Many companies are looking at merger and acquisition (M&A) activity as a wise way to put their cash to work. Before they move forward, however, corporate executives need to be aware of some dramatic shifts in the global landscape for strategic transactions. Compared with a decade ago, there is greater potential today for unseen and underappreciated risks that could hinder an otherwise sound merger or acquisition.

In the aggressive timelines that companies often adopt for the closing of transactions—which are more compressed now than they were in the past—due diligence may be abbreviated. This accelerates the M&A process but also increases the risks that the acquiring company will not fully identify the target company's historical and ongoing liabilities. Among these liabilities are environmental liabilities, exposures faced by directors and officers, and other legacy exposures.

Regulators in various jurisdictions have heightened their awareness of the legal and financial risks accompanying M&A transactions. Economic uncertainty has led both the Securities and Exchange Commission (SEC) and watchdog groups to become increasingly vigilant in pursuing their concerns about the anti-competitive implications of potential M&A deals. And the implementation of the Dodd-Frank Act and the JOBS Act will require target companies to provide their prospective acquirers with more financial statements from more years. These are significant hurdles that M&A participants 10 years ago did not face. It is crucial for companies to respond.