INSIDE:                                                                                                                   ...
M&A Integration——Planning theIntegration of anAcquired Company’sLegal DepartmentBY FRANK FLETCHER AND KEITH E. GOTTFRIEDYo...
When the acquisition of SmallerCo                                                              more than their SmallerCo c...
DISCOVERY & DISPUTE SERVICES CENTERInnovative. Efficient. Responsive.McDermott stands behind the commitment to helping cli...
The lack of attention                                              ACC Extras on…                                         ...
Macro   view.   Micro   focus.    One law firm.  The attorneys at Saul Ewing examine legal issues through  different lense...
tiously resolve the matter, which could result in a signifi-Five Ways to Doom                                              ...
in louisiana, we see the complete picture. When you have legal challenges in the Bayou State, you need attorneys who see t...
21. Is there an attorney at the acquirer with a necessaryHave you completed an                                            ...
MAKE YOUR MARKON THE CANADIAN LANDSCAPE.Navigate your business interests north of the border with the help of Borden Ladne...
Knowledge management                                               40. What will be the approval process for paying the  2...
56. With respect to outside counsel that will not                68. Have you received litigation budgets and      be reta...
82. Do the processes that have been implemented                102. Have actions by unanimous consent been      pursuant t...
118. Is there any patented technology at the acquired          132. Have you applied for all potential “cyber-       compa...
150. Have you reviewed the acquired company’s                   163. Has a timeline been established for converting       ...
180. Has an in-house legal person been appointed as the      194. Do the limits and retention amounts of the       point p...
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M&A Integration Planning The Integration Of An Acquired Companys Legal Department


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A General Counsel\’s Guide to integrating an acquired company\’s legal department

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M&A Integration Planning The Integration Of An Acquired Companys Legal Department

  1. 1. INSIDE: Asian Briefings November 2011 Receiverships and Commercial Real o mp li an c e Of fi ce r • Ma &CEstate Loan Defaults on • C o un s el na gin gS oci al ti e gra Me dia nt AI M& s • ion lu t g So fe i t in n te r ou ti- C An n• ic t io P re d on ig at iLit
  2. 2. M&A Integration——Planning theIntegration of anAcquired Company’sLegal DepartmentBY FRANK FLETCHER AND KEITH E. GOTTFRIEDYou are the general counsel of BiggerCo, a publicly-heldsoftware and services company with annual revenues of$600 million based in the heart of California’s SiliconValley. Almost three months ago, BiggerCo agreed toacquire SmallerCo, another publicly-held software andservices company located in Raleigh, N.C., pursuant toan all-cash, one-step merger transaction that mergesSmallerCo with, and into, BiggerCo. SmallerCo isrelatively comparable in size to BiggerCo, having aboutthe same revenues and an almost equal number ofemployees. While the transaction has been structuredas a merger of equals, there is no doubt that BiggerCo isacquiring SmallerCo and that BiggerCo’s managementteam will be running the combined company. Amongthe many attractions in buying SmallerCo were its verysignificant international operations, as well as its largegovernment business. SmallerCo’s largest customer isthe US government. In contrast, BiggerCo has not, todate, been successful in expanding overseas or in sellingto the US government. ACC Docket 57 November 2011
  3. 3. When the acquisition of SmallerCo more than their SmallerCo counterparts, FRANK FLETCHER is the generalwas first announced, many investors counsel of Nero AG, a developer partly due to the increased cost of liv-thought that BiggerCo had overpaid for of platform-neutral software ing in Silicon Valley. While BiggerCo technology for editing andSmallerCo. In response to that concern, managing video, music, photos requires all of its outside counsel toBiggerCo’s stock got walloped. To ad- and other multimedia, which is headquartered agree to its law firm retention agreement in Karlsbad, Germany, with subsidiaries indress investor’s concerns, BiggerCo’s Hangzhou, China; Yokohama, Japan; and and related outside counsel policies, Glendale, California. Fletcher is responsible forCEO has been spending a lot of time on all aspects of the company’s worldwide legal SmallerCo has no such process in placethe road touting the expected benefits of function, including mergers and acquisitions, and generally just executes whatever software licensing, patents, trademarks,the acquisition. Nevertheless, investors antipiracy and litigation. Prior to joining Nero, engagement letter is sent to it by its lawremain skeptical and are particularly he was a member of the products and firm. Having just completed a lengthy technologies law group at Sun Microsystems,concerned with whether BiggerCo has where he served as chief counsel for the CPU “beauty contest” process to reduce thethe ability to successfully integrate the manufacturing, testing and validation groups, number of law firms it uses, BiggerCo as well as the global business services group.two companies. He can be contacted at now uses only a handful of law firms With the closing of the acquisition of for most of its corporate, litigation and KEITH E. GOTTFRIED is a partnerSmallerCo now visible on the horizon, in the Washington, DC office of intellectual property work, and some of Blank Rome LLP. He concentratesBiggerCo’s CEO has asked each of his his practice primarily on mergers these firms were required to agree tosenior executives, including you, to be and acquisitions, corporate either alternative fee arrangements or governance, shareholder activism, securitiesready at the next meeting of the execu- regulation, NYSE and Nasdaq compliance, and steep discounts off their standard billingtive leadership team to present detailed general corporate matters. Over the course of rates, in exchange for being designated a his career, Gottfried has worked on a number ofplans for integrating the applicable high-profile mergers and acquisitions across a “preferred firm.” In contrast, SmallerCooperations of SmallerCo into their broad range of industries and sectors. Prior to uses over a dozen law firms and has rejoining Blank Rome, he was the generalfunctional group, post-closing. Many counsel of the US Department of Housing and no discount or alternative fee arrange-of the functional groups at BiggerCo, Urban Development, a position to which he was ments in place with any of them. All of appointed by President George W. Bush andincluding finance, accounting, market- unanimously confirmed by the US Senate. BiggerCo’s securities compliance and Previous to that, Gottfried was the generaling, product management, sales, IT and counsel of Borland Software Corporation in corporate governance work is done byhuman resources, have been working on Cupertino, California. He can be contacted at outside counsel, and you had not previ- M&A integration plans for months. ously contemplated bringing that workGiven that these other functional groups in-house due to the absence of appropri-have not been consumed for the past ate in-house resources. As such, you arethree months with executing the acquisition of SmallerCo, pleasantly surprised to learn that SmallerCo has been ablethey have had ample time to review the applicable func- to bring all this work in-house and you are very impressedtional group at SmallerCo, and contemplate and develop a with the in-house attorneys that service these areas. Youdetailed integration plan. are equally surprised to learn that, notwithstanding how As your integration plan will be due shortly, you can’t much government contracts work is done by SmallerCo, itput it off any longer. Where to start? You decide that to does not have any in-house government contract attorneysdevelop your integration plan you must first assess the situ- and that all of the government contracts work is servicedation. The majority of SmallerCo’s attorneys are based in by outside counsel. With respect to technology, all of theRaleigh, with several attorneys based overseas to support attorneys at BiggerCo have company-paid Blackberries® orSmallerCo’s international operations. BiggerCo has all iPhones.® The attorneys at SmallerCo don’t have any suchof its attorneys based in Silicon Valley and has never had devices provided by the company. While BiggerCo uses aattorneys based overseas. SmallerCo’s GC will move into state-of-the-art document management system that allowsthe organizational framework at BiggerCo, but an exact all of the attorneys in the legal department to have accessrole has not been identified, though it most likely will be to each other’s documents, no such system has ever beensome type of corporate development or corporate affairs deployed at SmallerCo.role. While the BiggerCo legal department did not use such As you begin to tackle your legal department integrationtitles as “assistant general counsel” or “associate general plan, you notice that, unlike many of the projects you takecounsel,” all of the attorneys at SmallerCo (other than the on, this one seems not to have any precedent or cannedGC) had the title “assistant general counsel” or “associ- checklists to look to. You check with your outside counselate general counsel.” In addition, there is significant pay and none of them have any sample M&A integration plansdisparity between attorneys in BiggerCo’s legal depart- for a legal department. It seems impossible to believe that,ment compared to those in SmallerCo’s legal department, with all the M&A transactions that get done in Siliconwith the BiggerCo attorneys being paid almost 20 percent Valley and beyond, nobody has ever sat down and prepared ACC Docket 58 November 2011
  4. 4. DISCOVERY & DISPUTE SERVICES CENTERInnovative. Efficient. Responsive.McDermott stands behind the commitment to helping clients address thedemands of discovery in the electronic age, from retention through review. www.mwe.comBoston Brussels Chicago Düsseldorf Houston London Los Angeles Miami Milan Munich New York Orange County Paris Rome Silicon Valley Washington, D.C.Strategic alliance with MWE China Law Offices (Shanghai)McDermott Will & Emery conducts its practice through separate legal entities in each of the countries where it has offices. This communication may be considered attorney advertising.Previous results are not a guarantee of future outcome.
  5. 5. The lack of attention ACC Extras on… Integration of an Acquired to developing effective Company’s Legal Department strategies for integrating ACC Docket an acquired company’s legal • Due Diligence and Your M&A Success Story department is extremely (Sept. 2011). short-sighted and causes InfoPAKSM • Organizational Effectiveness: The New Imperative many companies to miss the for Developing a World-Class Legal Department (July 2011). numerous opportunities Top Tens that may be presented by • Top Ten Things to Do When Your the acquired company. Company Is Acquired (Aug. 2011). • Top Ten Best Practices for Merger Transactions from a Litigator’s Perspective (Aug. 2011).a detailed plan for how to combine the legal departments two public companies. The more you think about it, themore issues come to mind, and there will be no shortage of Presentationissues to consider and address in planning the integration. • Adding Value: Strategic Planning andClearly, having a detailed roadmap to guide you would Demonstrating Success (May 2011).have been extremely helpful. This scenario may seem familiar to many of you. Likethe fictional in-house counsel depicted above, we also be- Articlelieve that a detailed roadmap for planning and executing on • Mergers and Acquisitions (Fraser Milner Casgrainthe integration of an acquired company’s legal department LLP) (June 2010). be very useful. In our experience, the integration ofan acquired company’s legal department is rarely given the ACC has more material on this subject on our website.thought and attention it deserves. There are many reasons Visit, where you can browse our resourcesfor this, including that a legal department is often viewed by practice area or search by a cost center, and the development of a well-executedintegration plan could be expensive in the near-term. In ad-dition, as noted above, a public company’s legal department are currently not being actively used — that can be poten-is generally not lacking for projects to keep it busy, if not tially recycled for the acquired company’s products. Thereconsumed, and there is little “down time” or even incen- may also be numerous “leaky faucets” in the acquired com-tive to be strategic. How likely is a legal department to get pany’s legal department that can be quickly turned off toapproval for additional headcount, or a budget to plan and produce significant cost savings. Obvious areas here wouldexecute an M&A integration? We believe that the lack of be franchise taxes for unused subsidiaries, trademarkattention to developing effective strategies for integrating maintenance fees for marks that will never be used again,an acquired company’s legal department is extremely short- outside counsel who are being inefficiently managed andsighted and causes many companies to miss the numerous retained at much higher rates than what the acquirer typi-opportunities that may be presented by the acquired com- cally pays, license fees for software that is not being used,pany. For instance, a thoughtful integration plan may, with retainers for consultants who are not being used, and feesregards to the review of the acquired company’s intellec- for warehouse space to store files that is not being used.tual property, uncover inventions that are still patentable. In addition, a thoughtful integration plan could uncoverA thoughtful integration plan may also uncover unused lawsuits and other claims where there is an opportunity —trademarks that have been extremely well-protected — but that theretofore had not been fully explored — to expedi- ACC Docket 60 November 2011
  6. 6. Macro view. Micro focus. One law firm. The attorneys at Saul Ewing examine legal issues through different lenses, combiningbig-picture analysis with scrutiny of the finer details. Getting multiple perspectives from the same law firm gives our clients a singular advantage. DELAWARE MARYLAND MASSACHUSETTS NEW JERSEY NEW YORK PENNSYLVANIA WASHINGTON, DC Celebrating 90 YearsFor more information please contact Managing Partner, David S. Antzis 610.251.5055 /
  7. 7. tiously resolve the matter, which could result in a signifi-Five Ways to Doom cant reduction in legal fees being paid to outside M&A Transaction There may even be cases where the acquired company can reap a very attractive settlement payment from a defendant,1. Execute poorly on the M&A integration or but in the midst of the acquired company’s sales process, do not complete it on a timely basis. no one had been willing to engage with the defendant and2. Pay insufficient attention to customers (and employees) its counsel to work out the mechanics of a settlement. as the kinks in the integration are worked out. Based on our M&A experiences, and particularly,3. Miss the landmines in due diligence. reflecting back on our past experiences in integrating an4. Overpay. acquired company’s legal department and being integrated into a acquirer’s legal department, we have prepared an5. Forget what it is you are buying (particularly in extensive list of issues that should be considered and ad- a services business when it is people). dressed sooner rather than later (hopefully, prior to the closing of the acquisition), as you begin to plan the integra- tion of an acquired company’s legal department with that of the acquirer, thus ensuring a smooth transition and aTwenty-Five Key Areas of Focus successful integration.for Legal Department Integration Gathering background1. Legal personnel 1. How do the legal needs of the acquired company2. Knowledge management compare to the legal needs of the acquirer?3. Budget and forecast 2. How will the legal needs of the acquired4. Technology support company be satisfied moving forward?5. Invoice management 3. Have you received feedback from your6. Records retention client groups regarding their anticipated7. Outside counsel management post-closing legal support needs?8. Litigation management 4. What are the expectations of the acquirer’s9. SEC reporting CEO in terms of headcount and post-10. Corporate governance acquisition budget for the legal department?11. International operations12. Subsidiary clean-up Integrating the GC of the acquired company13. Patents, trademarks and other intellectual property 5. Can the acquired company’s GC be expected to14. Labor and employment accept a role reporting to the acquirer’s GC, or15. Stock option and employee benefit plans would the acquired company’s GC prefer operating16. Forms and templates in a different department such as Corporate17. Contract management Development or HR? Does the former GC have18. Product licensing and sales knowledge and skills necessary for such a transition?19. Real estate (owned and leased) 6. Do you know what role the GC of the target20. Regulatory environment envisions for himself at the merged company? Does21. Government sales and relations the former GC expect a dual-GC type of role?22. Public relations 7. Does the former GC have job-title expectations23. Marketing (e.g., deputy GC, AGC or GC of subsidiary)?24. Insurance25. Corporate policies Other legal department personnel 8. Will the legal department personnel of the acquired company be retained? 9. Will there be a need to relocate legal department personnel from the acquired company’s offices to the acquirer’s headquarters? 10. Is it necessary for the acquirer to have lawyers at multiple locations domestically? Overseas? ACC Docket 62 November 2011
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  9. 9. 21. Is there an attorney at the acquirer with a necessaryHave you completed an core competency who is expected to leave the acquirer in the near future and who may be replacedassessment of the skill with an attorney from the acquired company? 22. Have you obtained the bios for eachsets for attorneys at each legal attorney from the acquired company, including title and salary history?department to determine 23. Have you thought about an on-boardingwhich skill sets are process for the new attorneys? Will they all be brought to the parent HQ for this process? Orin very short supply is an off-site for all attorneys warranted? 24. Is the integration an opportunity toand which are redundant? upgrade the skills and competencies of your legal department with more qualified attorneys from the acquired company? 25. Are there any state bar issues? What is the state11. What core competencies are required by the bar membership status of each new attorney acquirer’s legal department, and do any of the being added to the team? Can each new attorney acquired company’s legal department personnel produce a certificate of good standing in every fill a void in the acquirer’s legal department? jurisdiction in which they are admitted?12. Is there a need to hire additional legal department 26. If you are going to be relocating attorneys personnel as a result of the acquisition? to California, can these attorneys obtain13. Have job descriptions been prepared and in-house counsel registration? circulated to Human Resources for approval? 27. Have all legal department personnel from the14. Is there any pay disparity between attorneys at the acquired company been briefed on the policies two companies that will need to be addressed? and procedures of the acquirer’s legal department15. Did there seem to be an inordinate (i.e., outside counsel retention, issuance of number of promotions or raises prior legal opinions, bar admission requirements, to the closing of the transaction? attorney conduct rules, CLE policies, etc.)?16. Do you have a current organizational chart for 28. Do you have a standard email signature the acquired company’s legal department? Do that you require your attorneys to use? you have a current organizational chart for your Has this been communicated to the own legal department? Have you developed an acquired company’s attorneys? ∑ organizational chart for the merged company?17. Have you completed an assessment of the skill Please read the rest of this article, available exclusively in the sets for attorneys at each legal department ACC Digital Docket at to determine which skill sets are in very short supply and which are redundant? Have a comment on this article? Visit ACC’s blog18. Have you identified any “superstar” attorneys at on either side with skill sets you can’t afford to lose? Have you done anything to make sure you keep these individuals?19. Are there any competencies in the target company’s legal department that are currently being underutilized (e.g., an ex-Big Law attorney currently doing licensing who could be supporting future MA projects)?20. Is the acquirer missing any core competencies in its legal department (e.g., open source, export compliance, FCPA, patents, etc.)? ACC Docket 64 November 2011
  10. 10. MAKE YOUR MARKON THE CANADIAN LANDSCAPE.Navigate your business interests north of the border with the help of Borden Ladner Gervais LLP (BLG). As Canada’slargest law firm, we’ll help you realize your business goals and ensure there are no barriers to your Canadian success.Not only has BLG been recognized as a Go-To Law Firm® of the World’s Leading Companies for five straight years,but we also have the most lawyers selected by their peers in the 2011 edition of The Best Lawyers in Canada.®Download a free copy of our booklet Doing Business in Canada at blg.comCalgary | Montréal | Ottawa | Toronto | Vancouver | Waterloo RegionLawyers | Patent Trade-mark Agents | Borden Ladner Gervais LLP is an Ontario Limited Liability Partnership.blg.comGo-To Law Firm® is a registered trademark of ALM Media, LLC. Used with permission. The Best Lawyers in Canada ® 2011 (Copyright 2010 by Woodward/White, Inc., of Aiken, S.C.)
  11. 11. Knowledge management 40. What will be the approval process for paying the 29. How do you assess and preserve the knowledge of the outstanding legal invoices of the acquired company? acquired company’s personnel, including those in the legal department, before they leave the company? Records retention 41. Will all of the acquired company’s files be kept inBudget and forecast an existing location or moved to a new location? 30. Has the legal department’s budget and forecast 42. Has the acquired company’s records retention been revised to reflect the consolidation with the policy been recently updated and distributed legal department of the acquired company and the to the acquired company’s employees? resulting additional expenses, including, but not 43. Are processes in place to ensure that, with limited to, additional outside counsel fees, additional respect to open litigation matters, relevant attorney and legal support personnel, additional records are being preserved? Is there any need costs for software licenses and technology support to issue a document preservation memo(s) in (Blackberries®, cell phones, computers, etc.), connection with acquired company litigation? additional costs for malpractice insurance, additional 44. Is additional secure file storage capacity necessary? overhead allocation, additional travel and related 45. Have all the acquired company’s files and expenses, and additional bar and association dues? records been scanned and backed up as part of the acquirer’s disaster recovery plans?Technology support 46. Do you know where all the acquired 31. Does your IT department understand the company’s files are? needs of the merged legal department? 47. Are there files in the possession of the acquired Are any additional servers required? company’s outside counsel that should be retrieved? 32. Does either company’s legal department use 48. What is the timetable for implementing the acquirer’s matter management, document management records retention policy at the acquired company? and/or calendaring software that will need to be rolled out to the other? Do you need to purchase Combining best practices any additional software licenses or seats? 49. Does the acquired company’s legal 33. Does the acquired company have better software department use some best practices that license terms that can be leveraged by the acquirer? can be adopted by the acquirer? 34. Should all the computers in the acquired company’s legal department be scanned for documents Outside counsel management that can be imported into the acquirer’s legal 50. Have you received a list of outside counsel department document management system? employed by the acquired company, the tasks 35. Does each of the acquired company’s attorneys have a that they handle and the current billing rates? personal digital assistant or cell phone paid for by the 51. Have you received copies of all outside counsel company (e.g., Blackberry®, iPhone®, Android®, etc.)? engagement letters for all active matters? 52. Have all outside counsel to the acquiredInvoice management company, domestic and foreign, been 36. How does the acquired company’s legal notified about the acquisition? department process and approve its invoices? 53. Have all outside counsel to the acquired 37. Have all outside counsel to the acquired company been provided with a copy of the company been advised that, going forward, all acquirer’s outside counsel guidelines? invoices for legal services should be sent to the 54. Has a decision been made as to which of attention of the acquirer’s legal department? the acquired company’s outside counsel 38. Have all outside counsel to the acquired will continue to be retained? company been requested to notify the acquirer’s 55. Have all outside counsel to the acquired company legal department of all outstanding invoices that will continue to be retained been asked to as of a fixed date so that a proper accrual sign revised engagement letters with the acquirer can be made of legal expenses payable? that includes the acquirer’s standard engagement 39. Are any of the outstanding invoices items letter addendum and outside counsel guidelines? that are reimbursable pursuant to any indemnification or insurance arrangements?
  12. 12. 56. With respect to outside counsel that will not 68. Have you received litigation budgets and be retained going forward, has the acquirer forecasts for all ongoing matters involving the requested that all of the acquired company’s acquired company, including a calendar of court files be delivered to the acquirer? appearances, deposition schedules, etc.? 57. Have all outside counsel been asked to provide 69. Are continuances or postponements necessary so a list of all matters that they are currently that you can get your arms around the matters working on for the acquired company? or make changes in assigned counsel? 58. Are there matters being handled by outside counsel 70. Are all litigation matters appropriately described that can be handled more efficiently and effectively in the disclosure schedule to the acquisition by in-house counsel? Are those matters capable of agreement? Are there other claims or contingencies being transitioned from a practical perspective? If that have “come out of the woodwork” since it would be more effective to transition the matter closing that were not appropriately disclosed in the to in-house counsel, are additional resources disclosure schedule to the acquisition agreement? needed in-house prior to such transition? 71. Have you requested of all court filings for 59. In the acquisition, are you acquiring any ongoing litigation and other related materials new skill sets that would allow certain tasks for inclusion in the acquirer’s legal department previously performed for the acquirer by files and for distribution as required (insurance outside counsel to be brought in-house? companies, outside counsel, experts, etc.)? 60. Have all outside counsel been asked to provide 72. Have you designated a point person budgets for open litigation matters that they for each litigation matter? are working on for the acquired company? 73. Have the insurers been appropriately 61. Is there an opportunity to consolidate some of notified of all pending litigation to the extent the matters being handled by outside counsel to a required by the relevant policies? smaller number of firms? Does the acquirer need 74. Have you reviewed all current insurance multiple firms to process trademark filing requests? policies for applicable coverage? Does the acquirer need multiple counsel in foreign 75. Have you requested a letter from the insurance jurisdictions? Does the acquirer need multiple carrier delineating coverage terms and limits? counsel to support the human resources group? 62. Can the consolidation of outside counsel SEC reporting be leveraged to obtain cost savings? 76. Does the description of the business in the Annual Report on Form 10-K need to beLitigation management revised to reflect the acquired business? 63. Has a list of all outstanding litigation matters 77. Do any changes need to be made to the risk factors or to which the acquired company is a party the forward-looking statement safe harbor factors? been prepared and compared with what 78. Are there additional agreements that need was listed in the disclosure schedule? to be included as exhibits to the Form 10-K 64. Have all outside counsel representing the acquired (material contracts, employment agreements, company in litigation matters been notified of the leases, credit agreements, the acquisition acquisition, and the new protocols for consultation agreement, new employee benefit plans, etc.)? and approval of all actions in the litigation? 79. Will any of the officers or employees of 65. Has the estimate for the costs to resolve the pending the acquired company be deemed an matters changed since the transaction closed? executive officer of the acquirer for whom 66. Are there litigation matters that can be easily Section 16 filings will be necessary? settled or otherwise disposed of? Should 80. Are there any new directors of the acquirer settlement be considered? Are changes in as a result of the acquisition for whom litigation counsel necessary? Are changes Section 16 filings will be necessary? in litigation strategy necessary? 81. Are there any Section 16 officers that will be 67. Will any of the pending litigation matters need to be departing from the acquirer or who will remain disclosed in either the acquirer’s Quarterly Report with the acquirer but will no longer be deemed on Form 10-Q or Annual Report on Form 10-K? Section 16 officers? If yes, have “Section 16 exit memos” been prepared and distributed to them? ACC Docket C7 November 2011
  13. 13. 82. Do the processes that have been implemented 102. Have actions by unanimous consent been pursuant to Section 404 of the Sarbanes-Oxley Act prepared to change the officers and directors? need to be revised to address the acquired company? 103. Has a review been undertaken to determine which 83. Will there be any changes to the list of named officers subsidiaries to retain and which to eliminate? in the acquirer’s annual meeting proxy statement? 104. Are any of the acquired subsidiaries “significant subsidiaries” for SEC reporting purposes?Corporate governance 105. Are any of the acquired subsidiaries subject to 84. Will additional sub-certifications be needed to open federal, state, local or foreign tax audits? ensure compliance with the Sarbanes-Oxley Act? 106. Are any of the acquired subsidiaries parties to any 85. Are there any changes to any of debt instruments, or are any of their assets pledged? the board committees? 107. Has the par value of the subsidiaries’ shares 86. Are there any changes to the schedule been reviewed to determine whether excessive of board or committee meetings? franchise taxes are being incurred? 108. Are there domestic subsidiaries that need toInternational operations be merged out of existence or dissolved? 87. Are additional legal personnel 109. Are there subsidiaries that cannot be merged needed in overseas locations? out of existence or dissolved because of open tax 88. Do any of the acquired company’s trademarks audits, IP ownership or contractual reasons? need to be registered in overseas locations? 110. Have all the corporate minute books been 89. Are any additional foreign qualifications needed? retrieved and are they all up to date? 90. Are there redundant foreign subsidiaries 111. Are all the acquired subsidiaries in good standing or other legal entities as a result of the and are they qualified to do business in the acquisition that need to be merged out? jurisdictions where they need to be so qualified? 91. Are any changes needed to either party’s transfer pricing policies? Patents 92. Will there be any exchange control 112. Does there need to be coordination between issues going forward? the patent procedures at each company [e.g., 93. Are there any additional permits the invention disclosures, patent committees, or approvals to obtain? patent payments to inventors (upon 94. Should a compliance audit be performed submission of patentable idea, upon approval to assess any potential FCPA issues? of patentable idea by the patent committee, 95. Are there opportunities to obtain any governmental upon completion of the patent application, subsidies or incentives from the host government? upon issuance of the patent, etc.)]? 113. Do you have a current list of patentsExport controls compliance for the acquired company? 96. Has a review been undertaken to determine 114. How will the patents of the acquired company whether any additional filings need to be done be docketed and maintained (i.e., by an existing with the US Department of Commerce to export patent service provider or moved to a new service the products of the acquired company? provider)? In examining the preceding, do you 97. Are additional export licenses needed? recognize any tasks that can be brought in-house or consolidated for a third-party service provider, suchSubsidiary cleanup as management of maintenance fees for patents? 98. Do you have a list of corporate entities 115. Has a patent audit been conducted of the acquired owned by the acquired company? company to determine whether there are additional 99. Do you have an up-to-date list of inventions to patent that are not time-barred? your own corporate entities? 116. Have your patent attorneys sat down with the key 100. Have all of the acquired subsidiaries been entered inventors at the acquired company and discussed into the acquirer’s subsidiary tracking database? the patent philosophy of your company? 101. Have you determined who will serve as the 117. Is there any opportunity to license the directors of the foreign subsidiaries? Have you acquired company’s patents and develop checked residency/nationality requirements? a revenue stream from such patents?
  14. 14. 118. Is there any patented technology at the acquired 132. Have you applied for all potential “cyber- company that might cause you to change a squatting” domain names relating to current IP litigation strategy, or vice versa, is the acquired company’s products? there any patented technology at the acquirer 133. Have you coordinated on how you would that can be leveraged in any IP litigation like splash screens to appear on the acquired that the acquired company is a party to? company’s websites? Is there a click- 119. Does the transaction have any effect on through to the merged company’s site? any patent license agreements that the acquired company is a party to? Labor and employment 120. Does the acquisition open the door to 134. Should all of the acquired company’s employees examining a patent licensing strategy? be required to execute new offer letters? 121. Does the acquired company have procedures 135. Do the employees of the acquired company to examine patentable ideas prior to release need to sign new confidentiality and of new products? Would this be a good assignment of inventions agreements? opportunity to implement such procedures? 136. Have all of the acquired company’s employees been advised of the acquirer’sTrademarks and other intellectual property employee policies and procedures? 122. Has the acquirer’s list of trademarks 137. Have you coordinated with HR on any and service marks been updated? potential reductions in force (e.g., severance 123. Has a decision been made as to which brand agreements, employment law compliance, names, trademarks and service marks of the collective bargaining issues)? acquired company will continue to be used? 138. Have WARN Act notices been given? 124. Are additional registrations required, 139. Have severance agreements been drafted? domestically and/or overseas? 140. How can severance liabilities be minimized? 125. Are there opportunities to restructure the 141. Have all employment agreements with ownership of the acquired company’s intellectual severance provisions been reviewed? property to effect a more tax-efficient structure? 142. Should the legal department plan an 126. Are revisions to the acquirer’s inter- employment law compliance training session company agreements required? for the managers of the acquired company? 127. Are there older trademarks at either company 143. Are there any collective bargaining organizing that can be re-used or expanded such that prior- initiatives currently underway? use or registration rights can be leveraged? 144. Are the employees of the acquired company covered by any collective bargaining agreements?Website When are such agreements next up for renewal? 128. If the acquired company is going to continue with its stand-alone website for a transitional period, Stock option and employee benefit plans have the copyright and trademark notices, privacy 145. Are any new stock option plans being policy and terms of use been revised to be in implemented to rollover the stock options of accordance with the acquirer’s approved template? the employees of the acquired company? 129. Have all the country-specific websites of the 146. Are there any new incentive compensation plans acquired company been reviewed to determine what (ICP) or management by objectives (MBO) plans changes will need to be made to the copyright and that are being implemented for the new employees? trademark notices, privacy policy and terms of use? 147. Have the appropriate Form S-8 and 130. If the acquired company was a public company, other filings been made with the SEC have the investor relations and corporate and the applicable stock exchanges? governance links on the acquired company’s 148. Have the stock option plans been adapted, and website been re-linked to the acquirer’s investor the requisite approvals obtained, so that stock relations and corporate governance pages? options can be issued to employees overseas? 131. Are there web-linking agreements that need to be updated to reflect that the links Use of forms and templates will now be to the acquirer’s website? 149. Have you reviewed the acquired company’s template agreements and attendant rules of use? ACC Docket C9 November 2011
  15. 15. 150. Have you reviewed the acquired company’s 163. Has a timeline been established for converting templates to determine if key provisions all of the acquired company’s product (warranties, limitation of liability, license agreements and sales agreements indemnification, rights in derivative IP, etc.) to the new forms and templates? comply with the policies of the acquirer? 164. Have the forms been adapted for 151. Have you provided the acquired company’s use in new foreign locations? attorneys with a copy of your standard 165. Have the sales folks been briefed on the legal NDA(s) and the related rules of use? terms that they are not to negotiate without the approval of the acquirer’s legal department?Contract management 166. Are new click-through agreements needed for 152. Have the disclosure schedules been reviewed for the merged company’s software products? any contracts with change in control provisions 167. With the acquisition, is it realistic to form that will be triggered by the transaction and a group at the merged company to have require that a consent be obtained (or a paralegals or contract managers handle notice be provided) by the acquirer for the repetitive form agreements or processes, such contract’s assignment to be effective? as NDAs, evaluation agreements or open source 153. Has a form notice to customers and reviews, or new product release approvals? request for consent been prepared by legal/ contract management and approved by Real estate (owned and leased) sales/marketing for distribution? 168. Are any leases being terminated? 154. Are there contracts that require the acquirer 169. Do any of the leases to which the acquired to procure consents that still need to be company is a party to require notice or consent obtained for assignment of contracts from to assignment or change of control? the acquired company to the acquirer? 170. Are any subleases being contemplated with respect 155. Is someone charged with maintaining a to redundant office space of the acquired company? continuously updated list of contracts 171. Are any leases being renegotiated? that require consents to be obtained? 172. Are facilities being consolidated, 156. How will the contract management domestically or overseas? process be merged? 173. Are there “change of address” notices, which 157. Have the acquired company’s contract are required to be sent to any governmental management personnel been trained on authorities, domestically or overseas? the use of the acquirer’s forms? 174. Are there opportunities to minimize 158. How will the acquired company’s contract files be real estate or transfer taxes? maintained and where will they be maintained? 175. In reviewing the consolidated property 159. Are there customer contract forms used portfolio, are there opportunities to by the acquired company that should sell or sublease properties? replace forms used by the acquirer? 160. Are there changes to the form customer contracts Regulatory environment that need to be made due to the acquirer now doing 176. Does the acquired company place the business in additional states or foreign jurisdictions acquirer in a new regulatory environment where local law requires such changes? where, for the first time, it is subject to 161. Do you need to bring in a temp paralegal to compliance with a statute or regulation that handle notices and assignments required under the heretofore it did not have to comply with? acquired company’s agreements? Or is it realistic 177. Are there notices to be filed in order to to assign these tasks to current staff members? comply with new regulatory requirements? 178. Does the acquirer’s legal department haveProduct licensing and sales sufficient competency to ensure the acquirer’s 162. Has a decision been made on which compliance with the new regulatory regime? company’s product licensing forms and 179. Is the nature of the regulatory regime such that an templates will be used going forward? additional full-time in-house person is necessary, or is it such that outside counsel is sufficient?
  16. 16. 180. Has an in-house legal person been appointed as the 194. Do the limits and retention amounts of the point person for this new regulatory regime? Or has acquirer’s insurance need to be revised? outside counsel been identified to handle this area? 195. Is there transaction-specific litigation that needs to be brought to the attention ofGovernment sales and relations the insurance broker and the insurer? 181. Does the acquisition affect the acquirer’s 196. Has the acquirer’s legal malpractice government relations strategy? insurance coverage been updated to 182. Are additional state and/or federal include the additional legal department lobbying resources needed? personnel from the acquired company? 183. Does the GSA schedule need to be 197. Should any in-house counsel be covered amended to include the acquired company’s under the acquirer’s DO insurance policy products and price schedules? (e.g., GC, deputy GC, corporate secretary, 184. Do security clearances need to be obtained by any assistant corporate secretaries, etc.)? legal department personnel in connection with sales to governmental agencies and instrumentalities? Corporate policies 185. Are there government entities, domestic and 198. Have all of the acquired company employees overseas, where the relationship with the been made aware of the acquirer’s policies? acquired company could be improved? Have copies been distributed, either hard-copy or via email, of the acquirer’s policies to ensurePublic relations compliance (e.g., code of conduct, Sarbanes- 186. Have the employees of the acquired Oxley Act, policy against harassment in the company been advised of the acquirer’s workplace, insider trading, antitrust/competition, communications policies and processes? revenue recognition, whistleblower, records 187. Has the press release boilerplate been retention, foreign corrupt practices act, etc.)? updated to include, among other things, 199. Is additional compliance training necessary for any additional forward-looking risk factors the employees of the acquired company? and trademark attribution language? 200. Has a click-through acknowledgement been created for the website for the acquiredMarketing company employees to acknowledge that 188. Have the marketing personnel of the they have read the acquirer’s policies? acquired company been briefed on the acquirer’s process for vetting and approving Conclusion new brand names, trademarks and service The MA world is littered with deals that have gone bad marks, and approving all product packaging because folks paid scant attention to the heavy lifting that and the legal notices placed thereon? integration requires following the closing of any transaction. 189. Has the product packaging of the acquired We hope the 200 items that we have listed above will pro- company’s products been reviewed to determine vide in-house counsel with a useful roadmap for planning changes that will need to be made? the integration of two legal departments post-acquisition, 190. Has the “style guide” been updated to and will contribute to not only a smooth transition, but also incorporate the acquired company’s products an MA transaction that has a better chance of being suc- and brands, and has the legal department cessful due to a thoughtful integration strategy. approved the revised “style guide”?Insurance 191. Has the acquirer’s insurance broker been brought up to date on the transaction, and provided with relevant information and required notices with respect to the transaction? 192. Have the insurance policies of the acquired company been converted to tail policies? 193. Is there additional insurance that needs to be procured as a result of the acquisition? ACC Docket C11 November 2011