Three suggestions for clear groups throughout due diligence

Elevated consolidation within the well being care sector continues to attract media consideration and antitrust scrutiny from quite a lot of regulators together with the Federal Commerce Fee, the Antitrust Division of the Division of Justice and state attorneys basic. In consequence, well being care suppliers and hospital programs that are contemplating mergers, acquisitions and different kinds of strategic partnerships or joint ventures ought to take steps to make sure that they don’t violate antitrust legal guidelines when sharing info concerning the enterprise case for a specific transaction and also needs to remember the fact that failing to shut a transaction can flip a possible associate right into a better-informed competitor. Nevertheless, it’s not at all times clear what info could also be shared, or with whom. It is usually tough to know when a typical non-disclosure settlement could fall in need of the specified protections. Usually, the most effective follow is to determine guardrails across the diligence course of by delegating the accountability for reviewing documentation for competitively delicate info (and probably scrubbing such documentation to take away any competitively delicate info) to a 3rd social gathering or a particular group of the client’s workers (a “Clear Staff”).  

Talking usually, a Clear Staff’s function is to filter and take away competitively delicate info from the stream of data flowing from a vendor to a purchaser. A Clear Staff could accomplish this by, amongst different issues, redacting sure info (together with, however not restricted to, strategic plans, enterprise valuations, doctor compensation insurance policies, payor charges, facility efficiency, contractual phrases for particular clients or suppliers, and future plans resembling expansions or different capital expenditures) from paperwork {that a} vendor supplies to a purchaser within the due diligence section of a transaction. A Clear Staff may additionally mixture or roll-up sure info in order that it may be offered to the client in a abstract report or different method that doesn’t reveal competitively delicate particulars. The record beneath highlights three suggestions with respect to the institution and work of Clear Groups, however it’s not supposed to be an exhaustive record of potential antitrust concerns.

1. Use non-competitively delicate info, if potential

Whereas the trade of sure competitively delicate info concerning the events to a possible transaction is a essential a part of the planning course of, regulators are involved that, if not achieved fastidiously and thoughtfully, the trade of data might give the events a chance to interact in present or future anticompetitive conduct. Thus, the events ought to, earlier than responding to any request for competitively delicate info as a part of a due diligence request, think about whether or not there’s any publicly obtainable or in any other case non-competitively delicate info which might fulfill the request. For instance, historic monetary statements, tax returns, and asset depreciation schedules are usually not thought-about to be competitively delicate and is likely to be workable substitutes for sure competitively delicate info resembling present or future budgets or capital expenditure plans.

2. Select the appropriate staff

Cautious consideration needs to be given to the composition of the Clear Staff. Typically, it’s preferable to have a 3rd social gathering, resembling a purchaser’s exterior authorized counsel, exterior antitrust counsel or monetary advisers, function the Clear Staff. Any third social gathering chosen ought to enter into an settlement (the “Clear Staff Settlement”) with the client and vendor setting forth the third social gathering’s duties and duties, together with the responsibility to take care of the confidentiality of any info offered to it and to not share any competitively delicate info in an unredacted, disaggregated or in any other case unapproved kind with the client or its workers. Moreover, the id of every worker or consultant of the third social gathering needs to be disclosed to the client and vendor and such worker or consultant ought to execute an acknowledgment of such individual’s obligations as a consultant of the third social gathering beneath the Clear Staff Settlement. Importantly, the Clear Staff Settlement acts as a complement to, and never a alternative of, the non-disclosure settlement that the client and vendor ought to have entered into on the very outset of their negotiations.

Nevertheless, it’s not at all times potential to interact a 3rd social gathering solely for the aim of serving as a clear staff. Hiring a 3rd social gathering could also be pricey and time consuming, and the popular third social gathering could not conform to serve in a Clear Staff capability for a given transaction. Due to this fact, the duty could also be left to sure workers of the client, which presents its personal challenges. Workers of the client could function members of a Clear Staff, offered that such workers shouldn’t have (and usually are not moderately prone to have within the close to future) duties regarding strategic planning, direct pricing, negotiating payor agreements, gross sales and advertising and marketing, doctor compensation or different duties which might permit them to make use of any competitively delicate info revealed to them in an anti-competitive method on behalf of the client. It may be tough to search out the appropriate steadiness as a result of every worker ought to (1) be sufficiently educated concerning the potential transaction and their accountability to forestall the inappropriate disclosure of competitively delicate info, however (2) not have (and usually are not prone to have within the close to future) any job duties which might allow such worker to behave in an anti-competitive method primarily based on the data offered to them pursuant to their Clear Staff duties. 

3. Set up a clear room

To facilitate the switch of data between the events, the events want to determine a mechanism by which the vendor can present info which is probably competitively delicate to the Clear Staff, which is able to then assessment such info and cross it alongside to the client if acceptable. Due to the massive quantity of paperwork which can have to be reviewed, greatest follow is to determine a separate digital information room during which all paperwork to be offered by the vendor might be uploaded by the vendor and reviewed by the Clear Staff (the “Clear Room”). The client and its workers and representatives that aren’t on the Clear Staff shouldn’t have entry to the Clear Room. The Clear Staff ought to then assessment every doc offered and log whether or not the doc comprises any competitively delicate info. If the Clear Staff and antitrust counsel for the vendor concur {that a} doc comprises no competitively delicate info, then the Clear Staff can then ship the doc on to a separate digital information room (the “Peculiar Knowledge Room”) which the client and its workers and representatives could entry. The Peculiar Knowledge Room and Clear Room ought to have the same file hierarchy for ease of use and they need to even have clearly distinguishable names with the intention to make sure that a doc is just not mistakenly uploaded to the Peculiar Knowledge Room previous to assessment by the Clear Staff. If a doc does include competitively delicate info, then the Clear Staff ought to observe procedures established by the events’ respective antitrust counsels for redacting or aggregating the data earlier than sending to the Peculiar Knowledge Room, or withholding such info fully if acceptable. 

Greg Mennerick is an legal professional in Thompson Coburn’s Well being Care group.