FCPA Risks and Acquisition Integration Challenges
Chief compliance officers have devoted significant efforts to conducting pre-acquisition due diligence of a proposed target companies. I do not intend to diminish the importance of pre-acquisition due diligence, but I have noticed companies are increasing attention to post-acquisition integration planning and execution.
There is no question that disruption in the integration process can be very harmful to the overall success of an acquisition. Companies that acquire companies and fail to focus on the integration process are likely to suffer real and significant bottom line reductions. On the other hand, those companies that devote attention and effort to integrate new companies and assets can maximize gains over their competitors.
Compliance officers have to use the integration process as a significant opportunity to build internal relationships with their companies. By engaging in a comprehensive integration process the compliance officer can identify issues early in the process, work closely with the business to understand their operations and form important strategies and buy in for compliance issues.
In my experience, I have seen some common practices for effective integration procedures:
- A responsible committee with a designated chair or co-chairs: An integration committee should be established early in the acquisition process. The members should include a representative from every function. A chairperson or co-chairs should be appointed by senior management to run the committee. Members should design specific tasks and create timelines for assignments in their respective responsible areas. The chairperson(s) should report regularly to senior management. The more time and effort devoted will reap more effective results.
- The scheduling of regular integration planning meetings. The integration committee should meet weekly so that tasks are monitored and assigned as needed. Each member should understand his or her responsibilities and should be held accountable for their tasks.
- Detailed timelines and schedules for completing tasks. A master timeline or project map should be maintained so that overall progress can be measured and issues identified early in the process.
The success of an integration committee often depends on the chairperson(s). A company should designate a senior executive who has strong management and collaboration skills. The integration process is critical to a seamless transition for new company operations and employees.
A chief compliance officer has to plan for integration of new employees, third parties and critical compliance functions. Initially, CCOs will focus on training of the new company personnel, and onboarding of new employees. Many CCOs will visit new company sites and conduct in-person training to maximize the opportunity to promote a new compliance program to the employees. It is an important opportunity to advance a company’s compliance program to the new company.
CCOs also should conduct an anti-corruption audit of the new company after closing. Pre-acquisition due diligence is important but often is not detailed enough to verify the absence of bribery. A post-acquisition audit should be conducted soon after the closing to ensure that no bribery is occurring or that unaddressed significant corruption risks exist.
In many cases, senior executives can play a critical role in emphasizing the importance of ethics and compliance to the new company employees. Employees at the acquired company are often anxious or excited about new ownership and CCOs should recognize quickly the prevailing concerns among the new employees. CCOs usually can build on this initial meeting to reassure the new company employees and establish open lines of communication to address their concerns.