by Frank Aquila, Renata Hesse, Steven Holley, Matthew Hurd, Eric Krautheimer, Scott Miller, Melissa Sawyer, and Krishna Veeraraghavan 

On February 10, 2020, Edgewell Personal Care Co. (“Edgewell”) announced that it would abandon its $1.37 billion acquisition of Harry’s Inc. (“Harry’s”), after the Federal Trade Commission (“FTC”) sued to block the deal. Both Edgewell and Harry’s sell razors. While Edgewell is a longstanding incumbent in the industry through its Schick and Wilkinson Sword brands, Harry’s began in 2013 as a direct-to-consumer (“DTC”) retailer and expanded into retail outlets in 2016. Edgewell also announced that it anticipates litigation with Harry’s following Edgewell’s decision to terminate the merger agreement.

The FTC challenge demonstrates that it is closely scrutinizing acquisitions that may eliminate successful market disruptors, particularly in concentrated industries. The challenge also illustrates that statements executives make to investors while a deal is pending can significantly influence the merger clearance process. For private equity and venture investors, the case highlights that antitrust risks may limit available exit strategies for those pursuing investments in disruptive start-ups.

Finally, the threat of Harry’s filing a lawsuit against Edgewell provides a reminder that litigation between former merger partners does occur. Prospective acquirers should keep the possibility of litigation in mind when negotiating merger agreement provisions, and exhibit particular care towards provisions that govern the parties’ obligations in the event of an extended regulatory review or challenge. Continue reading →