Q: When two companies decide to merge, what financial information are they legally obligated to disclose to each other?
A: In any transaction each party should disclose any material information that might impact the other party's decision to move forward. Generally, each company should disclose their financial information and any known potential liabilities such as potential lawsuits, potential liabilities for recalls of products. There should be a discussion of the retention of key employees and whether licenses held by one company or the other can be assigned without the consent of the owner of the license. The same applies to longer term customer contracts or supply contracts that may not be assignable or may not be assigned without the customer or supplier consent. All of these things could be and usually are material and should be disclosed. A company that is serious about merger needs to do a careful due diligence.
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