HSR Filing Requirements and Thresholds: Size of Transaction and Size of Person Tests

The Hart-Scott-Rodino Antitrust Improvements Act of 1976 requires parties to acquisitions that meet specified size thresholds to file notifications with the Federal Trade Commission and the Department of Justice Antitrust Division before closing the transaction. The mandatory pre-merger notification requirement gives the agencies the opportunity to review proposed transactions for competitive effects and, where appropriate, to investigate further or seek preliminary injunctive relief before the acquisition is consummated. The HSR filing requirement is a procedural obligation, not a substantive approval: the agencies' failure to challenge a transaction during the waiting period does not constitute approval or immunize the transaction from subsequent antitrust challenge.

This sub-article is part of the HSR Antitrust M&A Legal Guide. It addresses the HSR statutory and regulatory framework in detail: the size-of-transaction test and its annual adjustment, the size-of-person test including the $23.9 million and $239 million thresholds, the large transaction threshold above which the size-of-person test does not apply, aggregation rules and the ultimate parent entity concept, the definition of voting securities and assets for HSR purposes, the acquiring-person and acquired-person rules, the principal exemptions including ordinary course acquisitions, intra-person transactions, the investment-only exemption at ten percent, and the institutional investor exemption at fifteen percent, the foreign commerce exemptions and the U.S. commerce nexus test, the 2024 final rule expanding the HSR form, ten-year merger history and labor market disclosures now required, how to calculate the value of a transaction for HSR purposes, and the relationship between non-HSR-reportable acquisitions and Clayton Act Section 7 risk. The companion article on the second request and antitrust investigation process addresses what happens after an HSR filing is made and the agencies open a more detailed investigation.

Acquisition Stars advises buyers and sellers on HSR compliance, antitrust risk assessment, and coordination of the merger review process with overall transaction timelines. The analysis below reflects the rules and thresholds in effect as of the publication date. HSR thresholds are adjusted annually and parties should confirm current thresholds with counsel. Nothing in this article constitutes legal advice for any specific transaction.

The HSR Statutory Framework and Annual Threshold Adjustment

The HSR Act, codified at 15 U.S.C. Section 18a, authorizes the FTC and DOJ to require parties to acquisitions meeting specified criteria to file pre-merger notifications and observe a waiting period before closing. The Act's implementing regulations, found at 16 C.F.R. Parts 801 through 803, translate the statutory structure into specific tests, definitions, and procedural requirements. The FTC's Premerger Notification Office administers the program, receives filings, and coordinates with the DOJ's Antitrust Division on review assignments. Congress built an annual inflation adjustment into the statute, requiring the FTC to revise the HSR thresholds each year to reflect changes in U.S. gross national product. The revised thresholds are published in the Federal Register each January and take effect on the publication date. Parties to transactions should confirm the current thresholds applicable to their transaction at the time of signing, not by reference to prior-year amounts that may have been superseded.

The HSR framework applies to three categories of acquisitions: acquisitions of voting securities, acquisitions of assets, and acquisitions of non-corporate interests such as partnership interests or LLC membership interests. Each category has its own calculation mechanics for determining transaction value and for applying the size-of-person test. The analysis begins with identifying the acquiring person and the acquired person, then determining the value of the acquisition, then applying the size-of-transaction threshold, then applying the size-of-person test if applicable, and then evaluating whether any exemption applies. This sequential analysis must be completed accurately before closing, because the civil penalties for failing to file when required are substantial. The FTC has authority to seek civil penalties of more than $50,000 per day for each day a required filing is not made, and the DOJ has authority to seek injunctive relief to unwind a transaction that was completed without a required filing.

The HSR framework requires separate filings by both the acquiring person and the acquired person, with each party paying a filing fee that scales with the transaction value. For 2024, the filing fees range from $30,000 for transactions between the base threshold and $173.3 million, to $280,000 for transactions valued above $5 billion. The fee schedule is also adjusted annually. Each party prepares its own filing using the HSR form, and the filings are submitted simultaneously to the FTC and DOJ. The waiting period begins on the date the agencies receive both completed filings. A filing that is incomplete triggers a deficiency letter from the Premerger Notification Office, which restarts the waiting period clock when the deficiency is cured.

The Size-of-Transaction Test: Base Threshold and Large Transaction Threshold

The size-of-transaction test determines whether a proposed acquisition is large enough to potentially require an HSR filing. For 2024, the base size-of-transaction threshold is approximately $119.5 million. An acquisition that results in the acquiring person holding voting securities, assets, or non-corporate interests of the acquired person valued at or below this threshold is not subject to HSR reporting. An acquisition valued above the base threshold is potentially subject to reporting, subject to the size-of-person test and applicable exemptions. An acquisition valued above the large transaction threshold, which is approximately $478 million in 2024, is subject to reporting without any size-of-person analysis: if the transaction value exceeds the large transaction threshold, the filing obligation applies regardless of how large or small the acquiring person and acquired person are.

The size-of-transaction test applies to the total value of what the acquiring person will hold after the acquisition, not just the value being paid in the current transaction. This aggregation principle means that an acquiring person who already holds some voting securities of the acquired person must include the value of those existing holdings in the size-of-transaction calculation. If an acquirer holds five percent of a target's voting securities worth $60 million and proposes to acquire an additional twenty percent worth $80 million, the size-of-transaction calculation includes the total post-acquisition holding valued at approximately $140 million, which exceeds the 2024 base threshold. This aggregation requirement prevents parties from structuring acquisitions in tranches to keep each individual tranche below the threshold while accumulating a significant position. The HSR rules include specific provisions addressing the aggregation of voting securities acquired within twelve-month periods to prevent such tranche structuring.

For acquisitions of assets, the size-of-transaction test is applied to the value of the assets being acquired rather than to the acquiring person's total post-acquisition asset holdings in the acquired person's business. This distinction matters in asset-only acquisitions where the seller retains some assets or where the buyer acquires assets from multiple sellers. Each asset acquisition is analyzed separately unless the acquisitions are part of a single integrated transaction, in which case the total consideration for all assets acquired in the transaction is the relevant measure. Parties to asset acquisitions that are structured in tranches or phases should analyze whether the phased structure results in each phase being analyzed separately or whether the phases should be treated as a single transaction for HSR purposes.

The Size-of-Person Test: $23.9M and $239M Thresholds

The size-of-person test applies when a transaction's value falls between the base threshold (approximately $119.5 million in 2024) and the large transaction threshold (approximately $478 million in 2024). For transactions in this range, the filing obligation requires that both the acquiring person and the acquired person meet minimum size criteria. The size-of-person test is satisfied in one of two alternative configurations. In the first configuration, one party must have annual net sales or total assets of $239 million or more, and the other party must have annual net sales or total assets of $23.9 million or more. In the second configuration, both parties can satisfy the test if one party has annual net sales or total assets of $239 million or more, even if the other party falls below $23.9 million, as long as the large threshold is met for at least one party. The test is conjunctive: both the acquiring person and the acquired person must meet their respective thresholds for the filing to be required.

Size-of-person calculations use annual net sales for manufacturing companies and total assets for entities that do not have annual net sales as their primary financial metric. A manufacturer with $250 million in annual net sales satisfies the $239 million threshold regardless of its total asset base. A financial institution or holding company with minimal net sales from product sales but significant total assets satisfies the threshold based on total assets. Companies that straddle the line between manufacturing and non-manufacturing, or companies in transition, should obtain guidance on whether annual net sales or total assets is the correct metric for their size-of-person calculation. The HSR rules provide specific guidance on how to measure annual net sales, including treatment of returns, allowances, and inter-company sales.

For the acquired person in a voting securities acquisition, the size-of-person test focuses on the acquired issuer's own annual net sales or total assets, not the total value of the acquisition. An acquisition of a very small company for a large price may exceed the base size-of-transaction threshold but fail the size-of-person test because the acquired company's revenues and assets are below the $23.9 million minimum. This scenario arises frequently in acquisitions of early-stage companies with significant valuation but limited current revenues, where the target's size-of-person metrics lag its market value. Parties should be careful not to conflate high transaction value with large company size: the two measures address different aspects of the HSR analysis and can point in different directions.

Ultimate Parent Entity: Definition, Control, and Aggregation Rules

The ultimate parent entity is the foundational organizing concept of the HSR framework. All HSR calculations are made at the UPE level, meaning the entire control group of both the acquiring person and the acquired person is aggregated for purposes of the size-of-transaction test, the size-of-person test, and the identification of what holdings the acquiring person will have after the transaction. Understanding how to identify the UPE correctly is essential to accurate HSR analysis.

Control for HSR purposes is defined in 16 C.F.R. Section 801.1(b) and means holding fifty percent or more of the outstanding voting securities of a corporation, or, in the case of a non-corporate entity, having the right to fifty percent or more of the profits of the entity or having the right to fifty percent or more of the assets of the entity on dissolution, or otherwise having the contractual power to designate a majority of the directors or persons exercising similar functions. The fifty percent control standard is a bright-line test. If an entity holds forty-nine percent of another's voting securities, it does not control the other entity under the HSR rules even if it has effective operational control through contractual arrangements. The HSR regulations do not apply the broader facts-and-circumstances control concept used in some other areas of law.

Once the UPE is identified for both the acquiring person and the acquired person, all entities within each UPE's control group are treated as part of the same person for HSR purposes. This means the revenues, assets, and voting securities holdings of every entity controlled by the acquiring person's UPE are aggregated for the size-of-person calculation. An acquiring person whose UPE controls dozens of operating subsidiaries across multiple industries will have its size-of-person calculation include all of those subsidiaries' revenues and assets, even if the subsidiary making the acquisition is a small division. This aggregation is why many acquisitions by large corporate groups require HSR filings even when the particular acquisition is relatively small in absolute terms. The UPE of the acquiring person must also review its existing holdings of the acquired person's voting securities, because those existing holdings are included in the size-of-transaction calculation.

Voting Securities: Definition, Convertibles, and Aggregation Within 12 Months

Voting securities for HSR purposes are defined as any securities that, at present or upon conversion, entitle the holder to vote for the election of the issuer's directors or persons exercising similar functions. The definition is broad and includes common stock, voting preferred stock, warrants and options that are currently convertible or exercisable into voting shares, and convertible notes that, upon conversion, would constitute voting securities. Securities that are non-voting on their face but that acquire voting rights upon the occurrence of a contingency, such as preferred stock that acquires voting rights upon a dividend default, are treated as voting securities for HSR purposes at the time the voting rights are acquired, not before.

The treatment of convertible securities requires particular care. A warrant or convertible note that is not yet exercisable or convertible is not itself a voting security at the time of acquisition, but the acquisition of such an instrument may still be HSR-reportable if its conversion or exercise would result in the acquiring person holding voting securities above the applicable thresholds. The HSR rules require analysis at both the time of acquisition of the convertible instrument and at the time of conversion. An acquirer who receives a warrant exercisable for twenty percent of a target's voting securities is acquiring an option to hold twenty percent and must analyze whether that acquisition is reportable under the HSR rules applicable to the acquisition of the warrant, and separately whether the exercise of the warrant when it becomes exercisable requires a new HSR analysis and possibly a new filing.

The twelve-month aggregation rule requires that voting securities acquired within the twelve months preceding the current acquisition be aggregated with the current acquisition to determine whether the total is reportable. This rule prevents sequential acquisitions that each fall below the reporting threshold from avoiding HSR review when the aggregate position reaches or exceeds the threshold. An acquirer who purchased five percent of a target six months ago for $50 million and now proposes to acquire an additional fifteen percent for $150 million must aggregate the two tranches. If the aggregate post-transaction holding exceeds the size-of-transaction threshold and the parties satisfy the size-of-person test, a filing is required for the current acquisition even if the current acquisition alone would not have been reportable. The twelve-month period is measured from the date the prior acquisition was made to the date of the proposed acquisition.

Assets: Definition, Ordinary Course Exemption, and Intra-Person Transactions

Assets for HSR purposes include any real or personal property, tangible or intangible, including manufacturing plants, inventory, intellectual property, real estate, accounts receivable, and contract rights. The acquisition of assets is reportable when the aggregate value of the assets being acquired exceeds the size-of-transaction threshold and the parties meet the size-of-person test. The HSR rules provide specific guidance on how to value assets for threshold purposes, including the treatment of assumed liabilities.

The ordinary course exemption is one of the most significant asset acquisition exemptions. It applies to acquisitions made in the ordinary course of the acquired person's business, including inventory, goods, services, real estate, and other assets that are sold in the normal course of the seller's operations. A retail chain selling one of its store locations in the ordinary course of its ongoing real estate management activities, for example, would typically qualify for the ordinary course exemption even if the transaction value exceeds the HSR threshold. The exemption is based on the nature of the seller's business activity, not the size of the transaction. Acquisitions of business lines, divisions, or collections of operating assets that are being sold because the seller is divesting a business segment are generally not ordinary course sales and are not exempt.

The intra-person exemption applies to transactions among entities within the same control group. An acquisition by a parent company of assets from a wholly owned subsidiary, or a transfer of assets between two entities both controlled by the same UPE, does not require an HSR filing because no change in ultimate beneficial ownership occurs. The exemption applies when both the acquiring entity and the acquired entity are within the same UPE's control group at the time of the transaction. Transactions that restructure assets within a control group but do not bring new parties into the structure are paradigmatic intra-person transactions. Partial intra-person transactions, where one party is within the control group and the other is not, are not exempt and must be analyzed under the standard HSR framework.

Investment-Only Exemption at 10% and Institutional Investor Exemption at 15%

The investment-only exemption under 16 C.F.R. Section 802.9 permits an acquiring person to hold up to ten percent of an issuer's outstanding voting securities without triggering the HSR reporting requirement, provided the acquisition is solely for investment purposes. To qualify, the acquiring person must not intend to participate in the formulation, determination, or direction of the basic business decisions of the acquired entity. This intent requirement is a facts-and-circumstances test that the agencies apply rigorously.

Evidence of management participation intent that disqualifies the investment-only exemption includes: seeking representation on the board of directors, negotiating an observer seat or information rights beyond those available to other investors of similar size, entering into a shareholder rights agreement that gives the investor veto rights over specified decisions, entering into a commercial agreement with the acquired entity that is conditional on the investment, communicating with the target's management about business strategy beyond what is reasonably necessary as a passive investor, or filing a Schedule 13D rather than a Schedule 13G with the SEC. A passive investor who files a Schedule 13G, which represents that the securities were acquired in the ordinary course of business without any intent to influence or control the issuer, is providing an indication of investment-only intent consistent with the HSR exemption. A filing on Schedule 13D, which does not include that passive intent representation, is inconsistent with the investment-only exemption.

The institutional investor exemption at fifteen percent is available to acquiring persons that qualify as institutional investors under 16 C.F.R. Section 802.64. Qualifying institutional investors include registered investment companies such as mutual funds and exchange-traded funds, banks and bank holding companies, insurance companies, investment advisers registered under the Investment Advisers Act, and certain employee benefit plans. The fifteen percent threshold is available only to these specific entity types and only when the voting securities are acquired solely for investment. An institutional investor that acquires more than fifteen percent cannot rely on the exemption for the portion above fifteen percent, and if the total post-acquisition holding exceeds the applicable size-of-transaction threshold, the institutional investor is not exempt and must file. Active institutional investors with board representation or governance engagement with the target should analyze whether their conduct is consistent with the solely-for-investment standard before relying on the institutional investor exemption.

Foreign Commerce Exemptions and the U.S. Commerce Test

The HSR Act's reporting requirements apply to acquisitions that have a nexus to U.S. commerce. The statute and regulations include specific exemptions for foreign acquisitions that do not have sufficient U.S. commerce involvement to warrant federal review. Understanding the scope of these exemptions is important for cross-border M&A transactions involving foreign buyers, foreign sellers, or foreign businesses.

The foreign issuer exemption under 16 C.F.R. Section 802.51 applies to acquisitions of voting securities of foreign issuers, meaning issuers that are not incorporated in the United States. A foreign issuer's voting securities may be acquired without HSR reporting unless the foreign issuer meets both of the following tests: the foreign issuer's total assets located in the United States exceed $100 million (adjusted annually), and the foreign issuer's annual net sales in or into the United States exceed $100 million (adjusted annually). If the foreign issuer meets both prongs of the U.S. commerce test, the acquisition of its voting securities is potentially subject to HSR reporting in the same manner as a domestic issuer acquisition. If the foreign issuer fails either prong, the acquisition of its voting securities is exempt from HSR reporting.

The foreign assets exemption under 16 C.F.R. Section 802.52 provides that acquisitions of assets located outside the United States are exempt unless the assets generated revenues from U.S. sales that exceed $50 million (adjusted annually) in the most recent fiscal year. Assets located outside the U.S. that are primarily used to produce goods or services sold in international markets, with U.S. revenues below the $50 million threshold, are exempt. U.S. buyers acquiring foreign operations with significant U.S. export revenues should confirm whether the foreign assets meet the U.S. revenue threshold before concluding that the acquisition is exempt. In cross-border transactions, the U.S. commerce analysis must be performed for each category of assets being acquired, as different asset groups may have different U.S. revenue profiles. See the companion article on the antitrust investigation process for how foreign acquisitions that are reported are reviewed by the agencies, including coordination with foreign competition authorities.

Calculating Transaction Value: Cash, Non-Cash Consideration, and Earnouts

The value of a transaction for HSR threshold purposes is the total consideration to be paid by the acquiring person, including all cash payments, the fair market value of any non-cash consideration, assumed liabilities, and contingent payments that are determinable at the time of the filing. Accurate transaction value calculation is critical because it determines whether the base threshold is met and, if so, whether the size-of-person test applies.

Non-cash consideration presents valuation complexity. When an acquiring person pays for a target using its own stock, the value of the consideration is the fair market value of the stock being issued at the time of the transaction. For publicly traded acquirers, this is typically the market price. For privately held acquirers whose stock does not have a readily observable market price, the value must be determined through a reasonable valuation methodology. Liabilities assumed by the acquiring person as part of the transaction are included in the consideration: if an acquirer pays $80 million in cash and assumes $50 million in target debt, the total consideration for HSR purposes is $130 million. The inclusion of assumed liabilities frequently causes transactions that appear to be below-threshold based on cash price alone to exceed the reporting threshold.

Earnout provisions raise specific valuation questions. An earnout that is genuinely contingent on future performance and whose value is not determinable at the time of signing is generally not included in the transaction value for HSR threshold purposes. However, an earnout with a fixed maximum amount may be valued at that maximum for purposes of the HSR analysis, depending on the specific structure. Earnout provisions where the payment is essentially certain because the performance threshold is very low, or where the earnout payment is guaranteed subject only to a specified triggering event, may be included in the transaction value. Parties who structure significant earnouts should analyze the HSR treatment of those earnouts with counsel before signing, because the determination of whether the earnout is included affects whether a filing is required and when.

2024 Final Rule: Expanded Form, 10-Year Merger History, and Labor Market Disclosures

The FTC published a final rule in October 2024 that substantially revised the HSR notification form for the first time in decades. The rule represents the most significant expansion of HSR filing requirements since the program's inception. The revised form is longer, requires more narrative information, and demands disclosure of categories of information that were not previously part of the HSR filing, substantially increasing the time and resources required to complete a filing for complex transactions.

The ten-year merger history disclosure is among the most significant additions. The acquiring person must now disclose all prior acquisitions it has made in the same or adjacent industries to the acquired person's business over the preceding ten years. This disclosure requires the acquiring person to conduct a systematic review of its acquisition history, categorize those acquisitions by industry, and determine which fall within the scope of the disclosure requirement. For large corporate groups or private equity firms that have made numerous acquisitions over the prior decade, this review is a substantial undertaking. The ten-year history requirement reflects the agencies' interest in evaluating serial acquisition patterns, sometimes called roll-up strategies, that may have cumulatively anticompetitive effects even if each individual acquisition was non-reportable or cleared without challenge.

Labor market disclosures are a new addition reflecting the agencies' interest in transactions that may affect labor market competition. The revised form requires the parties to identify overlapping employee classifications using Standard Occupational Classification codes, providing the agencies with a framework for analyzing whether the transaction would reduce competition for workers in specific labor markets. This requirement is particularly relevant in acquisitions involving service businesses, healthcare organizations, and other industries with high concentrations of specialized workers. Transaction parties in industries with significant labor market concentration should assess labor market competitive effects as part of the antitrust pre-closing analysis, not just product and service market effects. The companion discussion of second request scope and agency economic modeling addresses how labor market data provided in the HSR filing informs the agencies' competitive analysis.

Non-HSR-Reportable Acquisitions and Clayton Act Section 7 Risk

The HSR Act's mandatory pre-merger notification requirement is a procedural framework, not a substantive antitrust standard. The underlying substantive prohibition is found in Section 7 of the Clayton Act, which prohibits acquisitions of stock or assets where the effect in any line of commerce or activity affecting commerce in any section of the country may be substantially to lessen competition or to tend to create a monopoly. Section 7 applies to all acquisitions with competitive effects, regardless of whether the transaction was HSR-reportable.

The FTC and DOJ have authority to investigate and challenge non-reportable transactions before or after closing. The agencies can file suit in federal district court to enjoin or unwind a transaction that violates Section 7, and they can do so at any time within the applicable statute of limitations. The agencies have used this authority to challenge acquisitions that were below the HSR thresholds or that qualified for an exemption but that had significant competitive effects in concentrated markets. The FTC has also used its Section 5 authority to challenge conduct associated with acquisitions of nascent competitors that eliminated potential competition before the competitor could develop into a meaningful market participant.

Since 2021, the agencies have increased their scrutiny of non-reportable acquisitions, particularly acquisitions in digital markets, healthcare, and industries with existing high concentration. The agencies' retrospective review program identifies transactions that closed without HSR reporting and assesses their competitive effects using post-closing market data. Parties to non-reportable acquisitions in concentrated markets should assess the competitive effects of their transaction and document their competitive rationale before closing. Internal documents discussing a transaction's effect on competition are discoverable in subsequent agency investigations and can be used against the parties if the documents reflect an expectation of anticompetitive effects. Antitrust counsel should review strategic and board-level documents related to the acquisition to assess their exposure before closing.

HSR Filing Process: Waiting Periods, Deficiencies, and Strategic Timing

Once the parties determine that a transaction requires an HSR filing, the next step is preparing the notification forms and coordinating the submission. The standard waiting period after submission of a complete HSR filing is thirty calendar days. For cash tender offers and acquisitions in bankruptcy proceedings under Section 363, the waiting period is fifteen calendar days. The waiting period begins when the agencies receive both parties' completed filings, not when the parties submit their own individual filings. Accordingly, coordination between the parties' counsel on simultaneous submission is essential to avoid one party's filing starting the clock before the other's filing is received.

Early termination of the waiting period was historically available in non-controversial transactions, allowing parties to close before the full thirty-day period elapsed. The FTC suspended the early termination program in 2021 and has not reinstituted it systematically, meaning parties should plan their transaction timelines assuming the full waiting period will apply. During the waiting period, the agencies review the filing and conduct preliminary competitive analysis. If the agencies determine that the transaction warrants further review, they issue a second request before the waiting period expires. Receipt of a second request extends the waiting period until the parties certify substantial compliance with the second request. If the agencies do not issue a second request and do not seek a preliminary injunction before the waiting period expires, the parties are free to close.

Deficiency letters from the Premerger Notification Office identify categories of information that are missing from or inadequate in a filing. When a deficiency letter is issued, the waiting period is tolled and does not resume until the deficiency is cured and the cured filing is accepted by the Office. Deficiencies are common in complex filings where the form's information requirements are extensive and the responding party's data is incomplete or imprecisely organized. Preparing HSR filings under time pressure increases deficiency risk. Parties should begin HSR form preparation early in the deal process, well before signing, to identify potential data gaps and allow time for systematic data collection. Acquisition Stars coordinates HSR preparation with overall transaction management to integrate the HSR timeline with signing, financing, and closing mechanics. Contact us to discuss how antitrust process management fits within your acquisition timeline.

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