Your company has just made its largest acquisition ever and your Chief Executive Officer (CEO) says that he wants you to have a compliance post-acquisition integration plan on his desk in one week. Where do you begin? Of course, you think about the 2012 FCPA Guidance but remember that it did not have the time lines established in the recent enforcement actions involving Johnson & Johnson (J&J), Pfizer and Data Systems & Solutions LLC.
While there are time frames listed in these Deferred Prosecution Agreements (DPAs) are a guide of timeframes; many compliance professionals struggle with is how to perform these post-acquisition compliance integrations. An article from the Harvard Business Review, entitled “Two Routes to Resilience”, Clark Gilbert, Matthew Eyring and Richard Foster wrote about business transformation which speak directly to the compliance practitioner to help create post-acquisition integration game plan.
The authors, reviewed the situation where an entity must transform itself, leading to a transformation the authors call “establishing a ‘capabilities exchange’- a new organizational process that allows the two efforts to share resources without interfering with each other’s operations.” That is what a compliance practitioner must accomplish through a post-acquisition integration in the compliance context.
Anyone who has gone through a large merger or acquisition knows how terrifying it can be for the individual employee. Many people, particularly at the acquired company will be fearful of losing their jobs. This fear, mis-placed or well-founded, can lead to many difficulties in the integration process. The creation of a Compliance Capabilities Exchange process which allows “the two organizations to live together and share strengths” and will coordinate “the two transformational efforts so that each gets what it needs and is protected from [unwanted] interference by the other.” There are five steps in this process.
Whatever compendium of steps you utilize for post-acquisition integration, they should be taken as soon as practicable. The earlier you can deploy these steps the better off your company will be at the end of the day. In an Ernst & Young white paper, entitled “Increased Oversight of M&A: An Expanding Role for Audit Committees”, it stated “Failed M&A can destroy a company's market value, destabilize its financial position and credit ratings, impair its strategic position, weaken the organization and damage the company's reputation”. This is particularly true for failed M&A compliance. One need only consider the Latin Node FCPA enforcement actions where the acquiring company had to write off its entire investment.
Three Key Takeaways
This month’s podcast series is sponsored by Michael Volkov and The Volkov Law Group. The Volkov Law Group is a premier law firm specializing in corporate ethics and compliance, internal investigations and white collar defense. For more information and to discuss practical solutions to compliance and enforcement issues, email Michael Volkov at email@example.com or check out www.volkovlaw.com.