by Jonathan Alef
With the economy heating up leading to cash-heavy corporate balance sheets, navigating the corporate environment has become akin to sailing through pirate-infested waters, as companies ride the tide, snapping up smaller entities through mergers and acquisitions. The bevy of activity seen thus far in 2018 is on pace to eclipse the record of $4.7 trillion set in 2015.
What the public sees through the headlines and articles in the media often belies the complexity of the work being done in the background. The FTC and DOJ, empowered by the Hart-Scott-Rodino Act (HSR), investigate large proposed mergers for potential antitrust issues, potentially forcing second reviews. The large volumes of data and tight deadlines that are common in these proceedings, make them an ideal setting for an analytics suite and technology assisted review (TAR) workflows.
A second request is much like it sounds, where the acquirer in the transaction — if it meets certain thresholds — has to submit filings and a fee to the FTC and DOJ for them to review and grant approval of the merger. However, if either agency believes that the proposed merger would likely result in negative impacts to competition, a second request is made to allow the agencies the opportunity to perform a deeper investigation. Second requests can cover anything and everything deemed necessary to ensure compliance with antitrust provisions.
In recent years both agencies (the FTC in 2015 and DOJ in 2016) amended their Model Second Request forms to allow for the expanded use of analytics and TAR workflows. This is a potential blessing, so long as you follow their prescribed procedures. Most find it worth gaining written approval prior to implementing these tools and processes so that their company can see substantial time and cost savings over traditional linear review. Prior to the amendments, companies were required to review documents one-by-one for responsiveness, PII, and Privilege, often necessitating an army of contract attorneys.
When reviews are augmented with technology, they can usually be completed in a fraction of the time and at a reduced cost. For some background, there are two primary analytics functions that are always helpful to employ when performing a review, especially when used together: email threading and similar content analytics. Email threading is primarily used to organize review content, but can also be used to reduce duplicative content. Meanwhile similar content analytics (conceptual searching, near dupe analysis and clustering) work to identify the information that is most sought after by the requesting agency faster that it can be moved to the forefront of production. Compared to traditional keyword searching, these procedures offer significantly more flexibility, helping to produce results more quickly to meet deadlines.
TAR workflows incorporate machine learning, as a team of subject matter experts review a small segment of the total data population, and “feed” their learning through machine algorithms. The machine can then take this learning and apply it to the larger population, quickly identifying and classifying responsive documents. TAR is tremendously valuable, but does still require careful vetting for privileged and PII content, and the final outcome must include robust reporting of the process and metrics as required by FTC and DOJ.
In the past decade 575 mergers and acquisitions required second review, about 3 percent of all eligible transactions. That’s more than triple the likelihood of having your taxes audited by the IRS in 2015. These companies were subjected to a painstakingly laborious process requiring countless hours of discovery and legal review. Meanwhile, trillions of dollars rested on the findings of those second reviews, making technology-guided processes that whittle down and organize the review population critical. The smaller, richer review populations go a long way toward minimizing the risk and the costs.