CEOs think M&A activity will increase in 2024, according to a new survey from Teneo. One potential hiccup could be revised merger guidelines. Mitch Berlin, EY Americas Vice Chair of Strategy and Transactions, joined Yahoo Finance Live to discuss how those revised guidelines may impact deals.

With the Federal Trade Commission and Department of Justice taking tougher stances on dealmaking, Berlin stresses that these are guidelines, not rules, but "they do give us insight on how the FTC and DOJ are going to be evaluating deals going forward."

Berlin highlights some of the key changes including: a lower threshold to define a deal as anti-competitive, increased scrutiny on "roll-up" deals that consolidate market share, focus on tech platforms dominating a market or limiting newcomers, and stricter documentation standards that could potentially lengthen timelines.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

JARED BLIKRE: As deal flow works to recover from the lack of activity by private equity firms, a new wrinkle is added into the mix. The Federal Trade and Justice Department have set new merger guidelines. And our next guest says it's set to usher in the biggest changes to the way regulators review M&A in the US in 40 years. And here to discuss, we have Mitch Berlin, EY America's vice chair of strategies and transactions.

And thank you for joining us here, Mitch. This does indeed seem like a big deal. Might fly over the head of a lot of people, M&A, so what?

But we're talking trillions of dollars over the year in potential transactions. And not the least of which we see all the antitrust regulations going on with big tech. Please just break it down for us, why is this important?

MITCH BERLIN: Sure, well, thanks for having me. These are the largest changes to the M&A guidelines in the last 40 years. And it's important to note and remember these are guidelines not laws. But they do give us insight on how the FTC and DOJ are going to be evaluating deals going forward.

So a couple changes. One is they've lowered the threshold by which they would consider a deal to be anti-competitive. So in the past, the threshold in this consolidation index would be a 200-point change. They've now lowered that to 100-point change, so more deals will come under their scrutiny.

Two, is they're looking at roll ups and this is going to impact private equity. So small deals that ultimately can be rolled up and become anti-competitive is another area that they're going to be looking at. And so as PEs do roll up deals, this is something that's clearly going to impact them. They're going to have to prepare to be-- be prepared to discuss the rationale for that deal and that those deals are not anti-competitive with the FTC.

And then the other change is really looking at technology companies, specifically companies that have an opportunity to dominate a platform or crush a small competitor coming into the market to keep them from competing against themselves and perhaps limiting R&D and advancements in technology. And the last change is really just around the amount of documentation that can now be required by the FTC and DOJ. And so we're expecting this to increase the deal timeline by about two months in terms of not only accumulating that information, but then the FTC's timeline to review that information as well.

JOSH LIPTON: And so Mitch, the bottom line given these guidelines, what's your advice to executives, to CEOs who are looking to get deals done in 2024?

MITCH BERLIN: So a few things, we're telling them to plan early. It's going to take longer to accumulate the documentation, start earlier. Gather that information and then come up with different scenarios.

If you have to divest of assets and businesses yourself or through the target, how does that change your valuation model? How does that change what you're willing to ultimately pay for that transaction? And what are different scenarios that you can play with if you continue to get pushback from the FTC? So plan early and be flexible on what you're willing to do in terms of structuring that deal.