social_680x2202017: the year of social media fails. Over the last six months, an international air carrier’s stock plummeted following a viral video of security forcefully removing a passenger from a plane. Then, Twitter was used to publicly assail a soda pop company for its lack of judgment in releasing a commercial depicting a celebrity subduing a crowd of protestors with a can of pop.

Before committing to a transaction, a prudent buyer will want to know any and all potential risks associated with the target. While social media can play a positive role in a company’s business strategy, it, evidently, can also lead to downfalls. Incorporating social media into the due diligence process can help to ensure the buyer will not have to bear the brunt of the effects of a social media fail. Buyers should request the names of the target’s social media accounts, usernames and passwords, and the names of the employees operating the accounts. Further, an EY Capital Insights article highlighted the importance of an analysis into third party postings about the target company. This can shed light on the company’s reputation with the public. Negative comments can damage the company’s bottom line, and buyers should be conscious of the public’s sentiment towards the target.

The target’s employees’ social media use also deserves attention in the due diligence process. Employees are representatives of the company and, as a result, the company can feel the impact of their misconduct. Buyers should request a copy of the target company’s social media policy in order to address concerns relating to the dissemination of confidential information and monitoring comments made by upset employees. For more information, click here.

Social media can be a valuable asset to a company. However, with high-speed global dissemination of information comes significant risk. Evaluating a company’s social media presence should not be an afterthought.

The author would like to thank Elana Friedman, Summer Student, for her assistance in preparing this legal update.

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