Today, federal approval is no longer a guarantee that an M&A deal will cross the finish line. State AGs are emerging as an increasingly powerful force, reshaping the regulatory landscape and adding a new layer of scrutiny that dealmakers can no longer afford to ignore.
That influence was on display earlier this year when a coalition of 12 state AGs challenged Paramount’s acquisition of Warner Bros. Discovery. Similar challenges to Nexstar’s acquisition of Tegna and HPE’s acquisition of Juniper underscore the broader shift in regulatory power from the nation’s capital to state capitals. Now, even after Washington gives its blessing, states are intervening and forcing companies back to the negotiating table.
And the powershift will become even more consequential now as the political landscape in Washington changes. With Democrats taking control of Congress, Washington is headed for divided government. Beginning in January, Democrats will gain greater oversight authority, but their ability to pass major legislation will be constrained by a Republican White House.
That doesn't mean enforcement activity will slow down, however. State AGs have their own enforcement authority, political priorities and, increasingly, the resources to pursue major cases without waiting for Washington.
State AGs have long had the power to enforce federal antitrust laws and state competition statutes. They played important roles in challenges to the JetBlue–Spirit and Kroger–Albertsons mergers. What's different today is their growing willingness to act independently, including challenging transactions that have already received federal approval.
The increased scrutiny of Big Tech and the Biden administration's aggressive antitrust agenda (remember Lina Khan?) helped accelerate this trend. States have strengthened their enforcement teams, pooled resources and gained experience challenging complicated transactions.
For companies pursuing major acquisitions, the consequences are real. Even unsuccessful litigation can delay closing, increase financing costs, and complicate integration plans.
For dealmakers, this is more than another legal hurdle. It fundamentally changes when communications teams need to get involved and what they're expected to deliver.
For years, merger announcements have followed a familiar script: explain the strategic rationale, highlight expected synergies and make the case for shareholder value. Those arguments matter to investors. But they don't necessarily answer the questions being asked in Albany, Sacramento, and now even Austin.
State AGs and local stakeholders want to know what a transaction will mean for jobs, competition and their communities. Will facilities lose? Will prices increase? Will customers’ choices decrease?
If companies aren't prepared to answer those questions, opponents will answer them instead.
Today, major transactions need a state-level political and communications strategy, developed well before a deal is announced.
Communications leaders must be at the table early, alongside lawyers, bankers, and government relations advisers. Their role isn't simply to explain the deal. It's to anticipate opposition, understand stakeholder concerns and help make a credible case for the transaction.
Here are five steps dealmakers should consider:
1. Know where the risks are before announcing the deal.
Start with a 50-state risk assessment. Where do the companies have significant operations, employees, or customers? Which AGs have been particularly active on competition issues? Where might local officials raise concerns? The goal isn't to engage every state, but to identify where opposition could become a serious obstacle and prepare accordingly.
2. Make the case on Main Street, not just Wall Street.
Cost savings and shareholder returns may explain why a merger makes financial sense, but not why it's good for the community. Companies need a clear, data-rich story about jobs, investment, and competition, backed by commitments they can keep.
3. Build relationships before you need them.
The first conversation with a state AG's office shouldn't come after a subpoena arrives. Working with legal counsel, companies should engage relevant officials and stakeholders early, listen to their concerns and provide clear information about the transaction. They should also identify independent voices who can speak to the deal's benefits. A local community organization will carry more weight than another statement from corporate HQ.
4. Prepare for the fights you hope never happen.
What happens if an AG publicly challenges the merger? What if a local official claims the deal will cost hundreds of jobs? Companies need clear response plans, agreed-upon messaging and a process for making quick decisions. Legal, government relations and communications teams must work together, particularly when public statements could impact litigation or negotiations.
5. Be ready for a longer road to closing.
Federal clearance may not end the approval process. State challenges can extend timelines, create new demands and force companies to revisit commitments they thought were settled. Communications plans need to account for that possibility. Employees, investors and customers will want to know what's happening, particularly if closing dates slip. Companies don't need to comment on every development. But prolonged silence can leave employees anxious, investors uncertain and opponents with an opportunity to shape the story.
The midterm elections have added another dimension to an already complicated dealmaking environment. With Washington facing divided government, state AGs are empowered and remain important players in competition policy and enforcement. For Wall Street, that means another source of transaction risk. For corporate communications leaders, it's an opportunity to demonstrate why their expertise belongs at the center of M&A strategy, not on the sidelines.
Sean Neary is Co-President of Edelman Smithfield US and oversees Financial Public Affairs. Christine O’Brien is Vice Chair of Edelman Smithfield and leads its M&A practice.