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Don’t Overlook Social Media Assets When Planning M&A Transactions

06.27.16

In M&A transactions, buyers typically scrutinize a seller’s trademarks, copyrights, patents and other intellectual property (IP) and demand comprehensive representations and warranties regarding these assets. But when it comes to social media assets, buyers rarely exercise the same level of diligence — if they pay attention to them at all.

Social media assets may include LinkedIn and Facebook accounts and corporate pages, Twitter and Instagram accounts, blogs, YouTube channels, and other online platforms. The legal status of social media accounts, user names, screen names, posts, feeds and other content as “assets” is somewhat uncertain. After all, the platform host may have the right to cancel a user’s account or shut down the site altogether. Nevertheless, these accounts may provide significant value or liability exposure, so they should be treated like other assets.

Due diligence

As part of the due diligence process, buyers should ask sellers to provide a list of social media accounts, together with all user names, screen names, account names and other identifiers.

Among other things, buyers should investigate whether 1) these names or any content infringe any third-party trademark or other IP rights or contain potentially defamatory statements, 2) any accounts are owned or controlled by employees or third parties, 3) the company is in compliance with all social media platform agreements, and 4) the M&A transaction will impair the company’s ability to continue using any social media accounts, names or content.

Buyers should also ask to review any internal social media policies and procedures and determine whether the company’s employees are complying with those policies.

Representations and warranties

If the due diligence process reveals that the target’s social media assets provide significant value or expose the company to potential liabilities, the buyer should request representations and warranties in the purchase agreement to address these assets.

Appropriate representations and warranties depend on the nature of the target’s business as well as the type of social media assets and how they’re being used. But in general the seller should represent and warrant that its account names and content don’t violate any third parties’ IP rights or contain defamatory language; that it complies with all social media platform agreements; that its employees are bound by a social media policy; and that the merger or acquisition won’t impair the company’s ability to continue using its social media accounts.

Minimize social media issues

If your company is planning any M&A activity, be sure to discuss social media issues with your attorneys and include appropriate provisions in the purchase agreement to preserve these assets and minimize potential liabilities.