Assessing eDiscovery in M&A Due Diligence

ediscovery MAAs the M&A market continues to heat up, companies need to have as part of their due diligence checklist an assessment of how the target has addressed e-discovery in their litigation. How and whether e-discovery has been dealt with not only will give you insight into the risks in the litigation (including risks of an expensive discovery fight), but may also provide information on how well legal works with IT, and vice-versa. How well they work together pre-closing may be a good indicator on how well they will work together post-closing when integrating the businesses.

Things to look out for in due diligence include:

  • Whether a legal hold has been initiated in each piece of litigation, and whether the company continues to follow-up with custodians on the hold;
  • How much electronic information is being held, and where; and
  • Whether there any pending motions seeking to compel production of information against the target, and if so, what the projected costs are to respond to or defend the motion, as well as any potential sanctions liability.

E-discovery costs can be a significant liability post-closing, and understanding them must be a key part of any due diligence. If your M&A team doesn’t include an e-discovery lawyer capable of helping you evaluate these risks, you could be missing key risk factors that should be considered in any deal.

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