Wednesday, June 19, 2024
HomeHealth LawThree suggestions for clear groups throughout due diligence

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 a wide range of regulators together with the Federal Commerce Fee, the Antitrust Division of the Division of Justice and state attorneys basic. Because of this, well being care suppliers and hospital techniques that are contemplating mergers, acquisitions and different varieties of strategic partnerships or joint ventures ought to take steps to make sure that they don’t violate antitrust legal guidelines when sharing data concerning the enterprise case for a specific transaction and also needs to take into account that failing to shut a transaction can flip a possible companion right into a better-informed competitor. Nonetheless, it isn’t at all times clear what data could also be shared, or with whom. Additionally it is tough to know when a typical non-disclosure settlement might fall in need of the specified protections. Normally, the most effective follow is to determine guardrails across the diligence course of by delegating the accountability for reviewing documentation for competitively delicate data (and probably scrubbing such documentation to take away any competitively delicate data) to a 3rd celebration or a particular group of the client’s workers (a “Clear Group”).  

Talking typically, a Clear Group’s goal is to filter and take away competitively delicate data from the stream of data flowing from a vendor to a purchaser. A Clear Group might accomplish this by, amongst different issues, redacting sure data (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 reminiscent of expansions or different capital expenditures) from paperwork {that a} vendor supplies to a purchaser within the due diligence section of a transaction. A Clear Group can also combination or roll-up sure data in order that it may be introduced to the client in a abstract report or different method that doesn’t reveal competitively delicate particulars. The record under highlights three suggestions with respect to the institution and work of Clear Groups, however it isn’t supposed to be an exhaustive record of potential antitrust concerns.

1. Use non-competitively delicate data, if attainable

Whereas the alternate of sure competitively delicate data concerning the events to a possible transaction is a needed a part of the planning course of, regulators are involved that, if not achieved rigorously and thoughtfully, the alternate of data might give the events a possibility to have interaction in present or future anticompetitive habits. Thus, the events ought to, earlier than responding to any request for competitively delicate data as a part of a due diligence request, take into account whether or not there’s any publicly obtainable or in any other case non-competitively delicate data which might fulfill the request. For instance, historic monetary statements, tax returns, and asset depreciation schedules are sometimes not thought of to be competitively delicate and is perhaps workable substitutes for sure competitively delicate data reminiscent of present or future budgets or capital expenditure plans.

2. Select the precise crew

Cautious consideration must be given to the composition of the Clear Group. Typically, it’s preferable to have a 3rd celebration, reminiscent of a purchaser’s outdoors authorized counsel, outdoors antitrust counsel or monetary advisers, function the Clear Group. Any third celebration chosen ought to enter into an settlement (the “Clear Group Settlement”) with the client and vendor setting forth the third celebration’s duties and obligations, together with the responsibility to take care of the confidentiality of any data offered to it and to not share any competitively delicate data in an unredacted, disaggregated or in any other case unapproved type with the client or its workers. Moreover, the identification of every worker or consultant of the third celebration must 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 celebration beneath the Clear Group Settlement. Importantly, the Clear Group Settlement acts as a complement to, and never a substitute of, the non-disclosure settlement that the client and vendor ought to have entered into on the very outset of their negotiations.

Nonetheless, it isn’t at all times attainable to have interaction a 3rd celebration solely for the aim of serving as a clear crew. Hiring a 3rd celebration could also be expensive and time consuming, and the popular third celebration might not conform to serve in a Clear Group capability for a given transaction. Subsequently, the duty could also be left to sure workers of the client, which presents its personal challenges. Workers of the client might function members of a Clear Group, offered that such workers don’t have (and will not be fairly prone to have within the close to future) obligations 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 data revealed to them in an anti-competitive method on behalf of the client. It may be tough to seek out the precise steadiness as a result of every worker ought to (1) be sufficiently educated concerning the potential transaction and their accountability to stop the inappropriate disclosure of competitively delicate data, however (2) not have (and will not be prone to have within the close to future) any job obligations which might allow such worker to behave in an anti-competitive method primarily based on the data offered to them pursuant to their Clear Group 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 data which is probably competitively delicate to the Clear Group, which is able to then overview such data and cross it alongside to the client if acceptable. Due to the massive quantity of paperwork which can have to be reviewed, finest follow is to determine a separate digital information room through which all paperwork to be offered by the vendor will be uploaded by the vendor and reviewed by the Clear Group (the “Clear Room”). The customer and its workers and representatives that aren’t on the Clear Group shouldn’t have entry to the Clear Room. The Clear Group ought to then overview every doc offered and log whether or not the doc incorporates any competitively delicate data. If the Clear Group and antitrust counsel for the vendor concur {that a} doc incorporates no competitively delicate data, then the Clear Group can then ship the doc on to a separate digital information room (the “Bizarre Information Room”) which the client and its workers and representatives might entry. The Bizarre Information Room and Clear Room ought to have an identical file hierarchy for ease of use and they need to even have clearly distinguishable names with a view to be certain that a doc isn’t mistakenly uploaded to the Bizarre Information Room previous to overview by the Clear Group. If a doc does include competitively delicate data, then the Clear Group ought to observe procedures established by the events’ respective antitrust counsels for redacting or aggregating the data earlier than sending to the Bizarre Information Room, or withholding such data solely if acceptable. 

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




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