Mergers and Acquisitions
The telecommunications industry continues to experience consolidation through mergers and acquisitions. A merger or acquisition which closes without requisite federal or state regulatory approval can be costly and result in protracted hearings in multiple jurisdictions, fines and penalties, or worse yet, disapproval of the proposed transaction.
In addition, acquiring a telecommunications business or assets without requisite regulatory authorizations can result in liability under the Telecommunications Act of 1996 for unlawful switching of 1+ customers without their consent (generally known as “slamming”).
Telecom M&A Lawyer
A diligent, experienced telecommunications attorney can guide you through the complicated process of a telecom merger and acquisition. Ben Bronston has practiced in the telecommunications field for more than 20 years and understands the complicated issues and challenges in an M&A. He will bring his nationally recognized expertise to your matter. Call our law firm today at 888.469.0579
Ben Bronston represents telecom companies on mergers and acquisitions around the world.
- Key Considerations in a Telecom M&A
- Purchase Agreement
- Due Diligence
- FCC Approvals
- State Approvals
While many considerations must be addressed to effectuate a merger or asset acquisition involving one or more telecommunications service providers, some general guidelines should be followed:
- A stock or asset purchase agreement or merger agreement needs to be negotiated, prepared and executed.
- A careful investigation of the assets and telecommunications licenses of the company being acquired or merged with must be completed (generally referred to as “due diligence”).
- Approvals for the transaction must be obtained from the Federal Communications Commission (FCC) and separately from appropriate state PUCs/PSCs.
Mergers or acquisitions generally require the negotiation and preparation of an agreement which (a) effectuates the goals of the parties; (b) accurately reflects the price and terms of the transaction; and (c) identifies the applicable closing date.
Agreements typically take the form of stock or share purchase agreements, merger agreements or asset purchase agreements. An important consideration in preparing the agreement is ensuring that all needed assets to be acquired or sold are specifically identified in the agreement.
For example, in the case of a telecommunications asset sale/purchase, the agreement should specifically encompass needed federal and state telecommunications licenses and tariffs, network codes (e.g., CIC codes, etc.) and related authorizations to the extent transferable.
A complete inventory of the seller’s assets, authorizations and liabilities must be prepared as part of the due diligence process. Careful due diligence is crucial to ensure that the assets or business being purchased is fully known to the buyer. Your telecommunications attorney can help make sure everything is accounted for.
The buyer must ensure that: (a) all required federal and state licenses have been obtained and are effective; (b) all necessary tariffs have been filed and kept updated; (c) all federal and state filing requirements have been complied with; (d) all regulatory fees, contribution requirements and assessments have been paid; and (e) no investigation or enforcement proceedings by federal or state regulatory agencies have been initiated.
If the company to be acquired or merged with has Section 214 authorizations or other FCC licenses, prior FCC approval of the acquisition or merger is generally required.
The application for approval must include specific information regarding the proposed transaction and demonstrate that grant of the application is in the public interest. Typically, within weeks of filing, applications are placed on public notice by the FCC and usually granted in a month or less.
Telecom service providers generally are required to obtain authorizations from state PUCs/PSCs if they are (1) operating in that particular state; or (2) have certification to operate in that state.
On average, it takes approximately two to six months for the state approval process to be completed. Because some states do not allow post-consummation approvals to be granted, careful advance planning concerning the state approval aspect of the transaction is necessary.
Depending on the particular circumstances of the transaction, some states will not require any filings at all. Others require prior notification, some post-notification, and some require prior approval of the transaction before the deal can close.
If telecom providers fail to obtain required regulatory approvals, the FCC and/or state PUCs can undertake a number of enforcement actions. Further, because a number of states do not allow post-consummation approval of transactions, if prior approvals in those states are not obtained, state law may render the transaction null and void in those jurisdictions.
Both the FCC and state PUCs/PSCs may initiate investigations regarding the companies’ noncompliance with federal or state law, which can result in stiff penalties or, even if such penalties are avoided, costly legal bills. Ultimately, the FCC or state PUCs can revoke the companies’ authorizations to provide telecommunications service within their respective jurisdictions.