M&A integrity due diligence
Many companies seeking to expand overseas – in particular in the potentially-lucrative emerging markets – are increasingly looking to acquire (or invest in) an existing operation, or to enter into a joint venture with a local entity. While such a market entry strategy can bring significant advantages in terms of access to an established operation and customer base, it can also present the risk of heightened exposure to integrity, reputation and corruption risks (including – in some cases – inheriting liability for illegal acts). Failure to identify and manage these risks during the pre-acquisition or pre-investment due diligence phase can result in significant and costly legal, regulatory, commercial and reputational issues.
M&A Integrity Due Diligence (“M&A IDD”) is the gathering of independent information to gain an understanding of – among other factors – a target’s business background, track record and reputation. M&A IDD is now considered an established element of good corporate governance and an essential part of the overall due diligence process, and provides a detailed insight into a target company and its management, enabling clients to identify potential risk issues during the negotiation stage and to develop a plan for mitigating these risks.
Over the past 17 years, our 250-strong specialist IDD team has conducted many hundreds of M&A IDD projects on acquisition targets and potential JV partners worldwide. Working to a proven methodology with strict quality control procedures, we gather information through a combination of public record research and enquiries through our network of trusted outside (human) sources in or familiar with the relevant jurisdiction and sector.
The scope of each project is tailored to focus on our client’s key concerns, however our work might typically include gathering information in relation to the following:
- The beneficial ownership and management structure of the target (including any hidden beneficial owners or other influencers).
- The business backgrounds, track records and professional reputations of the target, its key shareholders and management; where relevant, we might also seek to understand the initial source of wealth of the founders of the company.
- The political and government links held by the target, its key shareholders and key management (and the impact of such government links on the target’s activities).
- The involvement of the target, its key shareholders and key management in ‘noteworthy’ issues (such as previous business failure; reports of financial problems; involvement in major business disputes or litigation; or involvement in illegal or unethical activities, namely: corruption, bribery, fraud, terrorist financing, money laundering or organised crime).