MEMORANDUM
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
To: Howard Bellamy, Partner, Antitrust & Competition Practice Group
From: Monica Reyes, Associate, Antitrust & Competition Practice Group
Date: February 2, 2024
Re: HSR Filing Checklist & Timeline — Acquisition of Pinnacle Health Systems, Inc. by Ardent Capital Partners III LP
Matter No.: 1001-00001
cc: Elliot Nguyen, Associate, Antitrust & Competition Practice Group
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I. Purpose and Summary
This memorandum sets forth the step-by-step checklist, timeline, and coordination plan for preparing and filing the Hart-Scott-Rodino ("HSR") premerger notification in connection with the proposed acquisition by Ardent Capital Partners III LP ("Ardent Capital" or the "Acquiring Person") of 100% of the outstanding shares of Pinnacle Health Systems, Inc. ("Pinnacle" or the "Acquired Person"). The transaction is structured as a stock purchase, with an enterprise value of $952,000,000 and an equity value of $534,000,000. The equity value comprises $505,500,000 in cash consideration and approximately $28,500,000 in management rollover equity from Dr. Marcus Ellsworth, the Chief Executive Officer of Pinnacle.
The Equity Purchase Agreement (the "EPA") governing the transaction was executed on January 31, 2024. Pursuant to the EPA and applicable federal antitrust law, premerger notification filings must be made under Section 7A of the Clayton Act, 15 U.S.C. § 18a, and the implementing regulations promulgated by the Federal Trade Commission (the "FTC") at 16 C.F.R. Parts 801–803. Both parties to the transaction are required to submit separate notification forms, and the statutory waiting period must expire or be terminated before the transaction may be consummated.
The objective of this memorandum is to organize and guide the filing process so that both the acquiring person and the acquired person HSR notification forms are submitted simultaneously on a target filing date of February 16, 2024, together with a formal request for early termination of the statutory waiting period. This target date provides a meaningful cushion before the contractual filing deadline established in the EPA, and allows sufficient time for thorough document collection, substantive antitrust analysis, and preparation of a voluntary submission white paper designed to facilitate the FTC's review and support a grant of early termination.
This memorandum is organized as follows: Section II provides an overview of the transaction and the relevant parties. Section III addresses the HSR jurisdictional threshold analysis. Section IV sets forth the applicable filing fee. Section V summarizes the regulatory filing obligations under the EPA. Section VI presents the detailed filing timeline and key dates. Section VII provides a comprehensive step-by-step filing checklist. Section VIII assigns responsibility for each workstream. Section IX lists key contacts. Section X addresses risk factors and contingencies. Section XI covers document retention protocols.
II. Transaction Overview
A. Acquiring Person / Ultimate Parent Entity
The Acquiring Person is Ardent Capital Partners III LP, a Delaware limited partnership. The general partner of Ardent Capital Partners III LP is Ardent Capital GP III LLC, a Delaware limited liability company. The sole member of Ardent Capital GP III LLC is Ardent Capital Management LLC, a Delaware limited liability company that serves as the investment manager and registered investment adviser for the Ardent Capital fund family. Ardent Capital Management LLC is registered with the U.S. Securities and Exchange Commission under SEC File No. 801-119247.
For purposes of the HSR Act and implementing regulations, the Ultimate Parent Entity ("UPE") of the acquiring person is Ardent Capital Management LLC, as the entity that ultimately controls the acquiring person through the control chain described above. The principal office of the UPE is located at 399 Park Avenue, 41st Floor, New York, NY 10022.
The client contacts for this matter at Ardent Capital Management LLC are Julian Desmond, Co-Founder and Managing Partner, and Priya Chandrasekar, Co-Founder and Managing Partner.
B. Acquired Person / Target
The Acquired Person is Pinnacle Health Systems, Inc., a Delaware corporation with its principal office located at 2200 Lakeshore Boulevard, Suite 500, Charlotte, NC 28202. Pinnacle's Chief Executive Officer is Dr. Marcus Ellsworth, and its Chief Financial Officer is Sandra Trevino. Pinnacle's registered agent in the State of Delaware is National Registered Agents of Delaware, Inc., 160 Greentree Drive, Suite 101, Dover, DE 19904.
C. Selling Stockholders
The equity interests in Pinnacle are currently held by the following parties:
• Veltrano Equity Holdings LLC (through Veltrano Equity Partners Fund V LP), holding approximately 62.3% of the outstanding equity.
• Founder and management rollover holders, holding approximately 23.1% of the outstanding equity.
• Minority physician investors, holding approximately 14.6% of the outstanding equity.
All selling stockholders will dispose of their equity in the transaction, except that Dr. Marcus Ellsworth will roll over a portion of his equity into the post-closing entity, as described below.
D. Transaction Structure and Consideration
The transaction is structured as a 100% equity acquisition (stock purchase), pursuant to which Ardent Capital Partners III LP (or a designated acquisition subsidiary) will acquire all of the outstanding shares of capital stock of Pinnacle Health Systems, Inc.
The key financial terms are as follows:
• Enterprise Value: $952,000,000
• Equity Value: $534,000,000
• Cash Consideration: $505,500,000
• Rollover Equity: Approximately $28,500,000 from Dr. Marcus Ellsworth, representing approximately 3.0% of post-closing equity
• EV/EBITDA Multiple: Approximately 9.7x, based on Pinnacle's FY2023 adjusted EBITDA of $98,200,000 as determined in the quality of earnings report prepared by Apex Advisory Group LLC
• Pinnacle FY2023 Revenue: $637,400,000 (per audited financial statements prepared by Harland & Marsh CPAs LLP)
• Pinnacle Total Assets: Approximately $812,000,000 (per audited balance sheet as of the most recent fiscal year-end)
E. Target Operations
Pinnacle Health Systems, Inc. operates 42 ambulatory surgical centers ("ASCs") and 31 affiliated physician practice management entities across nine states: North Carolina, South Carolina, Virginia, Tennessee, Georgia, Florida, Alabama, Ohio, and Texas. The company employs approximately 4,700 individuals. Pinnacle's operations are classified under the following NAICS codes:
• 621111 — Offices of Physicians (Except Mental Health Specialists)
• 621493 — Freestanding Ambulatory Surgical and Emergency Centers
F. Transaction Counsel
The parties to the transaction are represented by the following law firms:
• Transaction Counsel to Acquirer: Whitfield & Crane LLP (David Ostrander, Lead Partner, Corporate/M&A), 51 West 52nd Street, New York, NY 10019.
• Transaction Counsel to Target/Seller: Fendowell Thornton LLP (Catherine "Kate" Yardley, Lead Partner, M&A), 227 West Trade Street, Suite 2800, Charlotte, NC 28202.
• Antitrust Counsel to Acquirer: Calderwood & Harkness LLP (Howard Bellamy, Partner, Antitrust & Competition Practice Group), 600 Lexington Avenue, New York, NY 10022.
• Antitrust Counsel to Target/Seller: Greenvale Durneval LLP (Jonathan Felder, Lead Partner, Antitrust), 1800 M Street NW, Suite 1100, Washington, DC 20036.
III. HSR Threshold Analysis
The HSR Act requires premerger notification for transactions that satisfy both the "size-of-transaction" test and, in certain circumstances, the "size-of-person" test. The FTC adjusts these thresholds annually. The analysis below applies the thresholds in effect for 2024.
A. Size-of-Transaction Test
Under the 2024 adjusted thresholds, the size-of-transaction test is met if the acquiring person will hold, as a result of the transaction, an aggregate total amount of voting securities and assets of the acquired person valued in excess of $111.4 million.
In this case, the transaction value is $952,000,000, which represents the enterprise value of the acquisition and far exceeds the $111.4 million threshold. Accordingly, the size-of-transaction test is clearly satisfied.
It is further noted that because the transaction value exceeds $500,000,000 (the 2024 threshold above which the size-of-person tests do not apply and notification is required irrespective of the parties' respective sizes), notification is required without any further analysis of the size-of-person test. Nonetheless, we provide the size-of-person analysis below on a confirmatory basis for completeness of the record.
B. Size-of-Person Test (Confirmatory)
Even though the size-of-person test is not required to establish jurisdiction where the transaction value exceeds $500 million, both parties independently satisfy the applicable size-of-person thresholds:
• Acquiring Person (Ardent Capital Management LLC as UPE): Ardent Capital Partners III LP has total committed capital of $4,800,000,000. This figure vastly exceeds the $22.3 million threshold for the acquiring person under the 2024 size-of-person test. We note that for purposes of the size-of-person analysis involving investment funds, the relevant measure of "total assets" is the committed capital of the fund (or, alternatively, the total assets of the UPE and all entities it controls).
• Acquired Person (Pinnacle Health Systems, Inc.): Pinnacle reported annual net sales of $637,400,000 and total assets of approximately $812,000,000 in its most recent fiscal year. Both figures independently exceed the $22.3 million threshold for the acquired person.
C. Filing Requirement Conclusion
Based on the foregoing analysis, the HSR Act jurisdictional thresholds are satisfied. HSR notification is required for both the acquiring person and the acquired person prior to consummation of the transaction. Neither party qualifies for any exemption under 16 C.F.R. Part 802.
IV. Filing Fee Determination
Under the 2024 FTC filing fee schedule, as adjusted pursuant to the Merger Filing Fee Modernization Act of 2022, the applicable filing fee is determined by the value of the transaction. The current fee tiers are as follows:
Note: The fee schedule above reflects the 2024 tiers. The applicable tier for this transaction, with a value of $952,000,000, falls within the "$500 million or more but less than $1 billion" range, resulting in a filing fee of $280,000.
Pursuant to EPA §5.4(a), the filing fee is to be borne solely by Ardent Capital (the acquirer). The filing fee of $280,000 must be remitted to the FTC by wire transfer prior to or contemporaneously with submission of the notification form. Wire instructions will be sent to Ardent Capital by separate letter, targeted for delivery no later than February 14, 2024, to ensure that the wire transfer is initiated and cleared in advance of the target filing date of February 16, 2024. Timely remittance of the filing fee is a prerequisite to the FTC's acceptance of the notification.
V. EPA Regulatory Filing Obligations
The Equity Purchase Agreement contains several provisions governing the parties' obligations with respect to the HSR filing and antitrust regulatory clearance. The key provisions are summarized below.
A. EPA §5.4(a) — Regulatory Filings
Section 5.4(a) of the EPA requires the parties to file their respective HSR notification forms within 15 business days of EPA execution. The EPA was executed on January 31, 2024. Counting 15 business days from January 31, 2024 (inclusive of the day following execution as business day one), the contractual filing deadline is February 22, 2024. Our target filing date of February 16, 2024 provides a cushion of four business days before this contractual deadline. Section 5.4(a) further provides that all filing fees shall be borne by the acquirer.
B. EPA §5.4(b) — Cooperation
Section 5.4(b) of the EPA obligates both parties to cooperate fully in responding to any requests for information issued by governmental authorities in connection with the transaction, including any Second Request issued by the FTC or DOJ. The cooperation obligation extends to providing access to relevant documents and making knowledgeable personnel available for interviews. The acquirer bears all filing fees and costs associated with compliance with governmental requests.
C. EPA §5.4(c) — Efforts Standard
Section 5.4(c) establishes the efforts standard governing the acquirer's obligations with respect to obtaining HSR clearance. Ardent Capital is required to use "reasonable best efforts" to obtain HSR clearance, including engaging with the FTC and DOJ staff as necessary to facilitate the review process. Importantly, the EPA provides that the acquirer has no obligation to accept any divestiture, hold-separate order, or behavioral remedy as a condition to obtaining clearance. This "no remedies" carve-out is significant and should be noted in all communications regarding the scope of Ardent Capital's clearance obligations.
D. EPA §6.1(c) — Condition to Closing
Section 6.1(c) of the EPA establishes the expiration or early termination of the HSR waiting period as a mutual condition precedent to closing. Neither party is obligated to consummate the transaction unless and until the HSR waiting period has expired or been terminated. This closing condition is bilateral and cannot be waived unilaterally by either party.
E. EPA §7.1(b)(ii) — Termination Right
Section 7.1(b)(ii) provides that either party may terminate the EPA if HSR clearance has not been obtained by the outside date of June 30, 2024. This provision sets the outer boundary of the regulatory timeline and provides both parties with an exit right in the event of protracted regulatory review. Termination under this provision would not trigger the reverse termination fee described below unless the failure to obtain clearance is attributable to a regulatory block.
F. EPA §7.3(b) — Reverse Termination Fee
Section 7.3(b) provides that Ardent Capital is liable for a reverse termination fee of $28,560,000 (calculated as $952,000,000 × 3.0%) if the transaction fails to close due to an antitrust regulatory block — i.e., if the FTC or DOJ seeks to enjoin the transaction or if regulatory clearance is not obtained as a result of governmental action. This reverse termination fee represents significant financial exposure for Ardent Capital and underscores the importance of a thorough antitrust analysis and a well-prepared filing. As discussed in Section X below, the risk of a regulatory block is assessed as highly unlikely based on the current competitive analysis.
VI. Filing Timeline
A. Key Dates Summary Table
The following table summarizes the key dates and milestones for the HSR filing process:
B. Filing Date Strategy
Our recommended target filing date is February 16, 2024. This date provides a meaningful cushion of four business days before the EPA §5.4(a) contractual filing deadline of February 22, 2024. This cushion is adequate to accommodate any last-minute delays in the document collection process or form preparation without placing the filing at risk of missing the contractual deadline.
Filing earlier than February 16, 2024 is theoretically possible but would require significant acceleration of the Item 4(c)/4(d) document collection process and the preparation of the substantive antitrust analysis memoranda. In particular, the voluntary submission white paper, which we intend to submit simultaneously with the notification forms, is a critical component of our strategy to obtain early termination of the waiting period. Rushing the preparation of this document could compromise its quality and effectiveness. Accordingly, we recommend maintaining February 16, 2024 as the target filing date to ensure thoroughness and accuracy across all filing components.
If circumstances require, we could accelerate the filing to as early as February 14, 2024 by compressing the internal review cycle, but this would require Howard's availability for a same-day partner review of the draft form and white paper. We will monitor progress against the timeline and escalate promptly if any delays arise that threaten the target date.
VII. Step-by-Step Filing Checklist
A. Pre-Filing Preparation (February 2–15, 2024)
1. Entity and Organizational Information Gathering
The following entity and organizational information must be obtained, verified, and assembled for inclusion in the HSR notification form:
• [ ] Obtain and verify legal names, EINs, addresses, and jurisdictions of formation for all filing entities. The entities requiring verification are:
• Ardent Capital Partners III LP — EIN: 87-3421098; Jurisdiction: Delaware limited partnership; Principal Office: 399 Park Avenue, 41st Floor, New York, NY 10022
• Ardent Capital GP III LLC — EIN: 86-2198403; Jurisdiction: Delaware limited liability company; Principal Office: 399 Park Avenue, 41st Floor, New York, NY 10022
• Ardent Capital Management LLC — EIN: 84-5567312; Jurisdiction: Delaware limited liability company; SEC File No. 801-119247; Principal Office: 399 Park Avenue, 41st Floor, New York, NY 10022
• Pinnacle Health Systems, Inc. — EIN: 56-4389201; Jurisdiction: Delaware corporation; Principal Office: 2200 Lakeshore Boulevard, Suite 500, Charlotte, NC 28202; Registered Agent: National Registered Agents of Delaware, Inc., 160 Greentree Drive, Suite 101, Dover, DE 19904
• [ ] Prepare UPE entity structure chart showing the complete control chain from the Ultimate Parent Entity through the acquiring entity. The chart should depict the following chain of control:
Ardent Capital Management LLC (UPE) → Ardent Capital GP III LLC (sole member) → Ardent Capital Partners III LP (general partner relationship; Ardent Capital GP III LLC serves as general partner)
• [ ] Identify all entities controlled by the UPE (Ardent Capital Management LLC), including all portfolio companies held by Ardent Capital Partners III LP and any predecessor or affiliated funds managed by the UPE. Based on preliminary information, the following portfolio companies are controlled by the UPE and must be disclosed:
• Marlowe Asset Management Rehabilitation Holdings LLC — Outpatient physical therapy services; operates 74 clinics across Texas, Florida, and Georgia. Headquarters: 8950 Westheimer Road, Suite 600, Houston, TX 77063. This portfolio company is relevant to the vertical analysis discussed in Section VII.A.3 below due to potential referral relationships with Pinnacle's ASCs.
• Clearpath Diagnostics Inc. — Clinical laboratory services in Pennsylvania, New Jersey, and New York; approximately $218,000,000 in annual revenue. Headquarters: 1700 Market Street, Suite 3400, Philadelphia, PA 19103. This portfolio company operates in a distinct product market from Pinnacle but must be disclosed as a controlled entity of the UPE.
• [ ] Obtain prior-year annual revenue data for all entities controlled by the UPE, including Ardent Capital Management LLC itself, Marlowe Asset Management Rehabilitation Holdings LLC, Clearpath Diagnostics Inc., and any other controlled entities. This data is required to complete the Item 5 revenue schedules on the HSR notification form, which require reporting of revenues by NAICS code and by state.
• [ ] Identify applicable NAICS codes for the acquiring person's controlled entities and the acquired person's operations. The primary NAICS codes applicable to Pinnacle's operations are:
• 621111 — Offices of Physicians (Except Mental Health Specialists)
• 621493 — Freestanding Ambulatory Surgical and Emergency Centers
Additional NAICS codes may apply to the UPE's portfolio companies (e.g., Marlowe Asset Management Rehabilitation's physical therapy services and Clearpath Diagnostics' laboratory services). Elliot Nguyen should confirm the applicable NAICS codes for each portfolio company as part of the entity information gathering process.
2. Item 4(c) and 4(d) Document Collection
The HSR notification form requires the production of certain categories of documents pursuant to Items 4(c) and 4(d). This is typically the most time-sensitive component of the filing preparation process, and prompt initiation of document collection is essential.
• [ ] Draft and send Item 4(c)/4(d) document collection instructions letter to Ardent Capital (Julian Desmond and Priya Chandrasekar) — target delivery date: February 4, 2024. The instructions letter should clearly describe the categories of responsive documents under Items 4(c) and 4(d), identify the custodians from whom documents should be collected, establish a return deadline, and provide practical guidance on search methodology.
• [ ] Identify custodians within Ardent Capital who may hold responsive documents. Based on preliminary discussions with the client and our review of the transaction process, the relevant custodians are expected to include deal team members, investment professionals who participated in the diligence process, and managing partners who participated in investment committee deliberations. Specific custodian names should be confirmed with Julian Desmond.
• [ ] Collect all documents responsive to Item 4(c) — i.e., all documents that were prepared by or for any officer or director of the filing person (or, in the case of an unincorporated entity, a person exercising similar functions) that analyze the transaction with respect to markets, market shares, competition, competitors, potential for sales growth, or expansion into product or geographic markets. For purposes of fund filings, the relevant individuals include the managing partners and members of the investment committee of Ardent Capital Management LLC.
• [ ] Collect all documents responsive to Item 4(d) — i.e., all documents that were prepared by or for any officer or director (or equivalent) that analyze the transaction with respect to synergies, efficiencies, or other transaction rationale. These documents frequently include internal investment memoranda, confidential information memoranda received from the seller's financial adviser, and board or investment committee presentations.
• [ ] Review collected documents for attorney-client privilege and work product protection. Any documents withheld on privilege grounds should be logged on a privilege log prepared in accordance with applicable FTC guidance. Note that the privilege review should be conducted carefully, as the FTC has taken the position that privilege claims in HSR filings are subject to scrutiny, and overbroad privilege assertions can prompt follow-up inquiries from PNO staff.
• [ ] Prepare Item 4(c)/4(d) document log indexing all responsive documents to be produced with the filing. Based on preliminary custodian interviews, the anticipated total number of responsive documents from the acquiring person is 7 documents, consisting of:
• 3 confidential information memoranda / teasers received during the auction process
• 2 internal investment committee memoranda prepared by the Ardent Capital deal team
• 1 board presentation (investment committee presentation deck)
• 1 email chain among investment professionals discussing the competitive landscape for ASC platforms
• [ ] Note regarding acquired person's document production: The acquired person's filing will include a separate production of Item 4(c)/4(d) documents. Greenvale Durneval LLP (antitrust counsel to the target/seller) has indicated that approximately 11 responsive documents are anticipated from Pinnacle. We should coordinate with Greenvale Durneval to ensure consistency in the characterization of any documents that may appear in both parties' productions (e.g., CIMs or presentations that were shared between the parties).
3. Substantive Antitrust Analysis
A comprehensive antitrust analysis is necessary both to inform our assessment of regulatory risk and to support the voluntary submission white paper that will accompany the filing. The following analysis memoranda should be prepared according to the schedule indicated:
• [ ] Prepare preliminary antitrust risk assessment memorandum — target: February 5, 2024. This memorandum should provide an initial assessment of the likelihood that the transaction will raise competitive concerns warranting an extended review or Second Request, based on a high-level review of the parties' operations and market positions. This assessment will be delivered to the client as part of our initial substantive reporting.
• [ ] Prepare portfolio company overlap analysis — target: February 8, 2024. This analysis should evaluate whether any horizontal overlaps exist between Pinnacle's operations and the operations of Ardent Capital's existing portfolio companies, specifically Marlowe Asset Management Rehabilitation Holdings LLC (outpatient physical therapy) and Clearpath Diagnostics Inc. (clinical laboratory services). Based on preliminary review, these entities operate in distinct product markets from Pinnacle's ASC and physician practice management operations, and no horizontal overlap is anticipated.
• [ ] Prepare vertical relationships analysis — target: February 9, 2024. This analysis should evaluate the vertical relationship between Marlowe Asset Management Rehabilitation Holdings LLC and Pinnacle Health Systems, Inc. Specifically, Marlowe Asset Management operates 12 physical therapy clinics that are co-located with or in close proximity to Pinnacle ASCs in Texas, Florida, and Georgia. The analysis should assess whether the post-acquisition vertical integration of Marlowe Asset Management's PT clinics and Pinnacle's ASCs could give rise to foreclosure concerns or referral-related competitive effects. Based on preliminary review, this vertical relationship is expected to be competitively insignificant given the large number of independent PT providers and ASCs in each relevant geographic market.
• [ ] Prepare market definition and competitive analysis memorandum covering all 9 metropolitan statistical areas ("MSAs") in which Pinnacle operates — target: February 10, 2024. The relevant MSAs span North Carolina, South Carolina, Virginia, Tennessee, Georgia, Florida, Alabama, Ohio, and Texas. For each MSA, the memorandum should identify the relevant product and geographic markets, assess Pinnacle's market position, and identify key competitors.
• [ ] Prepare HHI concentration analysis workpaper for all 9 MSAs — target: February 10, 2024. The HHI analysis should calculate pre-transaction and post-transaction Herfindahl-Hirschman Index values for each relevant geographic market, using the best available market share data. Because Ardent Capital has no existing ASC operations, the post-transaction HHI values should be identical to pre-transaction values (i.e., the transaction does not change market concentration in the ASC market).
• [ ] Prepare competitor identification and market participant chart — target: February 10, 2024. This chart should identify all significant competitors in each relevant geographic market, including national ASC platforms (e.g., Ashbury Enterprises, Calderon & Co./Calderon & Co., Cascade Group), regional operators, and independent facilities.
• [ ] Prepare state regulatory/certificate of need ("CON") analysis memorandum — target: February 7, 2024. Several of the states in which Pinnacle operates maintain CON programs that regulate the establishment or expansion of healthcare facilities, including ASCs. The relevant states for CON analysis include Virginia, North Carolina, Tennessee, Georgia, Alabama, and Ohio. The memorandum should assess whether the transaction triggers any state-level regulatory filing or approval requirements, and whether CON laws create barriers to entry that are relevant to the competitive analysis.
• [ ] Draft voluntary submission white paper for FTC staff — target: February 15, 2024. The white paper should provide a concise, persuasive summary of the transaction, the relevant markets, and the competitive analysis, and should explain why the transaction does not raise competitive concerns warranting further investigation. The white paper is a key component of our strategy to obtain early termination of the waiting period and should be prepared with the expectation that it will be reviewed by FTC Bureau of Competition staff, likely in the Mergers IV Division (which handles healthcare transactions).
4. HSR Form Preparation
The HSR notification form consists of eight items. The form must be completed accurately and in full, with all supporting documents and schedules attached.
• [ ] Complete draft acquiring person HSR notification form (Items 1–8) — target: February 12, 2024. The form should be prepared using the current version of the HSR notification form available on the FTC's electronic filing portal. Each item should be completed based on the entity and organizational information, revenue data, NAICS codes, and document production assembled pursuant to the steps described above.
• [ ] Circulate draft to Howard Bellamy for partner review — target: February 12, 2024. The draft form, together with the supporting document log and any attachments, should be transmitted to Howard for review and comment. Howard should review the form for accuracy, completeness, and consistency with the voluntary submission white paper.
• [ ] Incorporate partner comments and prepare final execution version — target: February 15, 2024. All comments from partner review should be incorporated, and the final execution version of the form should be prepared for signature.
• [ ] Obtain certification signature from Julian Desmond on behalf of Ardent Capital Management LLC as UPE. The certification must be signed by an authorized representative of the UPE. Julian Desmond, as Co-Founder and Managing Partner, has been identified as the appropriate signatory. The signed certification page should be obtained in advance of the filing date; if an original signature is not feasible on the filing timeline, we should confirm that the FTC e-filing portal accepts electronic or scanned signatures.
• [ ] Verify that the early termination request box is checked on the notification form. Both the acquiring person and the acquired person filings should request early termination of the statutory waiting period.
5. Counterparty Coordination with Greenvale Durneval LLP
Coordination with Greenvale Durneval LLP, antitrust counsel to the target/seller, is essential to ensure consistency across the two HSR notification forms and to facilitate simultaneous filing.
• [ ] Send coordination protocol letter to Jonathan Felder at Greenvale Durneval — target: February 5, 2024. The letter should propose a coordination framework covering the topics described below and identify Monica Reyes as the primary point of contact at Calderwood & Harkness for day-to-day coordination.
• [ ] Coordinate on consistency of transaction description, transaction value, and deal structure characterization. Both parties' notification forms should describe the transaction, the parties, and the consideration in consistent terms. Any discrepancies between the two filings could prompt inquiries from FTC PNO staff and delay the review.
• [ ] Align on NAICS code classifications. Both filings should use the same NAICS codes to classify Pinnacle's operations. The applicable codes are 621111 (Offices of Physicians) and 621493 (Freestanding Ambulatory Surgical and Emergency Centers). Alignment should be confirmed via email by February 11, 2024.
• [ ] Confirm simultaneous filing logistics. Both parties should submit their respective notification forms on the same day (i.e., February 16, 2024) via the FTC e-filing portal. The timing of submissions should be coordinated so that both forms are submitted on the same business day, ideally within the same window to ensure the FTC records a common filing date and begins a single 30-day waiting period. Confirm logistics by February 13, 2024.
• [ ] Confirm that both parties will request early termination in their respective filings. The early termination request is more effective when both parties make the request, as the FTC considers the positions of both filing persons when evaluating whether to grant early termination.
6. Filing Fee Logistics
Timely remittance of the filing fee is a prerequisite to the FTC's acceptance of the notification. The following steps should be completed to ensure that the filing fee is processed in advance of the filing date:
• [ ] Send HSR filing fee wire instructions letter to Ardent Capital — target: February 14, 2024. The letter should include the FTC's wire transfer instructions (bank name, routing number, account number, and any reference information required by the FTC), the exact amount due ($280,000), and a request that the wire be initiated promptly to ensure receipt by the FTC before the filing date.
• [ ] Amount: $280,000 payable to the Federal Trade Commission.
• [ ] Confirm that wire transfer is initiated and received before the February 16, 2024 filing date. Elliot Nguyen should follow up with Ardent Capital's finance team to confirm that the wire has been sent and obtain a wire confirmation receipt.
• [ ] Obtain wire confirmation receipt for inclusion with the filing submission. The wire confirmation receipt should be retained in the matter file and a copy should be included with the cover letter transmitting the notification form to the FTC.
B. Filing Day (February 16, 2024)
The following actions should be completed on the target filing date:
• [ ] Submit acquiring person HSR notification form via the FTC e-filing portal. The submission should include the completed notification form, all Item 4(c)/4(d) documents (7 documents), and all supporting schedules and attachments.
• [ ] Confirm simultaneous submission of acquired person notification by Greenvale Durneval LLP. Monica Reyes should contact Jonathan Felder or his designated associate by telephone and email on the morning of February 16, 2024 to confirm that the acquired person's filing is being submitted contemporaneously.
• [ ] Submit cover letter to FTC Premerger Notification Office transmitting the notification form, the Item 4(c)/4(d) document log and documents (7 documents), the filing fee confirmation (wire receipt), and the early termination request. The cover letter should identify the transaction, the parties, and the filing person, and should reference the enclosed early termination request and voluntary submission white paper.
• [ ] Submit formal request for early termination letter addressed to both the FTC Premerger Notification Office and the DOJ Antitrust Division. The letter should briefly describe the transaction and request early termination of the 30-day statutory waiting period under 16 C.F.R. § 803.11.
• [ ] Submit voluntary submission white paper to FTC Bureau of Competition. The white paper should be addressed to the appropriate reviewing division (anticipated to be Mergers IV Division, which is responsible for healthcare transactions) and should be submitted contemporaneously with the notification form.
• [ ] Send client update email to Julian Desmond and Priya Chandrasekar confirming that the HSR notification has been filed, the filing fee has been confirmed, and the 30-day waiting period has commenced.
• [ ] Record start of 30-day initial waiting period. The waiting period begins on the date of filing: February 16, 2024. The initial 30-day waiting period will expire on March 17, 2024, unless the FTC or DOJ issues a Second Request (which would extend the waiting period) or grants early termination (which would shorten it).
C. Post-Filing / Waiting Period (February 17 – March 17, 2024)
The following actions should be completed during the 30-day statutory waiting period:
• [ ] Monitor for FTC PNO confirmation of filing receipt. The FTC Premerger Notification Office typically issues a filing confirmation on the same business day or the next business day following receipt of the notification. The confirmation will include an FTC-assigned transaction number, which should be recorded and used in all subsequent correspondence.
• [ ] Record FTC-assigned transaction number upon receipt.
• [ ] Send introductory email to FTC staff contact. Based on the transaction's classification as a healthcare services transaction, the reviewing division is expected to be the Bureau of Competition, Mergers IV Division. Our primary staff contact is expected to be Sarah Whitman, Attorney, Bureau of Competition, Mergers IV Division. Monica Reyes should send an introductory email to Ms. Whitman on or about February 20, 2024, identifying ourselves as antitrust counsel to the acquiring person, noting the filing, and offering our availability to answer any questions the staff may have regarding the transaction.
• [ ] Monitor for any informal requests for additional information from FTC staff. During the waiting period, FTC staff may reach out with informal questions or requests for supplemental information. Any such inquiries should be promptly communicated to Howard Bellamy for response. Informal staff requests are common and should be distinguished from a formal Second Request (which triggers a new waiting period and substantially greater document production obligations).
• [ ] Prepare first bi-weekly status report to client — target: February 29, 2024. The status report should summarize the filing date, the status of the waiting period, any communications with the FTC or DOJ, and our current assessment of the likelihood and timing of clearance.
• [ ] Monitor for early termination grant or issuance of Second Request. Early termination grants are published on the FTC's website and typically announced to counsel via email or telephone. If early termination is not granted and a Second Request is issued, we will need to prepare a separate memorandum addressing Second Request compliance. As discussed in Section X below, the risk of a Second Request is assessed as low.
• [ ] Upon early termination or waiting period expiration, complete the following steps:
• [ ] Notify client immediately. Contact Julian Desmond and Priya Chandrasekar by telephone and follow up with a written confirmation by email.
• [ ] Notify transaction counsel (David Ostrander at Whitfield & Crane LLP) so that the deal team can begin preparing for closing.
• [ ] Send letter to Fendowell Thornton LLP (Kate Yardley) confirming satisfaction of the HSR clearance closing condition under EPA §6.1(c).
• [ ] Prepare second bi-weekly status report (if applicable, depending on whether the waiting period extends beyond the date of the first status report).
• [ ] Confirm publication of early termination notice in the Federal Register (if early termination is granted). The FTC publishes a notice of early termination in the Federal Register, which serves as the official record of clearance.
D. Pre-Closing Deliverables
Following the expiration or early termination of the HSR waiting period, the following closing deliverables should be prepared:
• [ ] Prepare HSR clearance certificate (officer's certificate) for delivery at closing. The certificate should certify that the HSR filing was duly made, the waiting period has expired or been terminated, and the condition precedent to closing under EPA §6.1(c) has been satisfied.
• [ ] Coordinate delivery with Whitfield & Crane LLP as part of the closing checklist. The HSR clearance certificate is typically delivered as one of the conditions precedent documents at closing and should be included in the closing binder prepared by transaction counsel.
• [ ] Expected closing date: On or before June 30, 2024 (the EPA outside date), subject to satisfaction of all other closing conditions.
VIII. Responsibility Assignments
The following table assigns primary responsibility and review/approval authority for each major workstream:
All team members should coordinate daily during the pre-filing preparation period (February 2–15, 2024) and should promptly escalate any issues or delays to Monica Reyes (or, for significant issues, to Howard Bellamy directly). A brief team check-in call should be scheduled for each Monday and Thursday during the preparation period to ensure alignment on progress and deadlines.
IX. Key Contacts
The following table lists the key contacts for this matter:
X. Risk Factors and Contingencies
A. Second Request Risk
Based on our preliminary antitrust analysis, the risk of a Second Request is assessed as low. The principal bases for this assessment are as follows:
• No horizontal overlaps. Ardent Capital has no existing ambulatory surgical center operations. Its portfolio companies — Marlowe Asset Management Rehabilitation Holdings LLC (outpatient physical therapy) and Clearpath Diagnostics Inc. (clinical laboratory services) — operate in product markets that are distinct from Pinnacle's ASC and physician practice management businesses. There is no overlap in any relevant product market.
• No geographic overlaps. While Marlowe Asset Management Rehabilitation operates in three of the nine states in which Pinnacle has operations (Texas, Florida, and Georgia), Marlowe Asset Management's business (outpatient physical therapy) is in a different product market from Pinnacle's ASC operations. There is no geographic overlap within a common product market.
• Competitively insignificant vertical relationship. The one potentially noteworthy vertical relationship involves Marlowe Asset Management Rehabilitation's 12 physical therapy clinics that are co-located with or in close proximity to Pinnacle ASCs in Texas, Florida, and Georgia. Post-acquisition, Ardent Capital would control both the referring PT clinics and the receiving ASCs. However, this vertical relationship is expected to be competitively insignificant given: (i) the large number of independent PT providers and ASCs in each relevant geographic market; (ii) the absence of any contractual or exclusive referral arrangements between Marlowe Asset Management and Pinnacle; and (iii) the relatively small share of total referrals to Pinnacle ASCs that originate from Marlowe Asset Management clinics.
• Early termination expected. Based on the foregoing, we expect the FTC to grant early termination of the waiting period. The voluntary submission white paper will present the competitive analysis in a clear and accessible format designed to facilitate the staff's review and support a prompt clearance decision.
B. Timing Cushion
The target filing date of February 16, 2024 provides 4 business days of cushion before the February 22, 2024 contractual deadline established in EPA §5.4(a). This cushion is adequate to accommodate unforeseen delays in document collection, form preparation, or counterparty coordination. If significant delays arise, the filing deadline can still be met without risk of contractual default. We will monitor progress against the timeline and escalate promptly if any workstream falls behind schedule.
C. Filing Fee Timing
The wire transfer of $280,000 must clear the FTC's account before the filing date. Wire instructions should be sent to the client no later than February 14, 2024 to allow adequate processing time. In our experience, domestic wire transfers typically settle on the same business day or the next business day, but we recommend initiating the wire at least one business day in advance of the filing date to ensure timely receipt. Elliot Nguyen should confirm with Ardent Capital's finance team that the wire has been sent and obtain a confirmation receipt.
D. Interagency Clearance
The transaction involves healthcare services, a sector that typically falls within the FTC's jurisdiction for merger review purposes. The FTC and DOJ Antitrust Division maintain an interagency clearance process to allocate responsibility for reviewing specific transactions. Based on established practice and the healthcare sector classification, we expect that this transaction will be cleared to the FTC for review. The DOJ Antitrust Division is expected to defer to the FTC. This interagency clearance process is typically completed promptly and should not affect the filing timeline or the waiting period.
E. Reverse Termination Fee Exposure
If HSR clearance is not obtained — i.e., if the FTC or DOJ seeks to block the transaction or if the transaction fails to close due to a regulatory impediment — Ardent Capital would be liable for the reverse termination fee of $28,560,000 (3.0% of the $952,000,000 enterprise value) under EPA §7.3(b). This represents significant financial exposure for the client. However, based on our competitive analysis, this scenario is assessed as highly unlikely. There are no horizontal overlaps, no competitively significant vertical relationships, and no other features of the transaction that would be expected to trigger a challenge. Nonetheless, the existence of the reverse termination fee underscores the importance of a thorough and well-prepared filing.
XI. Document Retention and Filing Notes
All drafts, correspondence, memoranda, analysis workpapers, and other work product related to the HSR filing should be maintained in the firm's document management system under Matter No. 1001-00001. The following specific document retention protocols should be observed:
• Item 4(c)/4(d) documents and the document log should be maintained in a separate sub-folder within the matter file and clearly marked as documents produced (or to be produced) to the FTC. These documents should be retained in the form in which they are produced, along with any privilege log entries for documents withheld.
• Copies of all FTC and DOJ correspondence, including filing receipts, confirmation letters, the FTC-assigned transaction number, early termination notices, and any informal staff communications, should be annotated with the date of receipt and filed promptly in the matter file. A separate sub-folder for agency correspondence should be maintained for ease of reference.
• Substantive antitrust analysis memoranda (preliminary risk assessment, portfolio overlap analysis, vertical analysis, market definition and HHI memorandum, CON/state regulatory analysis) should be maintained in the matter file and clearly marked as privileged attorney work product. These memoranda should not be shared with third parties without prior approval from Howard Bellamy.
• The voluntary submission white paper, including all drafts and the final submitted version, should be maintained in the matter file. Because the white paper is submitted to the FTC, it is not privileged; however, internal drafts and comments on drafts may retain work product protection.