Retention of Merger and Acquisition Records and Information.

• Author: MONTANA, JOHN C.

The past two decades have seen an enormous increase in merger and acquisition activities by commercial organizations. Many industries -- finance, banking, manufacturing, telecommunications, and others -- have seen extensive consolidation. Some mergers and acquisitions have resulted in conglomerates with activities in several spheres of commercial enterprise; others have produced multinational organizations with operations in many countries. The effect has been a dramatic shift in the face of business worldwide.

Information Management Issues

On many levels, consolidations pose enormous issues for the organizations involved; financial and personnel systems must be merged, and conflicts in everything from organizational cultures to motor pools must be resolved so that the new organization functions smoothly.

The merger of records and information is among these issues. A merger or takeover involving two large commercial organizations involves harmonizing large amounts of information. Effective integration and management of the combined information set is critical to the well-being of the surviving or new organization. Unfortunately, this issue is typically overlooked in negotiations, contracts, and other merger-related activities. Consequently, problems with the resulting information set are often the norm after completion of a merger or acquisition.

These problems have several causes. Often, the organization fails to realize that the information sets of the two entities must be merged, so there is a lack of planning and preparation for what is, under the best of circumstances, a formidable task. Staff reductions and reassignments are often by-products of merger activity. Information management personnel in an acquired organization may have already left, or if still employed, may face elimination of their jobs. They may have little incentive to ensure that the information in their charge is handed over to their successors in good order, or to effectively assist in its integration into the data set of the new organization.

The result is that the surviving organization often finds itself with large amounts of information -- paper records, microforms, and digital information -- in disastrously disorganized condition, inherited from the acquired entity. The holdings may be warehouses full of poorly organized boxes, crates of unsorted microfiche or non-indexed reels of computer tape. In addition, there may be a very substantial body of information related to the merger or acquisition itself, such as due diligence files, contract documentation, inventory lists, and much more.

This body of information and its management imposes substantial responsibilities on various parties, depending upon the circumstances of the consolidation. These different circumstances will be examined in order.

The Corporation as a Legal Entity

The key to where liability resides after an asset purchase, acquisition, or merger is understanding the legal status of a corporation. A corporation is, legally, a kind of fictional "person," separate and distinct from the people who own shares or other ownership rights in it. It has its own rights and...