What is the Hart-Scott-Rodino (HSR) Act?
Takeaway: The HSR Act is a federal antitrust law that requires both the buyer and the seller in a large M&A transaction to file a detailed notification with the government and to observe a mandatory waiting period, allowing regulators to review the deal for potential anti-competitive effects.
For most startups, the acquisition process is governed by corporate and securities law. However, for larger transactions, a third area of law comes into play: antitrust law. The primary U.S. antitrust law that governs mergers and acquisitions is the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the HSR Act).
The HSR Act creates a mandatory, pre-merger notification and review process for any acquisition that meets certain size thresholds. Its purpose is to give the two federal antitrust enforcement agencies—the Federal Trade Commission (FTC) and the Department of Justice (DOJ)—the opportunity to review a deal before it closes to determine if it could substantially lessen competition in a particular market.
The HSR Filing Thresholds
An HSR filing is only required for very large transactions. The specific dollar thresholds are adjusted annually for inflation. In general, the Act applies if the deal meets two main tests:
The Size of Transaction Test: The value of the acquisition must exceed a certain large threshold (e.g., over $119.5 million for 2025).
The Size of Person Test: One party to the deal must have annual net sales or total assets above a certain threshold, and the other party must meet a second, lower threshold. For a typical startup acquisition where the buyer is a major corporation, this test is almost always met if the transaction size test is met.
The HSR Process: File and Wait
If your transaction meets the HSR thresholds, the process is mandatory.
The Filing: Both your company and the acquiring company must independently prepare and file a detailed notification form with the FTC and the DOJ. This form provides information about your respective businesses, revenues, and the structure of the deal. There is a significant filing fee that is typically paid by the buyer.
The Initial Waiting Period: Once the filing is made, a mandatory 30-calendar-day waiting period begins. You are legally prohibited from closing the acquisition during this time. The agencies use this period to conduct their initial review.
Potential Outcomes:
Early Termination: If the agencies quickly determine that the deal poses no competitive issues, they can grant "early termination" of the waiting period.
Expiration: If the 30 days pass without any action from the agencies, you are free to close.
A "Second Request": This is the outcome you want to avoid. If one of the agencies has a serious competitive concern, it can issue a "Second Request." This is a massive, burdensome, and incredibly expensive request for additional documents and information, effectively a full-blown antitrust investigation that can delay your deal by many months and potentially lead to a government challenge to block the merger.
For founders involved in a large M&A deal, the HSR filing is a critical and time-sensitive regulatory hurdle that must be factored into your closing timeline.
Disclaimer: This post is for general informational purposes only and does not constitute legal, tax, or financial advice. Reading or relying on this content does not create an attorney–client relationship. Every startup’s situation is unique, and you should consult qualified legal or tax professionals before making decisions that may affect your business.