Bribery and corruption in M&A: identifying potential exposure and remediating historical problems

19 September 2018

This year PwC’s Global Economic Crime and Fraud Survey saw the reported rate of bribery, corruption and other economic crime rise in every region across the 123 territories surveyed.  At the same time public expectations are rising in their demands for accountability. It is becoming increasingly unacceptable for corporates to ‘turn a blind eye’ to issues they may encounter.

In M&A targets, existing or historic bribery and corruption present obvious risks if due diligence is not robust, but there is also the opportunity for buyers and investors to raise standards in these companies, preventing and remediating issues that are identified.  With corruption risks and investigations both becoming increasingly international, in this blog we have summarised the latest US and UK prosecutors’ perspectives, plus key steps to reduce the risk of corruption.

Prosecutors’ views

In the US, Matthew Miner, Deputy Assistant Attorney General in the Department of Justice recently shared insight into the US prosecutors’ views on Foreign Corrupt Practice Act 1977 (FCPA) enforcement in an M&A context.  Mr Milner's speech continues the international trend by prosecutors of encouraging self-reporting and remediation by stating that the DoJ will apply the principles contained in the FCPA Corporate Enforcement Policy for successor companies.  This policy is designed to encourage companies to self-report, cooperate with any investigation and remediate any deficiencies.  In return they will have the opportunity to manage the process, reduce penalties, and/or potentially avoid prosecution.

In the UK similar views have been shared by the equivalent prosecutor for bribery and corruption, the Serious Fraud Office.  Prosecutory guidance suggests that corporate prosecutions are made less likely if “the company in its current form is effectively a different body to that which committed the offence” (see CPS Guidance on Corporate Prosecutions). Effectively giving companies the opportunity to change its culture and approach to compliance and ethics and remediate breaches in order to avoid prosecution.

What can companies do?

At any stage of the M&A process, due diligence has to be reasonable and proportionate and corruption and financial crime more generally is no different. Some typical key actions may include:

  • A review of relevant policies, procedures and material contracts;
  • Interviews with key management and staff across a range of functions to assess the corporate culture;
  • Corporate intelligence on the business, key owners, directors and key associated persons;
  • Interviews and site visits with external parties to assess the target’s external profile and third party relationships;
  • Walk through of systems and controls to ensure policies and procedures have been implemented; and
  • Transaction testing

Ultimately, you need to be satisfied that you understand the culture of any target, their key third party relationships and their approach to business, and in the event corruption issues are identified during the M&A process be proactive about remediating them.


Richard Wood

Richard Wood | Head of Legal Due Diligence Services
Profile | Email | +44 (0)20 7212 2451

Chris Cartmell

Chris Cartmell | Senior Solicitor
Profile | Email | +44 (0)20 7212 8849



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