Support de présentation sur le thème de la due diligence anti-corruption dans les opérations de M&A, dans le cadre de la conférence du Cercle Montesquieu du 29 octobre 2017.
Commission grand sud cercle montesquieu 29 octobre 2017 présentation de jan holtzhäusser
1. Anti-corruption due diligence
in private company
acquisitions
Conférence du 30 November 2017
Faculté de Droit de Toulouse UT1
Cercle Montesquieu - Commission Grand Sud
Jan Holtzhäusser
Avocat à la Cour
2. Overview
• FCPA resource guide
• UKBA guidelines
• Assessment procedures of business partners (Sapin 2)
• Scope/process of due diligence
• Dealing with identified corruption risks
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3. Potential bribery and corruption risks for buyers
• Criminal investigation and civil recovery
• Target’s value may be distorted
• Loss of public sector contracts
• Loss of key officers or employees
• Reputational damage
• Substantial remedial costs
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4. Buyer’s potential liability for bribery and corruption
• UK
Failure to prevent bribery?
Adequate procedures defence
Due diligence investigation establishes the
adequacy of its procedures
• France
Existence of a compliance programme?
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5. Purpose and scope of anti-corruption due diligence
• Identify, counter and manage the investment risk.
• Proportionate/risk-based level of diligence (new
markets/countries).
• Scope of diligence influenced by :
Transaction timetable
Parties’ bargaining position
Level of information available
Extent of buyer’s resources and appetite for risk
Size of stake acquired
Applicable anti-corruption laws
Transaction’s structure (bilateral or auction sale)
Jurisdiction/industry sectors 5
6. Process of anti-corruption due diligence
• Making an initial assessment of the corruption risk
Publicly available information
Key corporate information
High risk jurisdictions
T.I.: the Corruption Perceptions Index, the Bribe Payers Index
Nature of the business and industry
T.I.: Corruption by topic pages
Use of intermediaries and agents
Public sector contracts
Competitors’ corrupt practices
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7. Process of anti-corruption due diligence (cont’d)
Anti-corruption investigation
Is the target adequately managing corruption risk and not
engaging in corrupt practices?
Key issues to assess
Target involved in corrupt practices in the past?
Likely that corruption is taking place, how widespread is it?
Adequate anti-corruption programme in place?
Likely impact of potential past or current corruption on the
target business?
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8. Process of anti-corruption due diligence (cont’d)
Assessing policies and procedures
Target’s approach to reducing bribery risks?
Compliance policies, training materials, audits and
reports?
Procedures in place to prevent bribery?
Commitment to zero tolerance? Who is involved in
prevention procedures?
Third-party agents’ selection, checks and
monitoring.
Corruption indicators.
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9. Process of anti-corruption due diligence (cont’d)
Common red flags of bribery – French example (SCPC/TRACFIN
guide)
Agents and consultants
Purchasing and contracting
Common areas of high corruption risks
Gifts/entertainment.
Involvement of high-risks countries and offshore countries.
Use of cash.
Procurements/negotiation of significant contracts.
Facilitation payments.
Conflict of interest situations.
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10. Process of anti-corruption due diligence (cont’d)
Limitations on anti-corruption and due diligence
Documentation.
Accounting manipulation.
Seller’s management team reluctant to incriminate itself.
Confidentiality clause.
Anti-corruption due diligence report
Review carried out alongside the negotiation of the SPA.
Information communicated immediately to the buyer’s negotiating
team.
Problematic issues raised within the buyer before approving the SPA.
Report may, if corruption is suspected, recommend remedial
actions/contractual protection.
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11. Dealing with identified corruption risks
Seeking a price adjustment
Unlimited fines. Reputational damage’s evaluation?
Requiring remedial action
Resolving corrupt practices or risks prior to completion, as a
condition to the SPA. Impractical?
Excluding tainted assets
Restructuring a share purchase as an asset purchase to exclude
contracts obtained through bribery
Obtaining contractual protection
Negotiating an indemnity in the SPA
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12. Contractual protection
Anti-corruption representations and warranties
To encourage the seller to disclose prior to signing.
To give the buyer legal recourse against the seller
post-completion.
An escrow account may secure the seller’s potential
liability.
Anti-corruption related indemnities
• Against specific risks identified during the due
diligence or through disclosure against the
warranties.
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13. Post-completion monitoring
• Taking promptly any remedial action to address risks
identified during the due diligence.
• Monitoring the seller’s R&Ws and indemnities,
before the expiry of any warranty/indemnity claim
limitation period.
• Target’s policies to be harmonised with the buyer’s
anti-corruption programme.
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