Making M&A Faster, Easier and More Effective With Entity Management Software

Kerie Kerstetter

“Post-COVID-19, we reasonably expect a once-in-a-generation sea change in the market landscape and potential target companies that may be available.”

– A global acquirer interviewed in Harvard Business Review

COVID-19 has not stopped M&A activity. In fact, a Harvard Business Review survey earlier this year said nearly one in four (23%) C-level executives reported either “no impact in 2020 forecast deal volume” or an intent to accelerate deal volume.

A centralized corporate record, powered by robust entity management software, can help businesses seize these opportunities—and help GCs grow in their strategic role—at all stages of the process: due diligence, opportunity evaluation and post-merger integration. Here’s how.

The Need for a More Complete Picture

Every M&A opportunity starts with an intensive review of corporate records, stockholder information, litigation history and financial information for both the acquisition target and the acquiring company. The goal is to gain a comprehensive understanding of the target company’s financial health, operational assets, legal matters and strategic position in relation to the acquiring corporation.

Is the entity a viable asset? Are the compliance, governance, and financial fundamentals in place for streamlined post-merger integration and ROI?

Answering due diligence questions typically involves information about regulation, insurance, or leases and other real estate, and the COVID-19 pandemic has escalated the importance of areas such as supply chain security and crisis-related special termination rights.

How does a centralized corporate record help? A centralized corporate record hosts a corporation’s full suite of tax, legal, finance and compliance data and information—including operating licenses, corporate registrations and signing authorities.

While typically GCs have recognized such a record’s capabilities for compliance, the power and potential for due diligence cannot be underestimated. With a centralized corporate record, GCs can quickly gather this information, then thoroughly advise how a merger or acquisition affects their company’s legal standing, operations, finance and compliance.

“Diligencing a company without a centralized system is incredibly difficult.”

– Samantha Wellington, SVP, Chief Legal Officer and Secretary, TriNet

Entity Management Keeps Deals Moving

“Buyers are mapping out their ideal acquisition targets right now.”

– Elsa Berry, founder of Vendôme Global Partners

Working across siloed systems and manual processes, a due diligence team might spend precious time searching for data and calling and emailing back and forth across time zones. This is time that companies can ill afford to waste in today’s competitive M&A environment, with increased risk of errors.

By ensuring that all departments “drink from the same well,” a centralized record eliminates redundancy and duplication and increases entity data integrity. When this centralized record is powered by entity management software, it equips GCs and their legal teams to act quickly and accurately through features like:

  • Document templates
  • E-filing
  • Automated reports
  • Automated document verification
  • Compliance calendars

Entity management software increases efficiency over the long-term, as well. In a Gartner survey, more than half of GCs reported having their planned work interrupted by an urgent issue a significant percentage of the time. Entity management software gives this time back to the GC and legal team by providing authorized users with instant access to data, automating tasks like document verification, and more. Features like electronic filing and convenient cloud storage further empower legal teams to do more with less.

“Whether achieving post-COVID-19 strategic positioning requires your company to do one deal or 20, strategically use the temporary pause now to accelerate completion of (your) prior deal integration backlog.”

Harvard Business Review

Streamline Post-Merger Integration

“If you need a license to operate in a jurisdiction and you just don’t have those records, is that going to kill the deal? Maybe so.”

– Samantha Wellington, SVP, Chief Legal Officer and Secretary, TriNet

Integrating entities is critical for a successful M&A strategy, but that gets more difficult as a corporation—and its geographical footprint—gets larger.

Samantha Wellington, who worked on M&A activities for Oracle before joining TriNet, illustrates a worst-case scenario: “Say you have a company in the United States with an entity in the UK and a branch office in Hong Kong, and none of the paperwork has really been kept in any central location.” Any M&A activity could easily be delayed or scuttled entirely.

A centralized record and entity management system keeps things running smoothly. For example, if a company in Germany needed to find a data filing in the United States early Monday morning, they could have access to it through the entity management system before the U.S. office brews its first cup of coffee.

The Chartered Governance Institute cited a cautionary tale about why such connectivity, visibility and integration is necessary. In this instance, a multinational company discovered long after an acquisition that an acquired entity had not filed its company statements in a decade. As the entity’s original directors could not be found, the multinational’s only options were to pay a hefty fine and dissolve the entity entirely, or wait for the local government to dissolve the entity of its own accord.

Entity management software also facilitates good governance practices once an entity is acquired. Corporations and their legal departments have a centralized system for building and expanding policies, measurements, and reporting systems, as well as assessing risk and assigning ownership and accountability.

“Advantaged acquirers consider integration to be an essential element of target identification and prioritization in the transaction execution process.”


A Multifaceted M&A Tool

For GCs interested in expanding their role in M&A activities—from evaluating opportunities to reducing friction during post-merger integration—a centralized corporate record, delivered via entity management software, can be a powerful tool:

  • Establishing a single source of truth for legal, financial, tax, and compliance data
  • Standardizing due diligence for target companies
  • Eliminating redundancies for compliance in multiple jurisdictions
  • Enabling good governance across all entities

A single source of truth is critical to any strategic growth initiative. See why in our free white paper, “Driving Strategic Growth with a Centralized Corporate Record.”

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Kerie Kerstetter
Kerie Kerstetter is a former Senior Director at Diligent and the Next Gen Board Leaders. She has done extensive work into how governance and ESG technologies empower leadership to make informed, data-driven decisions while mitigating cyber risk. Kerie was one of the founding members of Boardroom Resources, the premier educational resource for board members, acquired by Diligent in 2018.