One pig-meat conglomerate buying another isn't typically my stock in trade, but I was intrigued by the recent news of the DOJ levying a $900K fine against Smithfield Farms for gun-jumping in its acquisition of Premium Standard Farms. Root of the problem? During the pre-close HSR waiting period, Premium Standard had submitted several long-term contracts for hog supply to Smithfield for review and approval. Sooey!
While the amount of the fine isn't huge (representing little more than one-tenth of one percent of the $810 million Smithfield paid), what's interesting is how after-the-fact it was. The deal closed nearly 3 years ago.
Lesson one, which isn't really a lesson, because both parties should have known better: Don't ask your acquiror to sign off on ordinary course contracts, even if they ARE large and DO extend beyond the closing date. Aside from the gun jumping risk, there are also significant benefits to the seller in maintaining its operational independence while awaiting the close (optionality in the event the deal goes south; additional motivation for the buyer to close quickly). And while the buyer's interest in making sure it's not saddled with non-economic contracts is obvious, tight operating covenants are a better solution than trying to assert de facto operating control pre-close.
Lesson two: Don't expect that closing the deal is the end of your dealings with the DOJ. If you haven't run a clean process, don't be surprised if the feds come calling long after the closing dinner is a distant memory.