June/July 2010 / Array
Confronting Corporate Amnesia
Mergers and acquisitions often result in the loss of “organizational memory,” the largely undocumented knowledge that workers acquire over years at a corporation and informally pass on to others. Organizational memory may be the only way to understand the unique facts underlying a dispute. When the acquirer is involved in a lawsuit, recapturing lost knowledge becomes litigation counsel’s task.
Often the opposing side has done business with the predecessor company and thus has knowledge the acquirer lacks. A consulting expert with specific industry knowledge also might assist in preparing the case, but most information in such situations will come from due diligence within the acquirer’s organization. Missing documents are routinely an issue, and so a wise first step is to implement a litigation hold and begin a search for potentially relevant documents.
Predecessor company employees who lost their jobs are good sources of institutional knowledge, but they are likely to be hostile witnesses. Separation agreements sometimes will require them to cooperate on transition matters. Otherwise, compensation for time and effort may be necessary, but it is imperative to avoid even the appearance of a “success fee.”
In the context of a dispute, there may be an institutional bias toward condemning a predecessor’s pre-merger conduct, but after-the-fact attacks can be both unfair and counterproductive.
