For the month of March, we will be considering how to create a more effective compliance program involving business ventures. This will include the role of compliance in M&A, JV agreements, distributorships, teaming agreements, franchises, and other forms of business relationships.

The FCPA Resource Guide, 2nd edition, made clear that one of the Hallmarks of An Effective Compliance Program is around M&A in both the pre-and post-acquisition See more +

For the month of March, we will be considering how to create a more effective compliance program involving business ventures. This will include the role of compliance in M&A, JV agreements, distributorships, teaming agreements, franchises, and other forms of business relationships.

The FCPA Resource Guide, 2nd edition, made clear that one of the Hallmarks of An Effective Compliance Program is around M&A in both the pre-and post-acquisition context. A company that does not perform adequate due diligence before a merger or acquisition may face legal and business risks. Perhaps, most commonly, inadequate due diligence can allow a course of bribery to continue – with all the attendant harms to a business’s profitability and reputation and potential civil and criminal liability. In contrast, companies that conduct effective due diligence on their acquisition targets can evaluate each target’s value more and negotiate for the costs of the bribery to be borne by the target. Equally important is that if a company engages in the suggested actions, it will go a long way towards insulating, or at least lessening, the risk of FCPA liability going forward.

The 2020 Update went on to say that “The extent to which a company subjects its acquisition targets to appropriate scrutiny is indicative of whether its compliance program is, as implemented, able to effectively enforce its internal controls and remediate misconduct at all levels of the organization” and posed the following queries.

One of the key themes in this chapter is the integrated nature of compliance and business ventures. Whether the compliance work is seen in the M&A context, JV context, or one of the myriads of other business relationships of the current business world, there is an approach that a CCO or compliance professional should take to assess the risk, monitor the risk and then manage the risk with continued monitoring with feedback of data and information into your risk management strategy.

Three key takeaways:

1. Consider the role of compliance in a wide variety of business relationships, including M&A, JV agreements, distributorship, franchises, and other forms of business relationships.

2. Compliance for M&A should be seen as a unidimensional continuum.

3. The evaluation focuses on what data your risk monitoring system used and how you utilized it going forward. See less -