With the increasing complexity of issues and diversity of interest among stockholders, our board preferred to hire a professional and independent resource to represent the interests of all stockholders during the escrow period. SRS was able to effortlessly integrate into the merger negotiation process and will provide our stockholders with a heightened level of service.  
Cynthia Garabedian McAdam Former VP and
General Counsel
Postini, Inc.		  

Home > Why SRS?

Why SRS?

Why are management and the investors typically reluctant to serve as the representative of the shareholders following closing? After closing, the officers either go to work for the acquiring company, take jobs with new employers or look forward to well earned time off. If they go to work for the acquirer, they have uncomfortable conflicts of interest in attempting to negotiate any claims or escrow disputes on the shareholders’ behalf against their new employer. If they take a new job, they don’t want to take the risk that being the shareholder representative is going to be a significant distraction when they’re trying to make a positive first impression. If they’re taking time off, they don’t want to be spending that free time navigating legal issues with lawyers and accountants.

Seasoned investors who have served as the shareholder representative know all too well why they try to avoid this job whenever possible. Whether it’s under the “life’s too short” theory or the “not a good use of my time” principle, these investors understand that serving as the shareholder representative is generally something to be done only as a last resort. Institutional investors should be focusing on finding the next great deal, not endless administrative tasks that come with being the representative. When disputes come up, the distractions just get elevated.

Unfortunately, post-closing problems are not hypothetical risks. Based on feedback from numerous deal professionals, disputes or post-closing issues arise in approximately 50% of M&A deals. When these problems do surface, the shareholders’ representative can be required to commit to uncertain and unpredictable blocks of time working through the issues. These matters can go on for months, or even years.

This work is often tedious. The jobs a representative can be required to perform include:

  • working through post-closing adjustments;
  • answering mechanical questions from individual shareholders and company employees;
  • managing communications with the acquirer;
  • managing distributions of funds or materials to shareholders;
  • working extensive hours with attorneys and accountants;
  • sitting through negotiations or depositions;
  • trying to track down dozens of former shareholders for consents or approvals;
  • managing communications with the escrow agent;
  • attempting to contact former executives;
  • tracking relevant dates and deadlines;
  • attempting to reconcile differing opinions among former shareholders;
  • managing distributions of tax reports to the former shareholders;
  • investigating matters the representative knows very little about; and
  • hoping not to get sued personally should anything go wrong.

It’s often not a great solution to have one of the other shareholders serve as the representative even if one is willing to volunteer. Such a representative may have different and potentially conflicting interests or objectives, may lack the proper focus on post-closing issues because of other demands on his or her time, may have emotional ties to an issue that cloud his or her judgment, or may lack the sophistication or expertise to do the job properly.