Mergers & Acquisitions: Ediscovery takes centre stage

Ediscovery technology has a long association with litigation, so you may be forgiven for wondering about the link to mergers & acquisitions, traditionally the domain of corporate deal-makers.

However, as regulatory scrutiny has increased on a national and international level, more law firms and in-house counsel are using ediscovery technology to swiftly dispense with formal Requests for Information (RFIs).

At the same time, anything that threatens the successful closure of a deal, or the integration of merging businesses is something that is generally investigated using ediscovery and forensic procedures.

Our clients come to us for assistance with matters that stem from the M&A process. Pre- and post-merger audits and merger control RFIs from regulatory bodies such as the European Commission, the UK Competition and Markets Authority, the French Autorité de la concurrence, the German Bundeskartellamt as well as the US Department of Justice are at the top of the menu.

Using ediscovery to enhance due diligence

The time prior to a merger or acquisition deal being finalised is critical, and data from entities being merged or acquired must be assessed as part of due diligence duties. In the past, these reviews typically focused on data in the form of financial reports and accounts; legal documents such contracts and intellectual property; asset valuations and company policies.

However, in this digital age, examining surface level information may not be enough to confidently be sure the deal is not risky or that combining with another company will not create risks.

If the company being acquired operates within markets that have seen anti-competitive behaviour or in countries with a greater incidence of corruption and bribery, it may be prudent to conduct a broader investigation into the company’s activities by examining a selection of unstructured data in audits.

What is unstructured data and why is it important for mergers and acquisitions?

Unstructured data largely consists of personal correspondence in the form of emails, text messages, voice mails and web-based messaging systems such as WhatsApp. Within even a medium-sized organisation the amount of data generated by these applications is enormous. For a global firm, the volume of data is almost unimaginably large. Yet just a handful of incriminating emails containing evidence of cartel activities that have serious repercussions at a later date should a regulatory body decide to investigate concerns relating to dominance.

By the same token, structured data (which is normally transactional data, stored in tables to record things like customers, products, orders and payments) may also be examined to look for anomalies that might signal a compliance risk using specialised data analysis tools and visualisation software.

Intelligent review technology is aiding strategic decision-making

Ediscovery technology can make short work of huge data sets both collecting, filtering and analysing data to get to the key information as quickly as possible. Armed with potential risks or given a clean bill of health, informed decisions can be made surrounding the deal, which can then proceed in a compliant and timely manner.

If this kind of investigation has not been possible prior to the merger or a company has doubts about an entity it has acquired or merged with, clients also come to us for post-merger compliance investigations which vary in scope from the very focused to the very broad. Ediscovery technology can also assist on an operational level by harmonising data estates of the merged companies.

Taking the pain out of Phase Two Requests for Information

If the European Commission is worried about the possible effects of a merger on competition, it may conduct an in-depth analysis of the merger in the form of a Phase II Investigation.

This is involves a more extensive information gathering exercise, working to a strict time-table, similar to ediscovery in the US or edisclosure in the UK. Looking at the deal from a variety of angles, (e.g. whether the proposed merger would create a monopoly, whether it will impact on the supply chain or increase the likelihood of price-fixing cartels forming between competitors), Phase II Investigations can be data intensive exercises, needing ediscovery expertise to ease the deal through.

Ediscovery services can help ensure this process runs more efficiently for the parties involved by:

• Assessing the likely complexity and cost of the data retrieval exercise, to support efforts to reduce the scope of an RFI.
• Assisting internal IT teams in the collation and collection of the data requested
• Ensuring this data is stored securely and processed quickly
• Providing analytical tools to check documents are relevant to the request and do not fall under privilege
• Working in a timely fashion to ensure the request for information deadline is met.

Phase II Investigations are often time pressured and delays can threaten the completion of a deal, so it is important to ensure that all teams are focused on the overall goal of the proposed merger.

Working with an ediscovery provider can expedite the submission of requested information, potentially speed up any decisions or remedies and get the deal through.

If you would like to find out more about how Kroll Ontrack can assist with mergers and acquisitions, please contact Rob Jones.