PMI – An Insider’s Guide – Part 3: What to do When You’re Asked to Assist in a Potential Acquisition – Post-Integration Run Phase and the Wheels Have Come Off

PMI – An Insider’s Guide – Part 3: What to do When You’re Asked to Assist in a Potential Acquisition – Post-Integration Run Phase and the Wheels Have Come Off

This is the third in a series of three articles on post-merger integration, find the other two articles here and here.

It’s been months since your company was all over the news with a splashy acquisition and the fanfare has died down a bit.  There are rumors, quietly at first, but then persistently louder, that things aren’t going so well with the transition: the new employees are unhappy, the promised revenue isn’t flowing, and the sought-after efficiencies appear elusive.  Then the dreaded phone call comes from your manager: we need you to help fix what’s happening here.  In other words, we need you to follow the parade with a shovel.

Even if you weren’t tapped to assist with the acquisition of the target entity (“Target”) and weren’t included in the planning and execution of integration, it’s never too late to dive in and make a difference when things don’t seem to be working.  Here are three steps to take to try to right the ship:

  1. What Happened?  When an integration goes awry, everyone involved has an explanation for why.  If possible, spend time with the stakeholders to understand the strategy for the initial plan to purchase the Target, and try to discern if over time the rationale and strategy has changed (and if the planning was ever aligned to the changes); if Target legal team members came over in the acquisition, their perspective will be invaluable about how they operated previously and what best practices can be carried over that may have been missed earlier.  Even if the planning and execution of the integration ended up as a misfire, it still makes sense to understand what the initial plan was (if there was a plan) and what information the plan was based on.  Gather as much information as possible about the transaction, what the initial planning was, and listen to the participants about what the vision was.  As recommended in previous articles, reviewing the due diligence memo and any presentation decks about the acquisition will provide insights that will still be pertinent down the road.  Remember to speak with your counterparts in other functional areas involved in integration as more often than not challenges are interrelated and may cross over the various functional areas – you are likely to gain insights on how to address issues and tap into institutional knowledge by keeping your perspective broader than just the legal group.
  1. Don’t Ignore Culture.  Everyone is familiar with the quote attributed to Peter Drucker that “culture eats strategy for breakfast,” but what does this mean in the practical reality of one business acquiring another?  If the business decision has been made to acquire the Target entity, all too often companies will ignore or soft pedal the cultural differences between the two companies because other more obviously economic synergies exist.  At whatever point in the acquisition cycle you become engaged to assist with legal support, take the time to try to understand the Target entity and how its industry, size, location, and core values shape its culture.   Often, there is a tension between how a smaller Target entity ran in an entrepreneurial, free-wheeling fashion, fostering an environment where process was less important than creativity, and the larger acquiring company where strong adherence to process, policy, and protocol have led to disciplined execution and strong customer focus.  Often lawyers trying to manage or create a legal support model in these circumstances must balance Target’s expedient practices with established process.  Being able to create interim solutions that keep the work flowing, the revenue coming in, and customers satisfied will help offset the inherent challenges many people face when an acquisition and the inevitable integration displaces the regular work flow and cadence of the Target entity.  It’s important to be sensitive to how difficult adjusting may be to the Target’s workforce and their changing roles/responsibilities.   By listening to your new colleagues about what was working before but isn’t now, you will be able to come up with solutions to keep the work flowing while leveraging the best practices.  Ultimately, the best laid plans and the most articulate strategy will fall in the face of resistance from your new colleagues if they feel their culture and contributions are being ignored in the new model.
  1. Triage to Steady State.  Depending on what has gone awry with the integration, focus your efforts on standing up a day-to-day support model that will both engage the Target’s legal resources (if any), as well as leverage the core knowledge of your own legal team.   This may also be the time to engage the assistance of outside counsel to provide a fresh perspective on a legal support model and an unbiased view of the challenges.  Also by using outside counsel who are either already familiar with your own business and legal team or have extensive in-house experience, you can bring in an already proven source of support to help manage the workflow.  Trusted outside counsel also play a role in helping to disseminate information related to sensitive issues when the internal legal leads may need to be shielded from having to deliver more difficult messages.   Outside counsel will also be able to share best practices for legal support models that may be key to getting over the hurdle of interim support.  Often leadership may not know their plans for the Target entity in terms of running it separately or immediately integrating operations into existing functions or some variation.

Even in the scenario where everything seems to have gone wrong, there are still steps that can be taken to set the delivery of legal services to the Target entity on a firmer path.  High level strategic debriefings and Monday morning quarterbacking will go on for months trying to determine if the Target should have been acquired in the first place.  But you can make a difference now in the delivery of legal services by keeping an open mind to try to understand what happened in the first place, and to do that from as many perspectives as possible while remaining uncompromisingly critical, becoming a student of your Target’s culture and values, and making tactical decisions to get the legal function meeting deadlines and keeping up with the flow of documents.  Using trusted outside counsel at any stage of the acquisition to plan for, implement and triage integration can provide an outside perspective and legitimacy and ultimately turn a perceived failure into a win.

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PMI – An Insider’s Guide – Part 2: What to do When You’re Asked to Assist in a Potential Acquisition – Between Signed and Closed Phase

PMI – An Insider’s Guide – Part 2: What to do When You’re Asked to Assist in a Potential Acquisition – Between Signed and Closed Phase

Your day starts with headlines screaming across the Internet – your company has acquired a particular entity (“Target”).  The office is buzzing with the news and potential impacts – what does this mean for my role now and in the future, and how much more work am I going to have to take on?  More often than not, the acquirer’s legal team will be tapped to coordinate the planning for post-merger integration and implementation.  So, what do you do when the first email of the day is from your boss informing you that you’ve been asked to manage the legal needs of the Target?  Here are three points to bear in mind to begin the process of that most nebulous of goals:  a successful integration after a headline grabbing acquisition.

Even if you weren’t tapped to assist at the due diligence phase (see my first article here: http://www.jdsupra.com/legalnews/pmi-an-insider-s-guide-what-to-do-when-28869), you can still make an impact and create the foundation for a successful transition, here’s how:

  1. Data Gather: Learn as much as you can, as fast as you can, about this transaction.  This will mean getting a copy of the final due diligence memo and any related or collateral materials that were prepared by the working team to help you better understand the acquisition purpose, the proposed business plan, critical milestones, and where the legal function fits in.  Take the time to reach out to the points of contact from the various functional areas involved in the deal, especially your Tax, HR, Finance, Facilities, Marketing, and IT teams to learn their perspective on the deal and what are their central issues.  Bear in mind that in an acquisition, legal issues are only one facet, and often not the most important facet, of the deal.  You will need to understand the challenges each of these areas are dealing with.  Those challenges and issues will often cross-over into Legal.  Forging strong internal relationships across functional teams will enable you to issue spot sooner and work with a team of subject matter experts to remediate issues quickly.  These cross-function colleagues can become your lifeline to making the deal an ultimate success as everyone is incented to want a deal they have been working on for months to work out.
  1. Plan for Day One and Execute on that Plan:  If you have been given the task to plan for legal support for the Target, start with the basics and work your way out to the more complex.  Don’t forget that one of the biggest pressure points you will face is ensuring that legal support (often measured in how quickly legal requests are responded to by the appointed legal team) flows as seamlessly the day after closing (when you and your company are now fully legally in charge of the Target) as it did the day before closing (when you weren’t in charge yet of the Target).  Some of these suggestions may appear obvious points but in the chaos of integration planning, even the obvious can get lost in the dust up, so keep a checklist with the following questions:
  • What contracting entities will be used after close?
  • Who has signature authority for those entities?
  • If there are to be changes to entities, make sure you are liaising with your tax and finance teams so entity changes are coordinated and you act in lock step with your SME colleagues in the other functional areas,
  • Are there any existing Target legal resources who will remain and assist and if so, try to spend time with them understanding their roles today, how the work flows, expectations about turn-around times;
  • Make sure there is a plan, even for the short term, to ensure legal support requests are responded to quickly after close.
  • Overall evincing a sense of calm and a good faith effort to control the chaos will help those around you be less afraid of what the future may hold and focus on the work at hand on a day-to-day basis, while the larger strategy gets sorted out.
  1. Be Nimble:  The best laid plans can be turned on their head as new information comes to light between sign and close.  What appeared to be a manageable number of client and vendor contracts is now several times larger, or the service that was thought to be unregulated is actually regulated and the required license or approval was never obtained, or the business leaders told the Target “nothing will change after you’re acquired” when the exact opposite is actually what’s happening.  The largest challenge in planning for and ultimately implementing a post-merger acquisition strategy is the general day-to-day chaos that everyone must learn to be comfortable with.   If you can become comfortable with lightly controlled chaos, you will have a better chance of succeeding and not pulling all of your hair out in the process.  If you continue to stay connected to your SME contacts in each functional area (having regular conference calls or in person meetings is the best way to do that), most likely a challenge you have in Legal is also one trickling into the other areas as well (Finance can’t recognize revenue they don’t know exists, Tax can’t move to wind down entities that still have people or contracts tied to them, etc.).  Leverage these relationships to quickly identify and respond to the changing landscape and help each other creatively problem solve in a way that helps everyone.  There is usually not just one way to solve a problem or address a crisis, so learning to be flexible and open in your approach will help you more easily and sanely shift course as needed during the planning and implementation phase of the integration.

Despite reports that most acquisitions fail, you can make a big difference in setting a foundation for success by following a few pointers.  Make sure you take affirmative steps to understand as much as you can about the acquisition process and rationale for acquiring the Target, devise a realistic plan to ensure continuity of legal support during the initial transition, and go outside of your comfort zone to be as nimble as possible to adjust plans and address issues as they emerge when facts on the ground change.

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PLG Opens a Chicago Office

PLG Opens a Chicago Office

Patrick Law Group proudly announces the opening of its new Chicago, IL office. The firm’s office expansion and growth with the addition of the Chicago office will enhance the firm’s ability to deliver on our continued commitment to deliver superior Client service both nationally and in our local office markets.

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PMI – An Insider’s Guide – Part 1: What to do When You’re Asked to Assist with a Potential Acquisition – Due Diligence Phase

PMI – An Insider’s Guide – Part 1: What to do When You’re Asked to Assist with a Potential Acquisition – Due Diligence Phase

By Peggy Abood


See all of Our JDSupra Posts by Clicking the Badge Below

View Patrick Law Group, LLC

See PMI – An Insider’s Guide – Part 1 here.

See PMI – An Insider’s Guide – Part 2 here.

See PMI – An Insider’s Guide – Part 3 here.

The Internet is jammed with articles reporting that most merger and [acquisition activity fails, and yet each year companies large and small continue to engage in the practice with the hopes that bringing onboard this particular piece of technology or that line of business will be the holy grail of their own success story.

One theory why mergers often fail is that process of acquiring a company: seeking the appropriate target, the due diligence process, and the merger negotiations are often led by a team of people who will have little to do with the target entity post-acquisition.   Once the purchase agreement is signed or closed, like a swat team, they move on to the next deal.  This team of corporate development executives are laser-focused on finding acquisition targets that meet a specific business need, such as a key piece of IP, a core group of personnel with specialized skills, a customer footprint or line of business in a coveted geography – in order to push forward the overall company goals and remain competitive in the industry.

Another factor in failed acquisitions is timing. The acquisition/merger process is often fast-moving, necessarily limited to a small number of senior executives, and highly focused on making a strong business case for why this particular target should be acquired.  The driver here is often on promised future revenue potential of the combined entity, with little to no focus on what happens after the acquisition is completed.

If we take the reports at face value that many if not most acquisition activity does fail, can post-merger integration (PMI) be one tool to turn around a failed buy?  This series of brief articles demonstrates that at any stage the legal group is engaged, there are steps that can be taken to make a successful integration.

_______________________

It’s the call no one in your legal group wants to get – too sensitive even for an email – and the voice at the other end delivers the news:  We’re looking to acquire a certain company and we need you to help us issue spot and prepare for the acquisition.  Now what?  Here are three points to bear in mind when asked to participate in a potential acquisition.

  1. Business First. Keep your business hat on even as you try to identify potential legal issues – at this phase your teammates in the working group may be skeptical of legal’s involvement other than the M&A team and outside counsel because the business is still trying to determine whether or not to acquire this target entity or another.  Because of this, try to think like your business colleagues and frame your questions in terms and examples that will matter to them as they think about potential risks and issues that could emerge in the target entity.
  1. Due Diligence Report. Obvious as it sounds, be sure to obtain a copy of the final due diligence report, likely generated by outside M&A counsel, to understand the full range of issues and considerations related to the target entity.  From this report you can start to piece together the initial critical pieces of information you will need to begin to strategize about what a legal support model may look like once the transaction is completed.  Focus on what geographies the target entity is based, what products or services it offers (and how they complement the acquirer’s existing product/service line), if any products or services are regulated or sold in a highly regulated country/region, if there are any existing legal staff to support this work (and if so, will they come over in the contemplated transaction), and how many client/vendor contracts you will need to transition.
  1. Secrecy is Paramount.  Don’t do anything that might jeopardize the confidentiality of the contemplated transaction.  This means you can’t discuss what you know with anyone else at the company except those who are already involved and are on the designated project team.  Because of the sensitive nature of acquisition activity, you don’t want to be the one checking out future colleagues on LinkedIn and raising suspicions of those who can see who has been looking at their profiles.  Restrict communications to the designated team and don’t share information with anyone else.

Taking a few small steps like these three can help you get out in front of the potentially large work flow that may come your way if the acquisition of the target entity proceeds and you are asked to help with planning for integration and integration implementation.  Remember to think like a business operator and not get too lost in potential legal issues while leadership makes strategic determinations about whether or not to pursue a given target; study the due diligence report for as much basic information about the contemplated deal as possible; be mature and discreet in your communications to show your ability to treat ultra-sensitive, potentially market-moving information, confidential.  All of these skills will serve you well, especially if you are called in to assist with the actual implementation planning if the acquisition proceeds.

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Just Push the Button! Instagram’s Response to Influencers, Hashtags and Disclosures

Just Push the Button! Instagram’s Response to Influencers, Hashtags and Disclosures

In April, the Federal Trade Commission (“FTC”), after reviewing Instagram posts by celebrities, athletes, and social media influencers, issued 90 letters reminding influencers and marketers about the FTC’s requirements that influencers clearly and conspicuously disclose their relationships to brands when promoting or endorsing products through social media.  In this case, the FTC focused on influencers’ posts on Instagram.

These letters and the FTC’s attention to this issue should not come as a surprise to the letter recipients, given the FTC’s 2016 Lord & Taylor enforcement action. In 2015, Lord & Taylor developed a multilayered advertising campaign, including a large social media influencer photo bomb push on Instagram.  Although Lord & Taylor ultimately settled the FTC’s charges, Lord & Taylor is now required to ensure that its influencers clearly disclose when they have been compensated in exchange for endorsements.

As additional background information, in 2016, Public Citizen, a consumer rights advocacy group, sent a letter to the FTC identifying 113 Influencers and celebrities who appeared to have published sponsored posts without properly disclosing their paid relationships to various brands (the “2016 Public Citizen Letter”).   Public Citizen asserted that Instagram had, “become a platform for disguised advertising directed towards young consumers.”  The 2016 Public Citizen Letter requested that the FTC act promptly and aggressively, “to change the culture around paid endorsements on Instagram.”

Thus, On April 19, 2017, a little over one year following the Lord & Taylor settlement and the 2016 Public Citizen Letter, the FTC released guidance entitled, “Influencers, are your #materialconnection#disclosures#clearandconspicuous”.  In its guidance, the FTC noted that it is concerned that some social media influencers may not be aware of the truth-in-advertising standards for endorsements and disclosures.   So, the FTC decided to spend some time on Instagram.  Consequently, the FTC sent 90 plus letters to social media influencers, to “influence influencers to comply with those established principles in their Instagram posts.”

The FTC provided the following advice on making effective disclosures on Instagram:

  1. Keep your disclosures unambiguous.  The FTC suggests making your disclosures very clear and avoiding vague terms like, “#partner,” or “#sp” because such disclosures are unlikely to explain that there is a material connection between the influencer and the brand.  One should avoid unfamiliar abbreviations or cryptic words that are subject to several interpretations. Further, the FTC recommends that the parties ask themselves, “In the context of this post, how can I make the connection clear?”
  2. Make your disclosures hard to miss.  When posting, the influencer’s and marketer’s goal should be to post in a way that makes the disclosures easy to spot.  All disclosures should be placed above the “more” button.
  3. Avoid hard to read hashtags. Avoid placing a disclosure in a string of hashtags because consumers are unlikely to read it.

Building upon the FTC’s advice, Instagram recently unveiled a new disclosure tool to a select group of influencers.  The tool is designed to streamline compliance with FTC disclosure requirements and bring more transparency to the platform.  Previously, influencers were responsible for how and where to disclose the sponsored nature of their posts.  Instagram’s new tool, however, removes this discretion by providing one clear, conspicuous and standardized form of disclosure.  Instagram describes its new tool as a “first step” and promises to take additional actions in the area of sponsored posts.

Following Instagram’s unveiling of its new tool, Public Citizen issued another letter (the “2017 Public Citizen Letter”) to the FTC arguing that the Instagram sponsored feature “needs to be refashioned” to better protect consumers. More specifically, they argue that Instagram should create an even more noticeable disclosure format by placing a red box labeled “advertisement” around every sponsored photo. The letter also urges the FTC to “work with Instagram to develop a system that makes it easy to denote paid posts consistent with FTC guidelines.”

Public Citizen also observed a limited immediate impact of the FTC’s 90 warning letters. Public Citizen claimed that since receiving the FTC’s letters, only one of the influencers has consistently disclosed sponsorships in compliance with FTC guidelines. Consequently, Public Citizen requested that “the FTC bring enforcement actions and seek penalties for posting nondisclosed sponsored content, especially for influencers and brands that are repeat offenders.”

While we are not aware of any public actions being brought against individual influencers, it is clear that the marketing and advertising industry views the new feature as part of a larger, ongoing conversation about sponsored posts. Instagram designed its new tool as a “first step” towards finding a practical, middle-ground solution that satisfies FTC Endorsement Guidelines.

Disclosure responsibility works both ways and the FTC’s Endorsement Guides applies to both brands and influencers, yet evidently public advocacy groups want more disclosure, while brands and influencers are trying to balance their business interests with regulatory requirements.

Clearly, the FTC’s view of how to avoid consumer deception will continue to evolve just as the forms of advertising and digital media advance; however, regardless of this evolution the FTC will continue to reinforce tried and true advertising  principles.  Consequently, educating influencers and brands will be paramount, along with providing the technology and practical tools that enable these stakeholders to achieve their goals, while still protecting

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By Dawn Ingley See all of Our JDSupra Posts by Clicking the Badge Below Recently, my automobile insurance company gauged my interest in saving up to 20% on insurance premiums.  The catch?  For three months, I would be required to install a plug-in monitor that...

When Data Scraping and the Computer Fraud and Abuse Act Collide

By Linda Henry See all of Our JDSupra Posts by Clicking the Badge Below As the volume of data available on the internet continues to increase at an extraordinary pace, it is no surprise that many companies are eager to harvest publicly available data for their own use...

Is Your Bug Bounty Program Uber Risky?

By Jennifer Thompson See all of Our JDSupra Posts by Clicking the Badge Below In October 2016, Uber discovered that the personal contact information of some 57 million Uber customers and drivers, as well as the driver’s license numbers of over 600,000 United States...

IoT Device Companies: COPPA Lessons Learned from VTech’s FTC Settlement

By Jennifer Thompson See all of Our JDSupra Posts by Clicking the Badge Below In “IoT Device Companies:  Add COPPA to Your "To Do" Lists,” I summarized the Federal Trade Commission (FTC)’s June, 2017 guidance that IoT companies selling devices used by children will be...

Beware of the Man-in-the-Middle: Lessons from the FTC’s Lenovo Settlement

By Linda Henry See all of Our JDSupra Posts by Clicking the Badge Below The Federal Trade Commission’s recent approval of a final settlement with Lenovo (United States) Inc., one of the world’s largest computer manufacturers, offers a reminder that when it comes to...

#TheFTCisWatchingYou: Influencers, Hashtags and Disclosures 2017 Year End Review

Influencer marketing, hashtags and proper disclosures were the hot button topic for the Federal Trade Commission (the “FTC”) in 2017, so let’s take a look at just how the FTC has influenced Social Media Influencer Marketing in 2017. First, following up on the more...

Part III of III | FTC Provides Guidance on Reasonable Data Security Practices

By Linda Henry See all of Our JDSupra Posts by Clicking the Badge Below This is the third in a series of three articles on the FTC’s Stick with Security blog. Part I and Part II of this series can be found here and here. Over the past 15 years, the Federal Trade...

Apple’s X-Cellent Response to Sen. Franken’s Queries Regarding Facial Recognition Technologies

By Dawn Ingley See all of Our JDSupra Posts by Clicking the Badge Below Recently, I wrote an article outlining the growing body of state legislation designed to address and mitigate emerging privacy concerns over facial recognition technologies.  It now appears that...

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