The FTC and DOJ Want to Rewrite Merger Filing Rules. Here’s What That Means for Startups.

Policymakers are looking at rewriting the rules around how companies get approval for mergers and acquisitions, which would impact the most common avenue for startups to exit. The Federal Trade Commission (FTC) and Department of Justice (DOJ) has been asking for input on the premerger notification process, the federal rules that govern how mergers and acquisitions get reviewed before they close. As Engine explained in comments we filed with the agencies, rewriting the rules could change the way founders, investors, and employees think about participating in the startup ecosystem.

The Hart-Scott-Rodino (HSR) Act requires parties to large mergers and acquisitions to notify the FTC and DOJ before closing and observe a waiting period, usually 30 days, while the agencies assess whether the deal raises competition concerns. Whether a deal requires a filing depends on its size and the size of the parties involved, with thresholds that adjust periodically. For 2026, the FTC set the minimum transaction value that triggers reporting at $133.9 million.

This process matters to startups because mergers and acquisitions are the primary form of exit for most startups. An analysis of roughly 12,000 startup exits between 2002 and 2020 found that 35 percent of startups failed, 61 percent were acquired, and only 4 percent underwent an initial public offering (IPO). For the vast majority of founders, early employees, and investors, an acquisition is how the company’s value gets realized, how capital gets recycled back into the next generation of startups, and how talent moves through the ecosystem in ways that spark innovation. When filing rules get more expensive and burdensome, they raise costs for founders and investors. This discourages acquirers from pursuing smaller deals altogether, narrowing the exit landscape for startups.

In February 2025, the FTC put into effect a dramatically expanded HSR filing form. It transformed what had been a relatively straightforward notification into something closer to a white paper: detailed written narratives of the deal’s strategic rationale, exhaustive descriptions of competitive overlaps and supply chain relationships, identification of top customers, expanded document production from a newly defined “supervisory deal team lead,” and disclosures about foreign government subsidies. The FTC estimated that the average filing would take 68 additional hours to prepare, with complex transactions requiring over 120 hours total.

The business community challenged the change. A federal judge vacated the rule in its entirety in February 2026, finding that the FTC had failed to justify the added burden with a reasoned cost-benefit analysis, and the agency went back to using the pre-2025 process. Now the agencies are going back to the drawing board. They have said explicitly that the 50-year-old form is “insufficient to review modern mergers,” and that they intend to pursue a new rulemaking regardless of how the appeal plays out.

As this takes shape, it’s important to understand the proposals in play and their potential impact on startups. A new form will most likely land somewhere in between the bare-bones old form and the kitchen-sink 2025 version. If the new form retains heavy narrative and document requirements, the filing costs will remain high and make acquisitions via exit more time consuming and expensive.

The agencies also ask if they should start reviewing “license and hire” transactions, which pair talent hires with intellectual property licenses rather than a traditional acquisition, allowing a larger company to bring on a startup’s key people and license its technology without buying the business. The agencies need to be careful not to sweep in ordinary hiring and licensing activity that startups engage in every day as part of normal market dynamics. An overbroad definition risks chilling routine talent mobility and technology licensing in ways that hurt startups more than incumbents. The agencies must also consider that increasing uncertainty around competition policy and enforcement actually encourages new types of transactions like “license and hire”; when traditional acquisitions become more costly and uncertain to complete, startups will instead pursue the exits that remain available.

On top of this, the agencies are exploring whether to require filers to disclose information related to foreign investment review and sovereign wealth fund ownership as part of the HSR form. The Committee on Foreign Investment in the United States (CFIUS) already handles national security review of transactions under its own separate statutory framework, with its own filing requirements and timelines. Layering those disclosures into the antitrust process risks conflating two distinct regimes and adding cost without clear antitrust benefit. The HSR form should stay focused on what the antitrust agencies actually need to evaluate competition. For startups with diverse investor bases, additional foreign ownership requirements would add compliance complexity to every filing regardless of whether the deal raises any national security concern.

The federal rewrite is not happening in a vacuum. Over the past year, Washington, Colorado, and now California have enacted state-level “mini-HSR” laws that require parties to HSR-reportable transactions to file copies of their federal submissions with the state attorney general (AG). Indiana is close behind, and bills are pending in several other states, including D.C., Hawaii, and New York. These state laws are “notice only” for now, meaning they do not impose separate waiting periods or approval requirements. However, they do impose tight filing deadlines (one business day in California) and real penalties for non-compliance ($25,000 per day in California, $10,000 in Washington and Colorado).

The emergence of state mini-HSR laws reflects a growing sense that federal merger oversight has left gaps. Some state AGs, particularly Democratic ones, view the current federal administration as insufficiently aggressive on merger enforcement. The more unsatisfied states are with the federal approach, the more likely this patchwork expands. That outcome would be particularly detrimental for startups and their acquirers, who lack the legal infrastructure to manage multi-jurisdictional compliance. A well-designed federal rulemaking that credibly modernizes the HSR form would help contain the fragmentation and reduce the momentum of these efforts.

The FTC and DOJ will almost certainly write a new rule while Republicans hold the pen. It will be stepped up from the old form, which both agencies have called inadequate, but likely less expansive than the 2025 Biden-era rule that the courts struck down. How the agencies calibrate the new rule will directly shape the cost and feasibility of startup exits. It will also determine whether the historically uniform federal system for M&A filings holds together, or whether states continue building out their own patchwork of laws, each with different thresholds, timelines, and penalties. For startups and the investors and acquirers they depend on, getting this right is not an abstract regulatory question. It is the difference between an exit environment that works and one that does not.