Every major transition period has its own unique set of risks and rewards. For corporate legal departments consolidating after mergers or acquisitions, risks include not gathering all needed documents, and not being able to integrate the gathered records into one system. The potential rewards lie in having an opportunity to use the integration budget to upgrade capabilities to yield operational and competitive advantages.
Risks – Lost Content
People. The period following a merger or acquisition can involve substantial turmoil as some people are terminated, some resign, and others retire or move to new positions. Any one of those situations can result in the loss of the documents when the people who know about them are no longer there. Those lost documents could be the only evidence within the company of rights held by or obligations owed by the company.
Systems. Important documents can be lost when laptops, workstations, file shares, SharePoint sites, or cloud storage leases are either repurposed or decommissioned without first preserving the data they hold.
Non-Scalable CMS. Even when all the documents managed by the acquired legal department are identified and collected, the content management system used by the acquiring company may not be up to the task of ingesting the additional volume of content. Putting content in a system without meaningfully precise retrieval falls far short of providing useful management of that content.
Potential Rewards – New Functionality
Before loading more content into the existing CMS, the acquiring company should examine how well that CMS is currently performing and how well it will perform with the additional expected volume of assimilated content. Systems that are more than a few years old may lack the ability to perform basic functions like:
- Consistently classify documents to enable the company to:
- Apply granular retention schedules
- Control access to content based on business need to see
- Determine storage location and security requirements
- Content-enable (i.e., add searchable text layers to these files) image-only PDFs, faxes, scanned documents, and other files
- Automatically redact PII from documents before producing in litigation or during investigations
- Extract specified data elements from certain document types.
Here are the four steps the acquiring company should take to minimize risks and maximize rewards:
1. Inventory and Collect All Legal-Related Content
All lawyers in the acquired company should be interviewed to determine what type of content they create or manage and where they keep it. The interviews should include those who assist the lawyers, e.g., paralegals, secretaries, assistants, file room managers, and document specialists. They should be asked open-ended questions about where documents are stored, followed up with specifics like:
- Company file shares
- Removable media
- Company content-management systems, e.g., FileNet, OpenText, Documentum, SharePoint
- Home computers
- Cloud-based storage, e.g., Dropbox, Google Drive, iCloud, Amazon Cloud Drive, Microsoft OneDrive, etc.
- Web-based deal rooms
- E-Discovery review platforms
- Outside counsel content sharing portals
- Productions held by opposing counsel or their vendors
2. Dedupe and Classify All Content
Deduping can dramatically reduce the volume of content to be managed. There is no value in keeping multiple copies of files that are bit-for-bit exact duplicates, so SHA hash values should be calculated for each file and only one file per SHA hash value should be loaded.
All content should be classified. There are multiple reasons for doing this including:
- Removing unwanted document types. This can result in removing 50% of the files remaining after deduping.
- Assigning retention periods based on document type. Without granular retention periods, everything is essentially kept forever, nothing has an expiration period.
- Detecting and flagging PII. If this is done as part of ongoing content management, there are far fewer risks of inadeptly producing or disclosing PII.
- Setting access rights based on work-related need to know. Security risks are proportional to the number of people who can access files. Consistent classification permits restricting access to those who need the content for their jobs, for example, HR specialists have no need to access oil & gas leases.
Note that classification need not be an expensive, protracted process. Unlike older text-based approaches that required extensive up-front consulting to write the scripts and rules to classify content, visual classification uses automatically self-forming clusters of visually-similar documents which greatly speeds the process.
3. Capture Document Attributes
New technology can reliably capture many document attributes that formerly would have taken extensive human coding. The legal department should itemize the types of attributes they would like captured about each document type without being restricted by what they think it would cost to obtain the data as they may be unaware of the new techniques and approaches. Once the list is compiled they will have a checklist to use to compare content management or file analytics options.
Some potential attributes will be applicable to only a subset of document types, e.g.,
- Names of parties to agreements
- Dates of leases
- API well numbers on oil & gas well logs
Other document attributes apply across all or most document types can also be captured at no additional cost:
- Presence of any handwriting
- Visual duplicates, e.g., PDF versions of Word documents
- Presence of typed or handwritten PII
- Email addresses of potential outside counsel, indicating possible privileged communication
The overall system should include checks and balances to validate the whole process, including:
Top Level: Total Counts. At a high level the overall system should be able to account for all files inventoried, e.g., how many were:
- System Files
- Discarded Document Types
- Unique Retained Files
Classification Validation. Lawyers should be able to browse within selected document type classifications to confirm that all documents assigned that classification are appropriately classified.
Attribution Validation. Lawyers should be able to visually confirm that any attribute associated with any document is correct by examining the underlying document. This should include examining documents that are missing attributes that one would expect from documents of that type, e.g., not having the names of two parties to an agreement.
Big Picture: Operational and Competitive Benefits
Work done in automating the collection, classification, and attribution of legal department documents pays big dividends going forward:
Operating Efficiency. Legal department personnel are among the highest paid in the company, and an efficient system for storing and finding documents makes them more efficient. It also reduces the risk of losing key documents and of wasting time recreating content that had already been created.
Major Step towards Overall Enterprise Content Management. The work done in developing classification and attribution procedures can be used as a foundation for broader efforts to upgrade the CMS for the entire enterprise as many of the document types encountered within legal department collections can also be found in the enterprise. As more functions or departments within the organization are automated there will be fewer and fewer new document types encountered and less and less work to do.
Competitive Advantage: Better Due Diligence & Post Acquisition Assimilation for Subsequent M&A Activity. Companies in the same industry tend to use common document types. This is the result of several factors:
- Form follows function. Just as cars that have similar capabilities have similar looks (e.g., five passenger cars that obtain 30 MPG on the highway and cost less than $25K tend to look alike), documents that perform similar functions tend to look alike (e.g., invoices for goods sold).
- Trade Association Best Practices Sections. Groups within trade associations often develop and share best practices for dealing with specific situations, and those can include suggested forms or formats.
- Employee turnover within an industry. As employees leave companies to work for other companies in the same industry, they take with them knowledge about the documents used to accomplish specific tasks.
- Shared vendors. Many of a company’s documents are created by their vendors, and to the extent companies share vendors, those documents will generally all look alike.
- Joint ventures. In some industries, companies participate in many risk-sharing joint ventures, further contributing to the development of common document types.
By developing an automated, scalable way to collect and analyze documents, a company puts itself in a better position to be able to conduct pre-acquisition due diligence and post-acquisition integration on subsequent acquisitions.
RCAV Model for Managing Unstructured Content
uses the RCAV model for managing unstructured content (Rationalize, Classify, Attribute, and Validate). The RCAV model is described in detail in Guide to Managing Unstructured Content. For more information on this model you can download your free, personal use copy of the Guide at: http://beyondrecognition.net/download-john-martins-guide-to-managing-unstructured-content/
- “Improving M&A Due Diligence & Acquisition Integration” (Nov 2015), http://beyondrecognition.net/improving-ma-due-diligence-acquisition-integration/
- “Rolling Intelligence: Enterprise-Level Paying It Forward” (Nov 2014) http://beyondrecognition.net/rolling-intelligence-enterprise-level-paying-it-forward/
- “Serial M&A Technology” (Aug 2014), http://beyondrecognition.net/serial-ma-technology/
- “New Technology for Faster, More Comprehensive M&A Due Diligence” (Aug 2014), http://beyondrecognition.net/new-technology-for-faster-more-comprehensive-ma-due-diligence/