Digital Archives of an M&A Deal Done In A VDR Can Make an Audit as Easy as 1, 2, 3
The FTC recently requested decades-old documents from tech’s biggest companies. Providing regulators with deal documents is simple, provided the deal was done with a virtual data room provider that offers post-closing archives.
23 March 2020
The Federal Trade Commission (FTC) announced on February 11 that it has issued Special Orders to five of the top U.S. tech giants to better understand companies’ acquisition activity. According to the FTC, the agency issued requests to “Alphabet (including Google), Amazon.com Inc., Apple Inc., Facebook Inc., and Microsoft Corp. to provide information on the scope, structure and purpose of transactions” of each company between January 1, 2019 and December 31, 2019.
Although these companies have executed numerous high-profile mega deals, the FTC emphasized in a press release that the focus of the probe will be on small transactions, noting that “large tech companies are making potentially anticompetitive acquisitions of nascent or potential competitors that fall below HSR filing thresholds and therefore do not need to be reported to the antitrust agencies.”
The FTC asked the five companies to provide “information and documents on their corporate acquisition strategies, voting and board appointment agreements, agreements to hire key personnel from other companies,” in addition to post-acquisition product development and pricing. The simplest way to ensure the preservation of this kind of information is with a virtual data room (VDR).
The FTC hopes that the examination will ultimately ensure markets are open and competitive after a merger or acquisition.
M&A deals need a post-close plan
When it comes to post-closing, the structure of the deal needs to be determined early on in the deal process. Documents need to remain intact and accessible. As any seasoned dealmaker will tell you, the relationship between the buyer and seller does not end at closing, especially as integration begins. The obligations between both parties – including adjustments to the purchase price, earnouts promised to the seller and various milestones – are detailed in a binding agreement and need to be referenced often.
For transactions done on Intralinks’ platform, those involved in a deal can provide audit trails to regulators, detailing documents shared as well as the documents viewed thanks to our deal archive.
The FTC request also begs the question: how will these five tech giants share those highly confidential files? Although the deals closed, the documents in question contain personally identifiable information, which the companies certainly don’t want to get into the wrong hands. An additional VDR can ensure the companies being audited can safely share these files, instead of emailing them back and forth.
When a deal closes, integration begins. So it’s important to cover all your bases with secure file sharing services rather than unsecure methods. You’ll not only keep sensitive documents safe, but you’ll also be prepared for any audit or requests for data.
Aiko Suyemoto is Intralinks’ Senior Associate on the Product Marketing team, supporting the M&A, Banking and Securities and Alternative Investments lines of business. She also has experience in corporate communications and business consulting.