May/June 2009 / Features
Potential E-Discovery Liabilities in Mergers and Acquisitions
Little attention is paid to the complex electronic discovery issues that are part of mergers and acquisitions. The acquiring company is generally accountable for ensuring that data relevant to ongoing or anticipated disputes involving the target company is properly preserved.
Failure to conduct due diligence on preservation of electronically stored information may cause substantial losses for the acquiring company. Preserving it correctly can be costly, as well. For example, data preservation that requires obsolete hardware and systems must be segregated from an acquiring company’s data. This necessitates additional manpower, special expertise and dedicated storage.
E-discovery checklists vary based on the industry in which the target company operates. At minimum they should encompass (1) identification, categorization and sourcing of the target company’s ESI, (2) maintenance of existing preservation and litigation holds, (3) cost analysis for preserving data for existing or anticipated litigation holds and (4) analysis of data storage and indexing systems for structured and unstructured data.
These issues should be on every e-discovery checklist. Ignorance regarding the state of a target company’s ESI and e-discovery obligations can diminish the value of an acquisition, and it may result in judicial or regulatory penalties for unintended spoliation.
Daniel B. Garrie is a managing member at EMI Capital LLC. He is an attorney and a special master for electronic discovery for Alternative Resolution Centers. Contact him at daniel.garrie@gmail.com.
