FCPA Due Diligence Attorneys & Consultants for M&A
M&A Transactions Frequently Present Issues in the Area of FCPA Compliance
The Foreign Corrupt Practices Act (FCPA) is a federal statute that imposes stringent requirements for both public and private companies. While most aspects of FCPA compliance focus on companies’ day-to-day operations and internal accounting controls, managing FCPA compliance can be a critical aspect of mergers and acquisitions as well.
As a general principle, acquiring companies can face liability for acquired companies’ pre-acquisition activities. While acquiring companies can manage this risk through due diligence and contractual protections, they cannot avoid it entirely. The U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) both enforce FCPA compliance—and both agencies have exhibited an enhanced focus on M&A transactions in recent years.
Attorneys and Consultants Experienced in FCPA Compliance and Enforcement
With this in mind, companies that are preparing to conduct mergers and acquisitions need to prioritize FCPA compliance. This means (i) conducting due diligence to determine whether the target entity is (and has been) in compliance, (ii) making informed decisions about resolving any FCPA-related risks, and (iii) taking proactive measures to establish and maintain compliance on an ongoing basis. Acquiring companies must proactively prepare for the possibility of facing a DOJ or SEC investigation as well, as being prepared to affirmatively demonstrate compliance can significantly reduce the risks and costs of defense.
At Oberheiden P.C., our attorneys and consultants are experienced in all aspects of FCPA compliance and enforcement. We guide company executives and in-house counsel through all aspects of the pre-closing and post-closing processes, from due diligence through integration. Our lawyers and consultants provide advice on all FCPA-related matters, and we assist with matters including drafting necessary contract provisions, negotiating amendments to existing third-party contracts, reorganizing and restructuring domestic and foreign business operations, updating FCPA compliance policies and procedures, and DOJ/SEC investigation defense as well.
Our FCPA Due Diligence and Consulting Services for M&A Transactions
When a merger or acquisition raises potential FCPA implications, there are several issues that must be thoroughly analyzed and carefully addressed. When representing companies before, during, and after M&A transactions, we provide services including:
Conducting Pre-Announcement and Pre-Closing FCPA Due Diligence
While due diligence is a critical aspect of any proposed merger or acquisition, the due diligence process takes on heightened importance when a proposed transaction raises FCPA implications or the targeted entity is (or will be) subject to FCPA compliance. Acquiring companies must have a clear understanding of the aspects of target entities’ operations that raise FCPA-related concerns, and then they must thoroughly analyze these aspects in light of the statute’s requirements.
As a result, conducting FCPA due diligence is not a “checklist” procedure. Each transaction requires a strategic and targeted approach that is informed by an intimate understanding of both the target entity and the law. With our lawyers’ and consultants’ experience in matters involving the FCPA, we are familiar with the areas in which compliance concerns can arise, and we are able to evaluate potential issues efficiently based upon insights gained from prior transactions and DOJ/SEC enforcement proceedings.
Consulting with Regard to FCPA Compliance
In addition to addressing compliance-related risks during the due diligence process, acquiring entities must also address any FCPA risks inherent in their proposed M&A transactions. From transferring funds overseas to disclosing the proposed (or consummated) transaction, there are several aspects of a merger or acquisition that can trigger FCPA-related concerns.
We consult with company executives and in-house lawyers with respect to all aspects of merger and acquisition-related FCPA compliance. We can help you understand when issues may arise, and we can help you take proactive measures to address these issues before they create a risk for enforcement litigation.
Managing FCPA Compliance Issues Pre-Closing
To the extent that there are FCPA compliance issues that need to be addressed, it will be necessary to address them prior to closing. Acquiring entities need to have a comprehensive understanding of the costs of remedying these issues, and they will want to ensure that they have all necessary contractual protections in place. Once we identify all pertinent issues, we then work with our clients to develop and execute strategies to limit or manage their risk accordingly.
Integrating and Updating FCPA Compliance Programs Post-Closing
The DOJ and SEC expect acquiring companies to develop fully-integrated FCPA compliance programs as quickly as possible after closing. In order to meet this mandate, acquiring companies must work diligently to integrate their and the acquired entity’s FCPA compliance programs post-closing; and, to the extent that any updates or modifications are necessary (to either company’s FCPA compliance program), these must be developed and implemented promptly as well.
Auditing, Monitoring, and Enforcing FCPA Compliance
Subsequent to closing a merger or acquisition, auditing, monitoring, and enforcing FCPA compliance take on heightened importance. It is imperative to ensure that both companies’ operations are compliant—and that both companies’ leadership and relevant personnel have a clear understanding of their roles in helping to protect the companies. After closing, our lawyers and consultants continue to work with our clients to assess their FCPA compliance efforts and needs on an ongoing basis, and we provide proactive recommendations when changes or unanticipated events present potential compliance concerns.
Defense Counsel for FCPA Investigations During and After M&A Transactions
We also represent companies in FCPA investigations during and after M&A transactions. If the DOJ or SEC decides to scrutinize your company’s deal, it will be imperative to have experienced defense counsel at the ready. Our lawyers and consultants can intervene and interface with the government’s attorneys on your company’s behalf, and they can begin working from the earliest stages of the investigation to steer it toward a favorable resolution.
FAQs: Mergers, Acquisitions, and FCPA Compliance
When Will a Merger or Acquisition Involve FCPA Compliance Implications?
A merger or acquisition can involve FCPA compliance implications for a variety of different reasons. This includes everything from the target’s contractual relationships with foreign entities to the acquiring entity’s accounting and recordkeeping obligations.
What are the FCPA-Related Risks Involved in M&A Transactions?
FCPA-related risks involved in M&A transactions include legal, financial, and reputational risks. On the legal side, failure to detect issues during due diligence can expose an acquiring entity to enforcement liability post-closing. Failure to detect issues can also lead to overvaluation of the target entity, and these types of failures during the M&A process can cause significant harm to a company’s (and its executives’ and in-house lawyers’) reputations.
How Can Companies Mitigate the FCPA Risks Associated with M&A Transactions?
The most effective way to mitigate FCPA-related risks during M&A transactions is through thorough due diligence and proactive risk management. During the due diligence process, overlooking even a single issue can lead to the legal, financial, and reputational risks discussed above—as unidentified issues cannot be managed. As a result, engaging a firm with highly-experienced FCPA lawyers and consultants is extremely important. At Oberheiden P.C., we have an extensive track record of helping acquiring entities mitigate FCPA risks associated with M&A transactions effectively, and we can use our experience to help protect your company.
What are Potential Solutions if a Target Entity has Violated (or is in Violation of) the FCPA?
If a target entity has violated (or is currently in violation of) the FCPA, there are a number of potential solutions. However, choosing a solution requires a careful assessment of the specific issue(s) and circumstances involved. For example, if a past violation presents an exposure risk for the acquiring company, then negotiating an indemnification clause or adjusting the terms of the deal may be appropriate. FCPA-related issues won’t usually warrant calling off a deal entirely, although this is an outcome that may need to be considered under some circumstances.
When Do the DOJ and SEC Examine Mergers and Acquisitions for Potential FCPA Issues?
The DOC and SEC examine mergers and acquisitions for potential FCPA issues for a variety of reasons. In some cases, media coverage of an announced transaction can spur an investigation. In others, complaints or tips from insiders may lead to DOJ or SEC scrutiny. Ultimately, while DOJ and SEC investigations present their own unique set of risks, these risks can be managed proactively as well, and it will often be possible to resolve an FCPA investigation without any formal charges being filed.
What are the Consequences of FCPA Non-Compliance for Acquiring Entities in M&A Transactions?
For acquiring entities in M&A transactions, the consequences of FCPA non-compliance can range from civil fines and administrative penalties to criminal prosecution. The DOJ and SEC take FCPA compliance very seriously, and they will aggressively pursue charges against companies and individuals suspected of engaging in, facilitating, or looking the other way with respect to bribes, accounting fraud, and other violations. Thus, FCPA compliance is a critical consideration in M&A transactions, and companies must work with experienced counsel to ensure that they are not taking on unnecessary risks.
Speak with an FCPA Lawyer or Consultant at Oberheiden P.C.
If you would like to speak with one of our FCPA lawyers or consultants about an impending M&A transaction, we encourage you to get in touch. To schedule an initial consultation at your convenience, please call 888-680-1745 or contact us online today.