M&A DUE DILIGENCE: WHAT HAVE WE LEARNED AFTER A DECADE OF ACTIVE FCPA ENFORCEMENT?
Every business transaction, even the simplest, is a risk. And perhaps no business transaction is riskier than the acquisition of, or a merger or joint venture with, another company, particularly one in a foreign market. Bringing in new teams and new individuals with their own ways of doing business is always difficult, but where the target team is the product of another country and culture, the risks multiply. Where the target hails from an emerging market with little history of anticorruption compliance, the risks multiply again.
Your job as an attorney – whether in-house or as part of an outside-counsel team – is to help your boss, your board and your shareholders decide if the potential reward is worth the known risks, recognising that such knowledge will always be incomplete. But ‘incomplete’ does not have to mean inadequate. There are ways to design an M&A due diligence process that is sufficient to adequately assess and quantify risks in an efficient manner.
Active anticorruption enforcement is a relatively recent phenomenon. A decade ago, many companies were only just beginning to implement robust anticorruption compliance policies and procedures. To the extent that these companies were performing anticorruption due diligence on foreign targets, it was often an afterthought, confined to a cursory review of sales to foreign governments and a few questions during interviews. Some companies lurched to the other extreme. These companies were unsure of what to do, fearing that compliance risks were unmanageable or that the cost of examining every sale, reading every email, questioning every payment made over the past five years would make the whole deal unmanageable, or at least unprofitable.
Apr-Jun 2017 Issue
Baker & McKenzie LLP