While it’s true that M&A transactions in the U.S. are up (by $ value), the number of deals for the 12 months ending 8.31.2013 decreased by 4.3%. Reports show deals over $1 billion increasing faster than any other category in the past year. As M&A transaction values grow larger, is there increased risk in discovery?
M&A Concerns & What To Watch Out For:
Due diligence , pre-merger, remains critical regardless of deal size. An initial assessment should examine any pending and potential legal obligations of the target entity. Given the continued increase in Foreign Corrupt Practices Act (FCPA) violations, these transactions require a detailed analysis of non-traditional discoverable data sources or transactional data (i.e. SAP, Accounts Receivable, etc.) to ensure compliance. Understanding the legal ramifications including future liability issues and preservation requirements demand comprehensive planning and review.
Regulatory hurdles can prove to be more challenging as deal size increases. The Hart-Scott-Rodino (HSR) Antitrust Improvements Act protects competition by blocking deals that are seen as anti-competitive. In fiscal year 2012 alone, the DOJ and FTC reviewed 1429 transactions. Know guidelines, the regulatory profile of the target, and identify key personnel to produce information. Given the short timeframe for these second requests, the ability to quickly gather, review, and produce information to the governing agencies is imperative to the success of the transaction.
Data migration and systems integration would seem to be obvious concerns for any deal. Most importantly, having resources (people, process, and technology) in place to safeguard data during and after the transaction. First and foremost, understand both the acquirer’s and the target’s data infrastructure and identify the types of data held by each entity. An analysis to calculate the costs to preserve Electronically Stored Information (ESI) and an assessment of all data management systems are critical to this process.
Create a comprehensive plan and utilize experts and technology to create an M&A best-practices approach allowing for quick identification of challenges and ensuring regulatory compliance while maintaining transparency throughout.
About the Author