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.

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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