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

Sep 6, 2017

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.

OTHER THOUGHT LEADERSHIP POSTS:

Good, Bad or Ugly? Implementation of Ethical Standards In the Age of AI

By Dawn Ingley See all of Our JDSupra Posts by Clicking the Badge Below With the explosion of artificial intelligence (AI) implementations, several technology organizations have established AI ethics teams to ensure that their respective and myriad uses across...

IoT Device Companies: The FTC is Monitoring Your COPPA Data Deletion Duties and More

By Jennifer Thompson See all of Our JDSupra Posts by Clicking the Badge Below Recent Federal Trade Commission (FTC) activities with respect to the Children’s Online Privacy Protection Act (COPPA) demonstrate a continued interest in, and increased scrutiny of,...

Predictive Algorithms in Sentencing: Are We Automating Bias?

By Linda Henry See all of Our JDSupra Posts by Clicking the Badge Below Although algorithms are often presumed to be objective and unbiased, recent investigations into algorithms used in the criminal justice system to predict recidivism have produced compelling...

My Car Made Me Do It: Tales from a Telematics Trial

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...