(Bloomberg)—Edgewell Personal Care Co. is ditching its bid to acquire shaving-supply maker Harry’s—and the broader takeaway is that big consumer companies may have to think twice before snapping up feisty upstarts that are nibbling away at their market share.

The company said it’s abandoning the proposed $1.37 billion deal a week after the Federal Trade Commission sued to block the merger on antitrust grounds. Its shares climbed as much as 27% on Monday—the most on record—after the announcement, which accompanied quarterly earnings, cheered on by investors who felt the company was overpaying.

Edgewell had planned to reinvigorate its Schick razor line by putting Harry’s co-founders, Jeff Raider and Andy Katz-Mayfield, in charge. Now it will have to formulate a new path forward for the 100-year-old brand.

On a call Monday, CEO Rod Little said the company remains “energized” in its mission to turn Schick around, but acknowledged that “it’s going to take us longer to get there” without the injection of expertise from Harry’s, which was a pioneer of the direct-to-consumer subscription model for shaving goods.

The FTC lawsuit could complicate future deals by big consumer-goods companies that hold sway in certain industries and want to grow via acquisitions. The FTC’s opposition to the deal may be a bad sign for Juul Labs Inc., the e-cigarette company whose sale of a stake to an established rival—Marlboro maker Altria Inc.—is still under review by the agency.

Other companies that roiled their industries in Harry’s-like fashion are seeing valuations plummet. Casper Sleep Inc., the mattress-in-the-mail maker that went public this month, fell as much as 9.5% in trading Monday, valuing the company at just over $400 million.

Acquiring early

The lesson may be to acquire young, potentially disruptive startups before they get too big. Harry’s had gained market share behind Procter & Gamble Co. and Edgewell, and the FTC couldn’t allow consolidation at that level, said Peter Carstensen, a law professor at the University of Wisconsin who specializes in antitrust matters.

Further consolidation by one of the biggest players in a market with few competitors “is not going to be allowed,” he said. “This merger was not going to do anybody any good, probably not even the shareholders.”

Last week’s FTC complaint said that Harry’s was a “uniquely disruptive competitor” in the shaving market that “forced its rivals to offer lower prices, and more options, to consumers across the country.”

Other deals

P&G last month agreed to buy Billie, which makes shaving products for women and the company has made a series of similar acquisitions in recent years. Unilever purchased Dollar Shave Club in 2016.

“We believe we would have prevailed in litigation, and are disappointed by the decision by Edgewell’s board not to see this process to its conclusion,” Raider and Katz-Mayfield said in a statement, adding they were “perplexed” by the FTC action.

The Harry’s deal stands out because of its size, with Harry’s and Edgewell trailing only P&G in U.S. shaving market share, according to Carstensen.

“This merger was so far over the line that it was a no-brainer,” he said.

Harry’s is No. 201 in the 2019 Digital Commerce 360 Top 1000.