Ideally, unclaimed property should be part of the M&A due diligence process. Unidentified liabilities could take months or years to be discovered. If unclaimed property hasn't been addressed — it's not too late.
Georgeson offers merger and acquisition due diligence consulting services to help you limit the risks associated with unclaimed property noncompliance.
The risks:
- Your company may have acquired a past-due unreported unclaimed property liability which could be subject to interest and/or penalties
- The acquired company may have filed correctly, but has not provided the documents necessary to prove past compliance
- In the absence of proof, auditors assume noncompliance and may calculate a liability based on historical revenues
- The value of acquired customer accounts may be overstated if some are dormant or unclaimed, and therefore due to be escheated.
Take action:
- Quantify your liability while you still have proactive options for addressing it (i.e. before an unclaimed property audit).
- Identify opportunities for state Voluntary Disclosure Agreements to reduce interest and/or penalties on past due property.
- Consider owner location services to activate lost accounts and reduce liabilities in states that do not offer voluntary disclosure agreements.
- Get the documentation necessary to prove historical compliance, while it can still be located.
A short case study example:
Challenge
A private equity firm was in the process of acquiring a mid-sized company when it discovered that the company had never filed an unclaimed property report to any state.
Approach
The private equity firm engaged a consulting team to perform a comprehensive compliance review, which resulted in the quantification of the company's unclaimed property liability on a state by state basis.
Recommendations
The resulting recommendations helped the company get into compliance with all state unclaimed property laws, while reducing the assessment of interest and penalties on past due property where possible.
Results
Since the potential liability was discovered before the acquisition, the purchaser was able to require an escrow account be set up to cover the expenses related to the past due unclaimed property liability. As a result, the purchaser was not hit with unexpected expenses related to historical unclaimed property noncompliance after the acquisition was complete. The seller also benefited from the abatement of more than $1 million in penalties and penalties on past-due property.