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HomeHealth LawThree ideas for clear groups throughout due diligence

Three ideas 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 methods that are contemplating mergers, acquisitions and different sorts 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 selected transaction and also needs to remember that failing to shut a transaction can flip a possible accomplice right into a better-informed competitor. Nonetheless, it’s not all the time clear what info could also be shared, or with whom. It’s also tough to know when a typical non-disclosure settlement could fall wanting the specified protections. Usually, the very best observe is to determine guardrails across the diligence course of by delegating the accountability for reviewing documentation for competitively delicate info (and doubtlessly scrubbing such documentation to take away any competitively delicate info) to a 3rd celebration or a particular group of the client’s staff (a “Clear Group”).  

Talking typically, a Clear Group’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 Group 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 comparable to expansions or different capital expenditures) from paperwork {that a} vendor offers to a purchaser within the due diligence part of a transaction. A Clear Group may additionally mixture or roll-up sure info 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 listing under highlights three ideas with respect to the institution and work of Clear Groups, however it’s not supposed to be an exhaustive listing of potential antitrust concerns.

1. Use non-competitively delicate info, if potential

Whereas the change of sure competitively delicate info 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 change of data may give the events a possibility 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, take into account whether or not there may be any publicly out there 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 of to be competitively delicate and may be workable substitutes for sure competitively delicate info comparable to present or future budgets or capital expenditure plans.

2. Select the fitting group

Cautious consideration must be given to the composition of the Clear Group. Typically, it’s preferable to have a 3rd celebration, comparable to 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 obligation 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 type with the client or its staff. Moreover, the id 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 below 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’s not all the time potential to interact a 3rd celebration solely for the aim of serving as a clear group. Hiring a 3rd celebration could also be pricey and time consuming, and the popular third celebration could not conform to serve in a Clear Group capability for a given transaction. Subsequently, the duty could also be left to sure staff of the client, which presents its personal challenges. Staff of the client could function members of a Clear Group, offered that such staff do not need (and should not moderately prone to have within the close to future) obligations regarding strategic planning, direct pricing, negotiating payor agreements, gross sales and advertising, doctor compensation or different duties which might enable 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 seek out the fitting 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 info, however (2) not have (and should not prone to have within the close to future) any job obligations which might allow such worker to behave in an anti-competitive method based mostly 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 info which is doubtlessly competitively delicate to the Clear Group, which is able to then evaluate such info and move it alongside to the client if applicable. Due to the massive quantity of paperwork which can should be reviewed, greatest observe is to determine a separate digital information room wherein 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 staff and representatives that aren’t on the Clear Group mustn’t have entry to the Clear Room. The Clear Group ought to then evaluate every doc offered and log whether or not the doc accommodates any competitively delicate info. If the Clear Group and antitrust counsel for the vendor concur {that a} doc accommodates no competitively delicate info, then the Clear Group can then ship the doc on to a separate digital information room (the “Atypical Information Room”) which the client and its staff and representatives could entry. The Atypical Information Room and Clear Room ought to have an analogous file hierarchy for ease of use and they need to even have clearly distinguishable names so as to be certain that a doc just isn’t mistakenly uploaded to the Atypical Information Room previous to evaluate by the Clear Group. If a doc does include competitively delicate info, 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 Atypical Information Room, or withholding such info totally if applicable. 

Tyler Ash and Greg Mennerick are attorneys in Thompson Coburn’s Well being Care group.

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