Key Details: Unclaimed property is a frequently overlooked liability in mergers and acquisitions that can materially impact deal value and post-close exposure. Because state enforcement allows for long look-back periods and estimated assessments when records are incomplete, buyers can inherit decades of risk. Proper due diligence, clear purchase agreement language, and proactive mitigation strategies are critical to managing unclaimed property exposure and protecting transaction value.
Unclaimed property compliance presents a unique and often underestimated risk in mergers and acquisitions. Unlike traditional liabilities, unclaimed property exposure can extend back 15 years or more, particularly when records are missing or incomplete.
State regulators and third-party auditors actively pursue enforcement, and public M&A activity can increase visibility, making transactions more likely to trigger audits. As a result, organizations may face significant financial exposure after closing, including interest, penalties, and remediation costs.
From a valuation perspective, unresolved unclaimed property liabilities can directly reduce deal value or create post-closing disputes between buyers and sellers.
In stock deals, buyers typically assume all historical and future liabilities of the target company, including unclaimed property exposure. This makes thorough diligence essential.
While asset purchases generally leave liabilities with the seller, exposure may still arise depending on deal structure, contract terms, or operational continuity.
M&A activity can attract scrutiny from state authorities. Audits may be triggered shortly after closing, leading to unexpected assessments.
States commonly review 10–15+ years of activity. If records are incomplete, auditors may estimate liability, often resulting in higher assessments.
Lack of historical documentation increases reliance on estimation methodologies, which can significantly inflate exposure.
Material exposure can reduce purchase price, delay closing, or lead to escrow requirements to cover identified risks.
Focus on accounts payable (uncashed vendor checks), payroll (uncashed wages), and accounts receivable (credit balances and refunds).
Evaluate unapplied customer payments, aging balances, and royalty or commission accounts.
Confirm whether the company has consistently filed unclaimed property reports across all jurisdictions.
Assess whether formal processes exist for identifying, tracking, and reporting unclaimed property.
Define responsibility for unclaimed property liabilities in purchase and sale agreements, including indemnification provisions.
Quantify potential exposure and use findings to negotiate price reductions.
Establish escrow accounts to cover identified or potential liabilities.
Maintain historical accounting records and institutional knowledge.
Participate in VDAs to proactively resolve historical liabilities.
About Peter Ryan
Partner, Co-founder, & CPA
Peter T. Ryan co-founded Ryan & Wetmore in 1988 with business partner Michael J. Wetmore. Peter provides clients with the best strategies for success. His expertise extends across various industries. Peter obtained a Master of Business Administration in Finance from the University of Baltimore and a Bachelor of Arts in Accounting from the Catholic University of America.
About Sagarika Susarla
Finance Consultant
Sagarika Susarla is a Finance Consultant at Ryan & Wetmore. She focuses on supporting clients through financial analysis, tax consulting, and building practical tools that improve efficiency and decision-making. Sagarika earned her MBA from The George Washington University and her undergraduate degree in Finance, with a concentration in Corporate Finance.