Compliance Risk Management: A Game-changing Strategy in Mergers & Acquisitions

Abstract

In a context where companies are facing increasingly complex regulatory requirements, more stringent legal enforcement restrictions and NGO activism (including ethical and environmental), the compliance part of the M&A due diligence is entering into the spotlight. Compliance has turned from a regular risk, more or less scrutinized before deal signature, into a game-changing parameter that can cause a deal breaker or substantively shrink its efficiencies in the post-merger integration (PMI) phase. Over the last 3 years, several enforcement agencies have issued “soft law” recommendations to outline the regulatory exposure and encourage companies to perform proper compliance due diligence throughout the deal journey. Although not (yet) legally mandatory, they set “state of the art” expectations while anti-corruption laws make them an essential part of a functioning Compliance Programme. This movement now goes beyond embedding Compliance in the M&A process but leans towards a true enterprise culture, where compliance and strategic growth work hand in hand. The authors further explain where the main compliance challenges in M&A deals lie, show the regulatory trends in this respect and point out which issues to focus on in the target due diligence process and how they can be dealt with, throughout the deal phases and during PMI.