Your company has just made its largest acquisition ever and your CEO says they want you to have a compliance post-acquisition integration plan on their desk in one week. Where do you begin? A good place to start would be the 2020 FCPA Resource Guide language:
Pre-acquisition due diligence, however, is normally only a portion of the compliance process for mergers and acquisitions. DOJ and SEC evaluate whether the acquiring company promptly incorporated the acquired company into all of its internal controls, including its compliance program. Companies should consider training new employees, reevaluating third parties under company standards, and, where appropriate, conducting audits on new business units.
The bottom line is that you must train the newly acquired employees, reevaluate third parties under your company standards, and conduct compliance audits on new business units. This process should be based your pre-acquisition due diligence and risk assessment. Moreover, the DOJ and SEC clearly view both the pre- and post-acquisition phases of M&A as tied together in a unidimensional continuum. If pre-acquisition due diligence is not possible, you should review the requirements and time frames laid out in Opinion Release 08-02 or the 2020 FCPA Resource Guide, which noted, “pursuant to which companies can nevertheless be rewarded if they choose to conduct thorough post-acquisition FCPA due diligence.” Whatever compendium of steps you utilize for post-acquisition integration, they should be taken as soon as is practicable.
The earlier you can deploy these steps the better off your company will be at the end of the day. An acquisition that fails for compliance reasons is a preventable disaster of the first order. One need only consider the Latin Node Inc. FCPA enforcement actions where the acquiring company had to write off its entire investment because it had wholly failed to engage in appropriate pre-acquisition due diligence.
Three key takeaways:
- Planning is critical in the post-acquisition phase.
- Build upon what you learned in pre-acquisition due diligence.
- You literally need to be ready to hit the ground running when a transaction closes.