Companies with an international presence, or those who plan to expand abroad – especially in emerging and developing markets – can face significant integrity and corruption risks. These, together with geo-political risks, can in turn affect the viability and sustainability of their operations. It’s clear that if companies fail to identify and manage these risks during the pre-acquisition or pre-investment due diligence phase, they can easily encounter substantial and costly legal, regulatory, commercial and reputational risks.
How we can help
Regulators and prosecutors are increasingly focusing on bribery and corruption issues. As a result, there is heightened awareness of the need to manage these risks, particularly with transactions in emerging markets or other medium- to high-risk jurisdictions.
The UK’s Bribery Act is widely regarded as one of the most onerous pieces of corruption legislation anywhere in the world. Its guidance for setting out due diligence to identify corruption risks is now one of the key elements of any company’s adequate procedures.
M&A Integrity Due Diligence (“M&A IDD”) is the gathering of independent information to gain an understanding of – amongst other factors– a target’s background, track record and reputation, as well as any integrity or corruption risks. Now an established element of good corporate governance and part of the overall due diligence process, M&A IDD rarely results in “deal breakers”. Typically, it identifies risks that can be effectively mitigated either pre- or post-completion.
Over the past 15 years, our 200-strong specialist Business Intelligence Services team has conducted thousands of M&A IDDs on acquisition targets and JV partners worldwide. Gathering information through a combination of public record research and enquiries within the relevant jurisdiction, we focus on identifying issues of relevance to our clients. These typically include:
- The background, track record and professional reputation of the target and key management.
- The beneficial ownership of the target (including any hidden beneficial owners or influencers)
- The political and government links held by the target and key management, and their impact on the target’s activities
- The involvement of the target and key management in ‘red flag’ issues such as corruption, bribery, fraud, terrorist financing, money laundering and organised crime
Click on this link to see some examples of Deloitte’s M&A related IDD work.