately from the EU, and its Competition and Markets Authority has become one of the most assertive regulators in the world. UK notification is technically voluntary, but proceeding without it is risky because the CMA can investigate and unwind a completed deal. Phase 1 runs 40 working days; if the CMA is not satisfied, it refers the deal to a Phase 2 investigation lasting 24 weeks, extendable by eight. The Microsoft and Activision saga showed the CMA's clout: its initial block over cloud gaming forced Microsoft to restructure the entire transaction before it could close.

CFIUS and Foreign-Investment Screening

Antitrust is not the only regulatory gate. When a foreign buyer acquires a US business, the deal may face review by the Committee on Foreign Investment in the United States, a body focused on national security rather than competition. CFIUS can recommend that the President block a transaction, and Presidents have done exactly that. The most dramatic recent case was Nippon Steel's bid for US Steel: President Biden blocked it in January 2025 on national-security grounds, and President Trump then cleared it in June 2025 subject to a national-security agreement that included a government "golden share" and large investment commitments. Foreign-investment screening regimes have proliferated globally, and buyers from certain countries in sensitive sectors now expect this review as a matter of course.

CFIUS

The Committee on Foreign Investment in the United States, an interagency body that reviews acquisitions of US businesses by foreign buyers for national-security risk. It operates separately from antitrust review, can impose conditions, and can recommend that the President block or unwind a transaction, as happened initially with Nippon Steel's bid for US Steel.

Regulatory analysis is not just for the lawyers. Bankers running a sale process think about antitrust from the first day, because it shapes who can buy the company, how much they will pay, and how a seller should run the auction. Getting this wrong can cost a client a full year and a failed deal.

Handicapping and Structuring the Deal

Before a process launches, the sell-side banker maps out which buyers carry regulatory baggage. A strategic acquirer that already dominates the market may be the highest bidder on paper but the riskiest on closing, while a private equity buyer with no competing business carries almost no antitrust risk. Bankers weigh this alongside price, financing certainty, and the results of buyer due diligence, advising the seller on the true expected value of each bid rather than just the headline number. A slightly lower offer that closes cleanly can beat a higher one that spends a year in a second request and then dies.

That analysis feeds directly into deal structure. On a risky deal, the banker pushes for a large reverse termination fee, a strong efforts covenant, and a generous outside date, so that if the seller takes regulatory risk, it is well compensated for doing so. In an auction, a seller may even run a "regulatory outs" analysis on each bidder, favoring buyers who will commit to hell-or-high-water terms. The whole point is to convert a legal risk into a set of negotiated protections, so the client goes in with clear eyes about which bid is genuinely the best.

Regulatory approval shows up constantly in deal-focused interviews, and candidates who can reason about it stand out because most cannot. Two questions come up again and again.

"What Could Stop This Deal From Closing?"

This is really a test of whether you understand conditions to closing. A strong answer walks through the checklist: shareholder approval, financing, the absence of a material adverse change, and, most importantly, regulatory clearance. Then you go deeper on the regulatory piece, noting whether the two companies compete directly (horizontal risk), whether the deal needs EU or UK approval, and whether a foreign buyer triggers CFIUS. Naming a real blocked deal, such as Kroger and Albertsons or JetBlue and Spirit, shows you follow the market.

"Why Does a Deal Take 12 Months to Close?"

The honest answer is almost always regulatory review. Walk the interviewer through it: the HSR filing and 30-day wait, a second request that stops the clock and takes many months to satisfy, parallel reviews in the EU and UK on their own timelines, and possibly a CFIUS review on top. Layer in the negotiation of remedies and, in the worst case, litigation, and a year is easy to account for. Being able to connect the timeline to the mechanics, rather than just asserting that "deals take a while," is what separates a polished answer from a vague one. Regulatory delay is also why merger-arbitrage investors exist, betting on whether and when a deal will close, a topic covered in the guide to merger arbitrage strategies.

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Antitrust and regulatory approval is the reason signing a deal and closing it are two different events, sometimes a year or more apart. The essentials to carry into an interview:

Master this framework and you can answer the two questions interviewers love most, "what could stop this deal from closing?" and "why does it take so long?", with the specificity that makes an answer memorable. Regulatory approval is not a footnote to a deal. For the biggest transactions, it is the whole game.