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The Facebook-Giphy sale shows how fear of regulators is slowing down the mergers and acquisitions market

Facebook and Giphy logos.

Rectangle | Anadolu Agency via Getty Images

In 2020, a top meta The executive explained that the company spent $315 million to acquire Giphy “because it’s a great service that needs a home.” Instagram head Adam Mosseri touted Jiffy’s “amazing team” and “expressive” userbase, and insisted that Jiffy’s user data was “not the inspiration”.

Meta sold Jiffy earlier this week Shutterstock For $53 million, an eye-watering 83% markdown. The sale was forced by the UK’s antitrust regulator, which ruled that Meta’s acquisition posed a risk to the social media and advertising markets.

Experts told CNBC that this is a small amount for most tech companies, but the prospect of regulators refusing to approve the deals or open them after they happen should help calm an already tense atmosphere. is of.

“You’re seeing deals that are 20, 30 cents on the dollar compared to six or twelve months ago,” Sultan Meghji, America’s Frontier Fund advisor and former chief innovation officer at the FDIC, told CNBC.

Regulators in Europe and the United States are eyeing mega deals such as MicrosoftProposed $69 billion acquisition of activisionand smaller ones, like Amazon’s acquired the vacuum-maker for $1.7 billion i robot,

Jonathan Kanter, who heads the Justice Department’s antitrust unit, and Federal Trade Commission Chairwoman Leena Khan have been given wide leeway by President Joe Biden to pursue potential anti-competitive behavior. the federal government has brought cases or launched investigations into Amazon, Google, jetblue airlinesMeta and Microsoft.

Prior to his DOJ posting, Cantor worked in private practice, advising directors and executives on potential deals and assisting regulatory damages. Khan made a name for himself with a widely cited journal article on the competitive effects of Amazon.

Brandon L. Morrison, co-president of global risk and crisis management at Morrison Foster. The Biden administration has “increased investigation and enforcement” of the deals, Van Graeck told CNBC.

Van Graeck, the former head of the DOJ’s Foreign Agent Registration Act unit, said regulatory scrutiny had been on the rise for years prior to the current administration.

Still, top advisers say boardrooms are now giving increased weight to regulatory concerns. High-profile actions have played a part in this, as have the increasing complexity and number of regulatory regimes.

From the FTC’s point of view, enhanced thinking is welcome. “Thousands of deals still happen every year,” FTC spokesman Douglas Farrar told CNBC. “But if mergers aren’t getting out of the boardroom because they would violate antitrust laws, that means we’re doing our job.” “

CFIUS factor

It’s not just FTC or DOJ concerns that are slowing down deals. According to research by PwC, publicly disclosed reviews of the all-powerful Committee on Foreign Investment in the United States, or CFIUS, have increased by 50% since 2020.

That number doesn’t account for warnings by CFIUS lawyers to steer companies away from deals or outreach to non-public CFIUS review papers. The committee generally operates in a highly secretive manner, and is rarely seen in the public eye, apart from a public and lengthy review by TikTok parent ByteDance.

That’s because CFIUS is charged with reviewing corporate acquisitions that could have an impact on national security, among other things. Even the suggestion of a CFIUS investigation could completely scuttle a deal or remove the preferred bidder from the running.

Cryptocurrency exchange Binance, for example, reached an agreement to acquire bankrupt crypto lender Voyager Digital in late 2022. Binance’s bid was accepted after Voyager’s earlier agreement with allegedly fraudulent crypto exchange FTX collapsed due to the latter’s November 2022 bankruptcy filing.

Shortly after the Binance-Voyager deal was announced, CFIUS filed a letter informing Voyager that it would review the deal.

CFIUS is a powerful “tool” in the US government’s arsenal, Van Grack told CNBC. Van Graeck said that through CFIUS, the Justice Department has been able to take “an increased role in the review and investigation of these transactions.”

The international scope of most deals has further complicated matters. It is not just a regulator that may weigh in on an acquisition or merger. The first question now has to be “how many jurisdictions do we touch,” Van Graeck said.

From there, assuaging regulatory concerns, whether on non-competitive or national security grounds, could mean divestment or mitigation. It can also mean, as with the CMA in the Activision-Microsoft deal, that regulators move to block a deal in its entirety.

Van Graeck said as boardrooms and executives weigh deals large and small, advisors are being forced to confront a global array of competing regulatory interests. “It’s just a more complex network: ‘Are we going to get approval? How long will it take? Will there be mitigation, and what will that mitigation look like?'”

“Answering those questions is becoming more challenging,” he said.

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