Chris Gash
Why Thousands of M&A Deals Are Avoiding Antitrust Scrutiny
Research examines the role of intangible assets such as patents and trademarks.
- By
- July 15, 2025
- CBR - Accounting
When fewer companies operate in a given market, it tends to hurt consumers by leading to higher prices, lower quality, and less innovation. That’s why, in the 1970s, US lawmakers established rules for examining mergers and acquisitions that could excessively stifle competition.
For deals above a certain size (about $500 million in 2025), companies must alert antitrust authorities, who may seek detailed information on the transactions before deciding whether they can proceed. For smaller deals above a minimum value (about $126 million in 2025), companies need to notify authorities if the parties involved hit certain thresholds in assets. But that requirement only includes assets on the balance sheet, which are largely tangible in nature, such as buildings or equipment. It doesn’t account for internally generated intangible assets such as patents, trademarks, brand recognition, data, customer relationships, and in-progress research and development.
This approach leads to hundreds of sizable acquisitions each year escaping the notice of antitrust authorities, finds research by Stanford’s John D. Kepler and Chicago Booth’s Charles McClure and Christopher Stewart. They present evidence that deals slipping through the cracks are leading to less competition and higher prices.
As the economy has transitioned away from manufacturing and toward service industries, intangible assets have become more important. Over the past 20 years, the ratio of intangible to tangible assets has doubled among all US companies that have been acquired, so that there are now $8 of intangibles for every $1 of tangible assets. Sectors of particular interest to antitrust authorities, such as technology and pharmaceuticals, tend to have a higher share of nonphysical assets.
The researchers reviewed details of completed mergers and acquisitions announced by public US companies between 2001 and 2020, focusing on a sample of deals that fell above the baseline set by law and below the threshold that mandates reporting to the Federal Trade Commission and the Department of Justice. They further homed in on deals in industries that tend to be of interest to authorities, and obtained the value of each acquired company’s intangible assets from the purchasers’ postdeal financial statements.
If intangible assets had been considered, the annual number of mergers and acquisitions reported to federal antitrust authorities would have increased by an average of about 260, the researchers note. These deals were collectively valued at an average of $33 billion a year. Unreported transactions were similar in size to reported deals during the period studied, and more than half involved consolidations among competitors.
The importance of intangibles
About 260 more deals per year would have been reviewed by the Federal Trade Commission if intangibles had been included in calculating the target firms’ asset size.
The researchers find signs in their sample that the overlooked transactions made markets less competitive. Companies involved in unreported acquisitions paid about 10 percent more on average than did those in reported deals. And unreported deals increased the valuation of acquiring companies by a higher amount than comparable deals that were reported, as well as raised valuations across the industry.
Acquiring companies’ gross margins increased in the year after an unreported acquisition and continued going up for at least two years—indication that these deals caused prices to increase.
The researchers also find evidence that unreported deals hampered innovation. In pharmaceutical transactions, unreported deals were much more likely to involve the acquisition of companies with overlapping projects. Afterward, acquiring companies in unreported pharmaceutical deals were about 40 percent more likely to cancel the competing project at the target company.
Private litigation is not enough to protect consumers and compensate for the lack of antitrust oversight, the researchers argue. For one thing, it is costly. For another, it can be hard to prove harm before a deal occurs and in markets where products are still in development. For example, how could a consumer filing a suit prove that the anticipated merger of two pharmaceutical companies would harm customers, particularly if the deal involved a drug that hadn’t yet been released? And if a competitor attempted to block two of its rivals from merging, anticipating predatory pricing, how could it prove that the merged entity planned to lower prices to squeeze out competition—and not because of increased efficiency?
Antitrust authorities and standard setters have ignored intangible assets in part because they’re hard to appraise, and yet companies assign a value to these assets after the acquisition is complete, point out Kepler, McClure, and Stewart. They suggest that one option is for companies involved in a deal to provide a ballpark estimate of this value earlier in the acquisition process and notify authorities accordingly.
If antitrust rules required that intangible assets be considered, 90 deals of the additional 260 reported would receive extra scrutiny each year, the researchers estimate. Five of those would progress to a “second request,” a more rigorous antitrust review that more often than not leads to the merger being halted. And 23 of the 90 deals likely wouldn’t even be put forward. “Those companies would realize they were likely to get investigated and blocked,” says Stewart.
Without reforms, the problem is likely to get worse, with negative consequences for both consumers and the competitiveness of US companies in the global economy, the researchers conclude. “Intangibles aren’t going away,” adds McClure, “so at some point, authorities will have to adjust the rules or accept that they’re going to miss deals they would’ve liked to have taken a closer look at.”
John D. Kepler, Charles McClure, and Christopher Stewart, “Competition Enforcement and Accounting for Intangible Capital,” Working paper, January 2025.
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