The importance of email in the workplace presents a variety of legal challenges when purchasing a business. Among those are concerns relating to emails and the email addresses of the seller’s employees who are no longer employed by the purchaser after closing.
First, there are confidentiality concerns in connection with former employees receiving information they should no longer have access to. Second, there are concerns that customers or other relevant individuals may be emailing former employees instead of the current employees of the purchaser. This can result in missed sales opportunities, gaps in customer service and a negative impact on the purchaser’s bottom line.
That being said, by carefully drafting a purchase agreement to include one or more of the following provisions, a purchaser can help protect itself against these pitfalls.
Post-closing covenants are obligations of the buyer or seller to do something after the transaction takes place. One way of avoiding the concerns mentioned above is to include a post-closing covenant which requires the seller to promptly forward all emails received at the former employees’ email addresses to the email addresses of the new employees of the purchaser. This ensures that the purchaser’s employees will receive all emails addressed to the former employees and assist with business continuity and integration.
A purchaser should also consider including a post-closing covenant requiring the seller to set-up automatic replies from the email addresses of the seller’s former employees directing senders to contact the appropriate person in the purchaser’s organization. In addition, it may be wise to include a provision where the seller agrees to give the purchaser access to all archived emails of the seller’s employees.
Another way of avoiding these concerns is to ensure that the purchase agreement includes a clause where all rights, title and interest in the emails or other electronic communication used by the seller and the seller’s employees are assigned to the purchaser on closing.
Given the number of aspects involved when purchasing a business, the facilitation of access to the seller’s email addresses and email correspondence is something that can easily be overlooked. By turning their minds to this issue early in the acquisition process and including the necessary clauses in the transaction documents, purchasers can help avoid falling prey to these pitfalls. Addressing these types of issues early on is also increasingly important in an environment that has seen a greater focus on rigorous information management by target companies.
The author would like to thank Josh Hoffman, articling student, for his assistance in preparing this blog post.
Stay informed on M&A developments and subscribe to our blog today.