Hypothetical:
A Large Distiller recently closed an acquisition of a smaller distiller in a jurisdiction that heavily regulates sales of alcohol and that has a perceived high risk of corruption. Large Distiller had conducted due diligence on the smaller distiller prior to the acquisition, but was not able to receive much information on the smaller distiller’s use of third party representatives and distributors. The due diligence did not find any indication of any ongoing or previously made improper payments and the smaller distiller represented that there had not been any improper payments or investigations of improper payments in the last five years. However, the smaller distiller did not have an anti-bribery policy. Large Distiller’s VP of Internal Audit has requested that, following the close of the transaction, Internal Audit conduct an FCPA audit of the smaller distiller. VP of Sales has said that such an audit is important, but that it should wait for “a couple of years” while Large Distiller integrates the smaller distiller into the business.
Key Considerations:
- The DOJ and the SEC state in the FCPA Resource Guide that a company should ensure, “as quickly as practicable,” that the company’s compliance policies apply to an acquired company.
- The DOJ and the SEC also state that a company should “conduct an FCPA-specific audit of all newly acquired or merged businesses as quickly as practicable.”
- The more limited the information acquired pre-transaction, the more acute the need to perform post-transaction audits and due diligence.
- Post-acquisition due diligence and integration should be conducted within several months of the acquisition and should include: reevaluating smaller distiller’s relationships with third parties using Large Distiller’s policies and standards; applying Large Distiller’s anti-bribery compliance policies, procedures and key finance and compliance controls to smaller distiller; including the smaller distiller in the appropriate audit cycle; training smaller distiller’s employees and set up a system for training new employees at smaller distiller; and documenting all post-transaction audit or due diligence steps.