Skip to main content
Date
Rule
801.10
Staff
Michael Verne
Response/Comments
Agree.

Question

February 17, 2005

Mr. Michael B. Verve
Pre-Merger Notification Office
Federal Trade Commission
600 Pennsylvania Avenue,
Washington, DC 20580

Dear Mr. Verne:

Iam writing to confirm our discussion yesterday about whether a particularcategory of payment that my client, the buyer, is making to the seller in anasset acquisition can appropriately be excluded from the calculation of the"acquisition price" for the transaction.

AsI explained, my client is purchasing assets that the seller has used to providea service to my client for a number of years. In providing that service, theseller has, in turn, relied upon services provided by numerous third-partyproviders with which it has contracts.

Inconnection with the asset purchase, my client has offered to make incentivepayments to the seller to encourage it to persuade the third-party providers toenter new contracts directly with my client. The contractual mechanism used tocreate the new contracts with my client involves the third party providersexecuting an addendum to their contract with the seller providing that upon aspecified event they will be deemed to have entered an identical new contractwith my client. The third-parties will retain their contracts with the sellerbecause the seller will also continue to need their services.

Youagreed with me that my client's calculation of the acquisition price under Rule801.10 can exclude these incentive payments because they do not representconsideration for the assets being acquired.

About Informal Interpretations

Informal interpretations provide guidance from previous staff interpretations on the applicability of the HSR rules to specific fact situations. You should not rely on them as a substitute for reading the Act and the Rules themselves. These materials do not, and are not intended to, constitute legal advice.

Learn more about Informal Interpretations.