SRS Acquiom sees deals in which the parties do not address what information the shareholder representative will be entitled to receive after closing in the event there is a claim, dispute or similar issue. This can raise significant issues with no clear answers. For example, if the buyer submits an indemnification claim, a logical reaction from the representative might be to say that it has a few questions and would like to see certain related materials such as work papers, technical documents or correspondence. The representative might reasonably request to speak with the employees of the buyers who worked on the matter to ask some questions.
Buyers may resist providing all or certain of those materials for a variety of reasons. Often, the issues are sensitive from a confidentiality perspective, and the buyer may want to limit access to the related materials as much as possible. Of course, the buyer might want to deny access for purely strategic reasons related to the dispute, figuring that it is to their advantage for the representative to know as little as possible. Finally, the buyer might not want to incur the time or expense of providing access to the applicable personnel or copies of the documents. Even if the parties agree that access to some information is reasonable, they can differ on how much is appropriate.
To help with this problem, the parties should set forth the rules related to access of information in the merger agreement. SRS Acquiom’s suggested language is:
Following the delivery of [the Closing Statement]/[each Earnout Report]/[a Notice of Claim], the [Shareholder Representative] and its representatives and agents shall be given all such access (including electronic access, to the extent available) as they may reasonably require to the books and records of the [Surviving Corporation] and reasonable access to such personnel or representatives of the [Surviving Corporation] and [Buyer], including but not limited to the individuals responsible for [preparing the [Closing Statement]/Earnout Report]]/[the matters that are subject of the [Notice of Claim]], as they may reasonably require for the purposes of resolving any disputes or responding to any matters or inquiries raised in the [Closing Statement]/[Earnout Report]/[Notice of Claim].
A related issue is whether the representative should be given a copy of the documents placed in the data room that was prepared in connection with the deal’s due diligence process at the time of closing. The target company may want to provide the shareholder representative with an electronic archive of the data room prior to closing so that it is not reliant on what the buyer may choose to later disclose. Buyers may, however, resist allowing the target to provide the electronic archive to the representative, claiming that it has confidential information that it will own after closing, there is no outstanding claim at the time, and providing access to all information is overkill. One solution may be to require that the data room archive be placed in escrow and released to the representative at such time the buyer makes a claim.