Jeter White Paper: Best Practices for Mergers and Acquisitions

Transcription

1 Jeter s Mergers & Acquisitions Toolkit Contents: Jeter White Paper Best Practices in Mergers & Acquisitions Jeter Case Study Jeter Helps Leading Energy Co. Handle 100 Acquisitions a Year Jeter RM Resource Mergers & Acquisitions Intake Assessment Tool

2 Jeter White Paper: Best Practices for Mergers and Acquisitions Records Management Before, During, and After Contents: 1. INTRODUCTION 2. BEFORE: Know what you re getting into Documentation and Retention Requirements Privacy Compliance The Cost of Keeping Records 3. DURING: Manage Risk While You Still Can Legal Provisions and Records Management File Acquisition and Processing 4. AFTER: Keeping it all Together 5. Conclusion 2006 Jeter. All rights reserved.

3 1. INTRODUCTION Corporate mergers, acquisitions and divestitures play an increasingly prominent role in today s business world. Large scale operational assets change hands as corporations realign their organizational structure and operational scope to better meet the needs of customers and shareholders. In acquiring another company s operations, your company will also require recorded evidence of the business activities which kept those operations going. These business records may be in either physical (e.g. paper) or electronic format, and their volume can be enormous. The acquisition of records from a major business acquisition is often treated as an afterthought to legal, financial and other due diligence exercises, focusing on little more than finding space in shelves, cabinets or file servers. This perspective overlooks the role that records play in a company s business operations. As essential business information, records directly participate in the transactions and decisions which make up the company s daily business activities. Meanwhile, records provide evidence of those same activities, giving them a level of risk or liability comparable to that of the activities themselves. A lack of due care with respect to records, then, can result in significant corporate compliance risks as well as interfere with your company s ability to fully capitalize on an important acquisition investment. It is therefore of the utmost importance that prospective buyers directly address records management issues before, during and after the acquisition. 2. BEFORE: Know what you re getting into A full audit of the vendor s records holdings and practices reveal previously unseen risks and opportunities for the buyer to better maximize their investment. Such an audit is most effective if performed before the final decision to proceed, though this is not always feasible given the extreme sensitivity which 2 can surround corporatelevel negotiations. Some companies therefore perform a records management audit once the major decisions have been made but the final details of the acquisition are still being worked out. With the full cooperation of the vendor, the buyer might choose to engage a third party consultant with no direct interest in the acquisition, allowing them to measure the vendor s records management practices and collections from a position of impartiality in a sensitive and often emotionally charged environment. The following discussion outlines some of the main issues which may be brought to light during a preliminary records audit Documentation and Retention Requirements Any business acquired by your company will be subject to a host of legal requirements, ranging from broad-based business laws to detailed technical regulations. Many of these laws and regulations will state which records must be retained and for how long. Others imply a records retention period by limiting legal liability to a certain period of time records must be retained in case of legal action, which can occur during that time period. Still other requirements may prescribe which documents must be kept on a given file, or even which specific data elements must be included within the individual document. With so many diverse requirements affecting records retention, you should examine whether the records you are acquiring meet those requirements. Look first at overall collections. Do the records of given business activities go back far enough to meet the requirements of laws and regulations affecting those activities? Where records have been destroyed, were they disposed of according to a records retention schedule, with 2006 Jeter. All rights reserved.

4 sign-off by designated authorities? Next, focus in on samples from key collections. Are all of the specific documents required by regulators present? If not, can they be recovered with reasonable effort from internal and external sources? What level of risk is associated with not having the missing documents? 2.2. Privacy Compliance Depending on where a company operates, it will need to follow one or more sets of rules for what it does with personal information about employees, customers and other individuals. Canada s Personal Information Protection and Electronic Documents Act, the United States Health Insurance Portability and Accountability Act, and the European Union s Data Protection Directive are just some examples of recent legislation requiring organizations to protect privacy. Typically, privacy laws set limits on how much personal information a company can collect and how long they can keep it. Your company may already have strict controls around privacy, but it cannot control what information other companies collect, particularly if they collected it before the advent of privacy laws. Years ago, it was not unheard of for employers to collect detailed medical history as part of pre-employment screening, often involving past conditions or treatments which could not possibly impact on job eligibility or performance. Files containing such unnecessary sensitive information persist to this day. Don t be too shocked, then, if you acquire a large collection of files with many years worth of information which, by today s standards, never should have been collected in the first place. In acquiring this information, your company also acquires a certain degree of risk. Even when the original collection of the information predates legislation and is covered by a grandfather clause, your company is directly liable for any continued retention of that information, to say nothing of the employee or customer-relations nightmares that can result from a privacy breach. The records audit should therefore locate and identify any inappropriate personal information and plan for its secure disposal at the earliest opportunity during the acquisition process The Cost of Keeping Records Even when record content and handling practices meet every conceivable requirement, the ongoing maintenance of those records may pose an undue financial burden. Your preliminary audit can help protect your company s investment by analyzing such records management costs as equipment and supplies, systems maintenance, storage services, and staffing. Look closely at the physical enclosures and other supplies which the vendor uses for storing records. Are they sufficient to protect the records from loss or damage, optimize storage space, and facilitate easy retrieval? Or would it be more cost effective over the long run to convert the files to a more secure, efficient format? Review any service level agreements affecting the storage of those records being acquired. Do commercial records centers or other service providers meet your company s needs? If your company uses a commercial storage provider or its own, how do regular and incidental costs for the newly acquired records measure up to the rates your company normally pays? You may need to plan for transferring the records to your own service provider. That too can bring its own financial risks, as the service level agreement may stipulate hefty relocation fees Jeter. All rights reserved.

5 What electronic systems does the vendor use to capture and maintain records and data? In a perfect world, all of the vendor s hardware and software platforms would be identical to your own. It is seldom that easy in reality. You may need to weigh the relative costs of either maintaining two separate systems or migrating data from one system to the other. This decision should take a long-term view and factor in the ongoing costs of keeping information accessible for the duration of its scheduled life cycle. Acquiring a business and its records may also mean acquiring the human resources who maintain those records. Is the number and expertise of the vendor s records management staff appropriate to the volume of records and associated challenges? If staffing appears excessive or insufficiently qualified, then some tough decisions may have to be made prior to merging the two groups. Conversely, the newly acquired staff may bring new efficiencies and innovations. Your audit will identify any opportunities to add value to your existing records management program and better contribute to your company s continued success. 3. DURING: Manage Risk While You Still Can A preliminary audit of the records being acquired should bring to light any significant risk exposures or business inefficiencies. Once the acquisition has formally begun and the records move into the custody of the buyer, it is time to confront those exposures and inefficiencies head on. In considering records management s place in a corporate acquisition, it is useful to consider both senses of that very term. On one level, acquisition in an abstract legal event, where a mere pen stroke changes ownership of a company or some portion thereof. On a more concrete plane, we see movable assets changing hands. As just one type of movable asset that is exchanged during a legal acquisition, records must be accounted for on both of these levels Legal Provisions and Records Management An acquisition and divestiture agreement is the legal instrument by which assets (including records) and their associated liabilities pass from one party to the other. If both of these parties have done the appropriate due diligence, the agreement should make clear what level of liability the buyer assumes for activities previously performed by the vendor. The agreement should also stipulate exactly which records are being transferred to the buyer as evidence of those same activities. This direct provision for records management protects both parties. On one hand, it ensures that the vendor will assist the buyer in meeting its newly acquired responsibilities for record-keeping. For the vendor, the agreement may provide for their continued retention of certain records. This is especially important when the vendor retains some liability for activities performed, or if there are laws and regulations stating that it must retain records even after it divests the assets. It is therefore in the best interests of both parties that the agreement specifies exactly which records are being transferred, and who assumes which responsibilities for records retention File Acquisition and Processing Your preliminary audit will have brought to light applicable records management requirements and threats to the integrity of newly acquired records. Now that you are actually acquiring these records, it is time to assess individual files and take direct steps to address all gaps. This work may be divided into four stages: 2006 Jeter. All rights reserved.

6 Intake Assessment: While the record audit uncovered overall requirements and compliance risks at a collection level, the intake assessment process allows you to examine each file for any compliance gaps. File content should be checked to ensure that all required documentation is present, and any missing documents noted for possible recovery later. Any information which potentially breaches privacy should be flagged for removal. At this stage, you can also assess each file in terms of your company s established collections. What activities do each file support? How do these activities fit into your company s own system for classifying records? Do any individual files overlap with files already kept by your company? This is especially useful in natural resources and other sectors where different companies hold joint interest over the same asset. If this situation applies to your company, you should check each acquired file against your company s file collections to see if your company already holds an interest in the asset and therefore has a corresponding file. Information gained at this stage will prove very useful during the actual file conversion, during which time you will need to either merge the content of two files or incorporate the one new file into your company s system. File Integrity Clean-up: This physical processing directly addresses any gaps identified in a given file. If documents are missing, all reasonable attempts should be made to recover them. This may range from locating documents which have been misfiled elsewhere in the collection to obtaining copies from such external parties as partners or regulators. Even if responsive records cannot be produced for litigation or audit, the company can at least show due diligence in the form of documented, system-wide efforts to identify and address information gaps during the acquisition stage. 5 The Cleanup should also remove information which threatens the integrity of a file. Where a file contains information deemed inappropriate under applicable privacy laws, the information should be securely destroyed, subject to documented approval from an authorized stakeholder, or moved to some other file series whose users have a legitimate need for such information. The Clean-up also allows you to address years of bad filing practices by rearranging documents into reverse chronological order, move any documents which are in the wrong section of a file, and discard any obvious duplicate documents or nonrecord material. File Conversion: TAB recommends that each incoming collection be converted to the same physical filing system which is already in place for the corresponding file collection at your company. In order to make optimal use of shared storage equipment, all file folders should follow the same size specifications and labeling format (i.e. top tab vs. end tab). Label designs, folder color schemes, and tracking controls should be standard across the collection to facilitate fast retrieval for users. Where a collection maintains internal subdivisions using classification folders, those same subdivisions should be applied to all files. Alternately, you could decide to convert your company s existing files to match those acquired from the vendor, or even convert both collections to meet some new standard. It all depends on which is the better system in terms of physical protection, security, retrieval and long-term cost, all of which should have been explored in your preliminary records audit Jeter. All rights reserved.

7 Deployment: Once a file has been assessed, cleaned-up and converted, it is ready for integration into the corporate filing system. A critical step in this deployment is the assignment of a file number and other attributes which will determine how the file is arranged and stored within the collection, accessed by users, and tracked throughout its life cycle. In the next section of this report, we will consider the continued maintenance and use of records and see that the challenges and decision-making associated with bringing records into a company are by no means over once the acquisition is complete. 4. AFTER: Keeping it all Together Well after records have been bought into a company and all content or formatting gaps addressed, team members will need to locate and retrieve those records in order to perform their work. Exactly how this happens will depend on how the newly acquired records were integrated into the existing filing system. Are physical file folders maintained as two isolated collections or filed together under one scheme? Are electronic records stored on one or multiple systems? Is there one system which allows users to track the location or signout status of all files? It is not unheard of for a company to maintain more than one record keeping system after a merger. This may even seem like a good idea at first. Before the acquisition or merger, each company had a system which more or less served its purpose. Why mess with something that was already working? But even the most subtle conflicts between different recordkeeping systems can work as major roadblocks. Users will now require training on two or more different systems, and it will not always be clear to them which system contains required information. Searching becomes a matter of trial and 6 error, slowing down the very business processes which records are meant to facilitate. Worse still, a user who is accustomed to a faster, more automated system may not account for the time required to find material in a more manual system. Depending on what exactly this user needed the information for, such roadblocks may pose a significant risk to the newly merged corporation s financial and/or legal position. 5. Conclusion Records support business, and business is about people. For many of those people, the prospect of a corporate merger, acquisition or divestiture is a source of stress. Individuals may worry about their own job security, the pressure of newly aligned responsibilities, or the adjustment challenges that follow the merging of different corporate cultures. The goal of effective records management is to alleviate these challenges rather than compound them. Effective synergy between newly merged teams requires fast, efficient solutions which meet the information needs of today and allow team members to look back at past activities. This goal can only be realized by incorporating records management best practices into all stages of the corporate acquisition process. C o n t a c t o n e o f o u r r e p r e s e n t a t i v e s t o d a y. J e t e r S y s t e m s A k r o n, O H To l l F r e e w w w. j e t e r s y s t e m s. c o m 2006 Jeter. All rights reserved.

8 Jeter M&A Intake Assessment Tool As a records management (RM) professional, you may have witnessed first hand the impact of corporate mergers and acquisitions on an RM program. A company acquires new business assets and operations, along with the records which support those assets and operations. The question is, are those records subject to standard RM controls? And how consistent are those controls with those you ve worked so hard to develop and implement on behalf of the acquiring company? Incoming file collections - both paper and electronic - can be a real surprise package. Unless you ask the right questions, their unique challenges and needs can go undetected. But newly acquired file collections do not have to ensnare your RM program in undue risk, redundant documents, and inconsistent application of standards. Jeter has developed the following Intake Assessment Tool based on decades of experience in reviewing and consolidating file collections as part of major corporate mergers and acquisitions. By using the questions and action items listed below as a starting point in assessing your company s incoming file collections, you can take a more proactive approach to addressing the legal requirements, business risks, and practical needs associated with those collections.

9 Jeter M&A Intake Assessment Tool 2 Collection Title Format / Location Key Documents Risks / Compliance Issues Part A: Intake Planning As soon as possible, meet with incoming records management staff and/or corporate stakeholders to identify all file collections to be acquired. This identification process should cover the entire spectrum of corporate records, including: Records created or received in any format, including paper and electronic media Records of all business activities, ranging from core operations to internal administration Active file collections and any semi-active or inactive collections stored outside of offices The following table outlines the key information that should be collected for each in-scope file collection. This information provides a baseline for applying specific questions (see Parts B and C) that will help in deciding which actions to take (Part D).

10 Jeter M&A Intake Assessment Tool 3 Yes - No Action Required Yes - But Work Needed No - High Risk; Address ASAP Not Applicable Part B: Program Assessment One of the biggest tasks in integrating newly acquired file collections is to standardize the application of RM program controls across all file collections, both new and old. You begin by assessing all controls (or lack thereof) applied to file collections in their pre-acquisition environment and ensuring that the post-acquisition environment addresses applicable requirements and risks. The following questionnaire outlines criteria to explore at the programwide level. Where these questions lead to identification of gaps, refer to relevant action items under Part D below. Notes: Were incoming records previously governed by a Records Management policy or similar governance tool? Were incoming records managed subject to a Corporate Records Classification or similar retrieval tool which covers all file collections and specific key documents? Are incoming records subject to a Records Retention Schedule or other tool that standardizes how long records are kept? If incoming records are still stored or processed by a third party service provider, does that service meet standards for security, customer service and cost efficiency? Where incoming records are tracked and/or managed via electronic systems, are those systems compatible with those used by your company? If record tracking systems are different from or incompatible with those used by your company, can content be migrated or converted to your company s system with minimal risk and at reasonable cost?

11 Jeter M&A Intake Assessment Tool 4 Yes - No Action Required Yes - But Work Needed No - High Risk; Address ASAP Not Applicable Part C: Collectionlevel Audit The following questions should be asked separately for each file collection (paper or electronic) identified under Part A. Where these questions lead to identification of gaps, refer to relevant action items under Part D. The following questionnaire should be copied and repeated for each collection. Notes: If the collection was subject to a retention schedule, does existing content meet minimum retention periods? If records from the collection were destroyed, were all disposals subject to documented authorization? Do individual files contain all key documents identified by regulators or otherwise required for business? If files contain personal information, is the amount and type of information consistent with legislated privacy requirements? Do individual files avoid duplicate copies and redundant versions of documents? Is individual file content subdivided and/or arranged in a manner consistent with user needs and standard practices? Are the format and content of physical file labels consistent with user needs and standard practices? Are naming conventions for electronic folder structures and documents consistent with user needs and standard practices? Are filing equipment (e.g. cabinets, shelving) and supplies (e.g. folders) sufficient to protect file media and make optimal use of physical space? Are filing equipment and supplies compatible with those already in use at your company?

12 Jeter M&A Intake Assessment Tool 5 Develop new Records Management Policy or update existing governance tool to cover all business records. Develop new Corporate Records Classification or update existing classification to cover all file collections and key documents. Develop new records retention schedules or update existing schedules to cover all file collections and incorporate legal requirements from all relevant legal jurisdictions. Standardize electronic records tracking and management tools by converting/migrating content (preferred) or implementing a plan for maintaining parallel systems. Reclassify and re-label physical and electronic files to reflect standard classification/retention categories. Part D: Action Plan The following checklist provides examples of action items you can perform to directly address identified gaps. You may wish to use the checklist as a starting point for identifying action items that respond directly to the unique file collections, risks and needs associated with your company s merger or acquisition. Convert physical file folders, labels and content arrangements to standard formats. Consolidate redundant or parallel files by combining content and purging unnecessary duplicates. Perform final audit and review of above activities and take remedial action to address any errors. Other (identify): Notes:

13 Jeter M&A Intake Assessment Tool 6 Get Started! Now that you know what questions to ask and which actions to take, it is time to get started. The next time your company undertakes a merger or acquisition, get involved as early in the process as possible. Apply this tool to all incoming file collections, both physical and electronic, as well as the RM controls applied to those records in their previous environment. Through proactive application of RM best practices, you can help all interested parties make the most of a potentially trying organizational change. Merging, Moving and Converting Collections Jeter File Management Services Is your company in an acquisition phase? Merging your operations into one location? Reducing the square footage of your facilities? Finding multiple filing systems inefficient? Whatever the reason, in today s environment, chances are you will be faced with the tough challenge of moving and consolidating different file collections. This is a resource intensive proposition, and if it isn t done right, it can have a negative impact on your ability to operate. Jeter can help you merge, move and convert your files and filing systems quickly with minimal disruption - keeping your documents accessible to you throughout the process. Moves You quickly realize how important your documents are when you can t find them. And files aren t furniture, so why trust your files to movers or untrained professionals? We have the experience to move your entire collection safely and securely while keeping your documents accessible the whole time. In the process we can help you streamline your collection by elimination non-essential items. We can also help you consolidate your different collections! Mergers In every merger, management must ensure a smooth transition and show increased profit from the acquisition. One way to do this is to integrate and streamline the two company s records management operations into one. Jeter can show you how to successfully combine two organizations information while reducing costs, minimizing disruption to your business and ensuring regulatory compliance. Converting for Increased Efficiency Jeter can help you transform different document storage systems into a single highly efficient, secure system. We provide the people, methods and products to streamline your existing filing practices, so you can achieve efficiencies in time, space and cost. We can show you how multiple file organization methods can be consolidated into a single, centralized system that eliminates duplication and confusion. Jeter can also facilitate a switch from one storage type to another and guide you through the process of folder conversion. Throughout the consolidation or conversion, we ll take care of all sorting, validation, and filing of your documents into the new system. That means peace of mind. If you need help with a file merge, move or conversion, contact Jeter. Contact one of our representatives today. Jeter Systems Akron, OH Toll Free

14 Jeter Mergers and Acquisitions Case Study Business Issue The Land Records file room for a leading energy company wanted a more efficient way to incorporate the high volume of new files generated from their constant acquisition of assets. For A Leading Energy Company constantly acquiring new properties, the Land Records file room was always a very busy place, but as their business began an unprecedented growth phase, they really had their hands full. With up to 100 acquisitions made in a year, the task of incorporating thousands of new files from different companies was enormous, and their system for well and lease files was being pushed to its limits. The Land Records Manager wanted a more efficient way to incorporate new files and track existing files. As they began the search for a partner to help them do this, Jeter was contacted and asked to present. Consistency is Key Jeter consultants met with the Land Records Manager and file room staff, analyzing the current state of the file room, their immediate needs and plans for future growth. They then took them through Jeter s records management process from beginning to end. In talking together they realized that both the intake and tracking problems would be solved by implementing a consistent Records Management methodology across the enterprise. Jeter recommended that the best way to achieve consistency would be to start by converting all existing files, standardizing on a color coded system with custom labels, and using a file tracking software as the linchpin to guarantee accuracy and consistency. Then, as new files came in, they would easily be incorporated using this new system. The Land Records team agreed and Jeter won the business. File Tracking Software Benefits Quickly track every file at all times Speed retrieval times Improve overall access to information Maximize efficiency of RM resources What s On the Label Getting the label design right is a critical step in creating an efficient Records Management process. It has to match your business process and include all relevant information. Jeter s Professional Services Division designed a label template that matched the company s dynamics, using the well number, well name, legal, county and state to clearly identify the file. When the template was approved, Professional Services personnel deployed and the conversion began. Jeter Mergers & Acquisitions Case Study

15 Records Management Software has really improved our ability to keep track of all our files - Land Records Manager Making the Conversion The Jeter team used a series of audits designed to ensure that the file conversion was accurate. They began with a data test, using printouts of the existing electronic data base, and physically matching it to every file on the shelves. Then as protection against error in the data test, all the information was pulled from every label in the room. This information was then compiled and cross referenced. With this completed, the Professional Services Division began producing labels and converting files, uploading each one into the software as it was created. All of this was done on site, eliminating downtime and ensuring that every file remained accessible without losing a single one. RM Software: Training on the Right Tool With the conversion complete, the Jeter Professional Services team trained the Land Records staff at their facility on how to manage Jeter s RM software, including checking files in and out with the program, installation, and training their own staff later, so that everyone in the file room could access it. During this process, the Jeter team installed a day forward process for integrating incoming acquisition files and incorporating them into their new Records Management program. When inputting a new file, a bar code and color label would be generated immediately, ensuring consistency across the board. Success The conversion project was completed within the prescribed time frame and with a minimum of disruption. The energy company now had one consistent method for managing their records throughout the entire cycle, and a robust tool to do it with. According to the Land Records Manager, We were very happy with Jeter s work. We loved the labeling - it is very efficient and Jeter s RM software has really improved our ability to keep track of all our files. The Jeter team was professional at all times, and from a customer service standpoint they excelled. The one thing that sold us on Jeter was their quick response and great customer service, a major requirement, of our company, when looking for a vendor. Jeter s continued engagement with this energy company, including converting the Land Acquisition file room, the Engineering file room, and the imaging of about lease files is a testament to the soundness of Jeter s Records Management practices. Jeter RM Software Functions Create database of all files Bar code labels Document indexing Multi-level tracking Pop-up Notes Field Flexible reporting On-screen file requests Records Retention Entry Validation Contact one of our representatives today. Jeter Systems Akron, OH Toll Free Jeter Mergers & Acquisitions Case Study