by Andre Guilbeau THE SECOND REQUEST IS NOT JUST ANOTHER E-DISCOVERY PROJECT Few legal events are as all-consuming as the M&A second request. In recent years, complying with this most difficult of legal challenges has become more costly and complex then ever–primarily due to changes in antitrust analysis and technology. Full and immediate compliance now poses a wide range of problems, requiring major resources and placing acute demands on companies and their legal teams. As such, the second request process should be approached with a total commitment and expertise that goes well beyond the typical requirements of e–discovery or litigation support. Few law firms, legal departments, or even legal technology providers possess this expertise for electronic preparation, reviewing, and reporting. For that, you need the support of a vendor that knows the second request process inside and out. Following the initial public filing of a merger or acquisition plan, theU.S. government has 30 days to submit a formal second request for information from the parties involved. While many M&A deals elude the second request procedure, a percentage of mostly larger deals (or those that raise specific antitrust concerns) must undergo this demanding exercise of information retrieval, review, and production. In these cases, it is imperative that the process be treated with respect and care, since non–compliance could potentially signal the potential demise of the transaction. When the Department of Justice (DoJ) or the Federal Trade Commission (FTC) flags a deal, executives and their legal departments must rapidly implement a plan to pull materials together in order to meet the extremely restrictive schedule. Timelines–typically 30–90 days–differ depending on the situation, but all parties involved must ensure that this process be completed as swiftly as possible. During a normal litigation, there could be months to prepare documentation, but in a second request, every moment and every action counts. A vendor with the experience and technologies to expedite the process can help you determine the method of compiling data, while reducing the heavy burden of processing. The short turnaround is a major hurdle primarily due to the massive volume of data involved in a second request. These investigations once meant a mass of paper records–including desks, filing cabinets and basements full of hard copies. Today, it means hundreds of thousands, if not millions, of electronic files stored on computer servers and hard drives, recordable media (such as DVD discs), backup systems, and mobile devices. However, while the digital age has changed the source of the information, experts agree that this remains review and production on a grand scale. The growth in the number of electronic documents has increased the volume of potentially relevant materials and raised substantial technical document production challenges. The wide array of software and file formats used to produce and manage electronic records has seriously complicated the process, as well. Meeting all these conditions is incredibly demanding in the best of circumstances. Add to that the pressure of a looming federal deadline and the merger or acquisition that looked so nearly done last week may start to look doubtful today. Thankfully, you really can get through it. All it takes is a plan that clears your path to full compliance—and a partnership with an experienced second request vendor capable of helping you along every step of the way. TAKE A PROACTIVE APPROACH TO SECOND REQUEST PREPAREDNESS · Build an overall information preparedness plan to shorten response times, should the second request become a reality. · Alert and work closely with your IT department to ensure all data—from all appropriate sources, even mobile devices and backup systems—can be collected in an efficient, defensible manner. · Understand the relative size of your entire data pool so that your legal team may more efficiently prepare for potential computing and processing and review requirements. · Going into the M&A, identify your vendor of choice for electronic processing, should a second request review be required. · Be ready to give your provider search criteria upfront, and ensure that there is clear understanding of what needs to be completed, and by when. SEEK OUT EXPERIENCE FOR EVERTYTHING FROM PROCESS TO PRIVILEGE Significant capabilities and experience are necessary to meet the second request challenge with maximum timeliness and accuracy. Again, because the process is much more complex than a typical e–discovery project–and more complicated than simply executing a software program–your vendor of choice should have a thorough understanding of all the logistics involved. This includes the bandwidth to manage large volumes of data, and the means to conduct an air–tight validation and QA procedure. Fully understanding current FTC/DoJ requirements is indispensable, as is the capability to appropriately review and categorize the data itself. A vendor able to react quickly and manage expectations efficiently can help ensure that, even if there are surprises along the way, they can be dealt with as rapidly as they arise. While there is a virtual mountain of information to produce in order to properly synch with the government agency’s investigation, it is crucial to respect the content of the data itself. A certain degree of confidentiality is required, and identifying privileged documents are at the heart of this imperative. Searches and review protocols must be defined to identify these documents by a set of predetermined terms, such as “privileged”, client details, or product–specific or production details. If, for example, a consumer–products company maintains a recipe for a manufactured good, the details of that item would need to be kept confidential and well–protected. The search mechanisms and validation rules employed must be intelligent enough to understand and separate these delicate materials so that the interests of the corporation (and its most valued assets) remain intact. Choose a vendor capable of developing a privilege log–an automated database that enables your team to quickly review and protect privileged data–that is an “order of magnitude” greater in size and scope than anything you’ve had to create before. Major Grocery Chain Merger: Kiersted’s Fast & Nimble Response · Facts: Deal valued at $565 million. Larger player in category (at 191 stores) merges with biggest competitor (110 stores). · Special security needs arranged within 48 Hours: Kiersted / Systems utilized a ‘Citrix Farm’ with restricted IP addresses so that only a limited group of users are able to access data from a single IP. · Thursday Noon: Large hard drive of data (at least 2,375,000 documents) arrives at K / S offices; data sweep begins. · Friday Night: Electronic document processing underway, conversion to a common, searchable format in preparation for review procedure. · Saturday Morning: K / S holds training session for 40+ reviewers, files made available to review team who begin officially assessing document instantly. · Quick reaction = cost savings and a high-value response Beyond privilege is confidentiality of data. As a result, technological security is another top priority to consider, especially when privileged documents are being handled. Your second request vendor must guarantee that all files are protected with guaranteed control along the entire chain–of–custody. Also ensure that your technology vendor dedicates network space to your project solely, and maintains highly sensitive encryption security. Completely stand–alone, redundant power systems, as well as disaster preparedness response mechanisms, will help keep the data secure. Each situation brings its own challenge to the table, so understanding the limitations of reviewer or user groups, IP address management, and even biosecurity or biometrics can be options that experienced vendors use to enrich overall information safety. FIVE QUESTIONS TO ASK ANY PROSPECTIVE SECOND REQUEST VENDOR When choosing a second request vendor, a few very important attributes should be top–of–mind. Your partner of choice should be single–minded and purpose–driven with the mindshare and proprietary technology to manage even the most complicated second requests. For starters, make sure that your vendor can answer these five questions to your complete satisfaction: · Does the vendor have real-world second request experience? The vendor’s ability to meet or, better yet, exceed the expectations of the FTC or DoJ is the result of fully understanding the agencies’ particular requirements. Years of experience handling actual second requests should be a prerequisite. Don’t trust your deal to anything less. · Does the vendor provide exceptional high volume data review and production capabilities? Those capabilities should include the ability to react with intelligence and immediacy to even the tightest deadlines. · Does the vendor offer an air-tight, diligent validation/QA process? Once the documents have been reviewed, be sure that the converted data and load files are coded thoroughly and consistently from start to finish · Does the vendor possess a sophisticated technology infrastructure, including security and redundancies? A robust technological infrastructure—one that enables simultaneous processing capabilities–is necessary to churn through massive amounts of data. Additionally, seek vendors with tailored, proprietary software (not off–the–shelf solutions) and powerful automated search solutions built from the ground up for the needs of the second request. · Does the vendor have the personnel to actively administer the process and train your people? This should include project management teams to handle the process and take a leadership role to add seasoned perspective and offer trusted counsel, as necessary. Providing for highly effective online training is equally important. As most companies know, the ideal way to overcome a challenge outside of the norm is to build a trusted alliance. Addressing a second request is never going to be easy, but sharing the burden with a highly capable second request vendor is the best forward strategy. With the changing landscape of technology and policy, a knowledgeable partnership can create the ideal end result. WHY KIERSTED IS THE SECOND REQUEST PARTNER OF CHOICE When it comes to second request electronic preparation, reviewing and reporting, there exist only a handful of service providers that offer a compelling business case to get the job done. Among them, Kiersted / Systems is unique in its approach to the second request process. Major Oil Company Merger: Kiersted / Systems Plays Crucial Role Managing Massive Capacity · Facts: ·- Transaction valued at $80 billion. ·- Deal with global scale and reach. ·- Complex and significant electronic/paper production. ·- The biggest and fastest merger of its time. ·- 26 million pages of documents. ·- 90 days, 100 individuals full-tilt. ·- Incredibly strict timelines, given the huge volume of materials. · K / S rises to the occasion: ·- Privilege log development and quality control, database design, coding platform analysis, and logistics management. ·- Oversaw overall throughput, tracked processes, and provided real–time feedback, consulting and troubleshooting. ·- Ensured that all deliverables were in the government’s hands on-time. · Scalable abilities = results at any size One significant advantage of Kiersted / Systems’ methodology is its proprietary software. Kiersted’s KEPS system was designed to handle all aspects of second request information processing, including conversion, data processing, indexing, OCR, text extraction and output. It is the first system of its kind built from the ground up, and customized, during an actual FTC production; surrounded by attorneys and other experts in the M&A field, the K / S team chiseled out the ideal model for efficient second request problem–solving. Kiersted has continued to evolve KEPS, and it remains completely customizable for each unique investigation and company. To meet highly compressed second request timelines, Kiersted / Systems’ technology infrastructure supports the rapid implementation of compliance procedures and simultaneous processing of data from all relevant sources. However, beyond its technology attributes, the firm has also gained extensive human experience through it work with FTC and DoJ methodologies. This is especially important when faced with changes that invariably occur in the areas of workflow, custom reporting, or production. The highly agile K / S team–working with the flexible KEPS technology–can respond on–the–fly to implement new processes in hours, not weeks. Unlike most other legal technology providers, Kiersted / Systems brings together an consummate mix of experience, intelligence, technology, and agility to meet the special requirements of the second request–helping companies and their legal teams act with utmost speed and security. It is imperative to remember that second requests pose a major challenge not simply to the completion of a transaction, but the long-term health of the companies involved. However, the right vendor can make the impossible possible. That vendor–along with well–conceived plan–can help companies and their legal teams survive even the most challenging second requests. ABOUT US Kiersted /Systems is a leader in electronic discovery and legal technology consulting, offering customized solutions to help businesses of all sizes manage the complexities of today's legal environment. With a dedicated team of seasoned consultants and e-discovery specialists, K / S has the knowledge and expertise to meet all aspects of your legal technology needs. Visit www.kierstedsystems.com to learn more. ©2008 Kiersted /Systems. All rights reserved.
Not surprisingly, most companies involved in a merger or acquisition enter into the second request process without a plan–and without fully understanding the risks of non–compliance or the costs of legal exposure. Proactive planning for a second request can help provide an important level of visibility and preparedness. With that in mind, Kiersted / Systems recommends a series of proven approaches to consider prior to entering into any M&A activity:
