By Cécile Nzengu | Director of Operations Skan1
Although the Sapin II law has set the rules of the game concerning companies’ commercial partners, M&A transactions do not yet fall within its scope.
Thus, while compliance procedures are flourishing within companies, it is clear that integrity due diligence is still far from being part of the “standard package” of audits engaged by M&A players.
The latter, armed with their in-depth knowledge of the target from an operational, legal and financial standpoint, often tend to rely on the positive impression they have of their interlocutors and only too rarely question their integrity or business ethics.
However, as the French Anticorruption Agency (AFA) reminds us in its guide to good M&A practices, this is risky to say the least because the penalties in terms of liability are high and the possible sanctions, whether financial, operational or reputational, can be particularly heavy.
On this last point, the AFA is very clear. It recommends, prior to the signing of any M&A deal, to lead audits on: the target’s history and activities, its shareholding structure, its managers and beneficiaries, its potential links with public officials, its current anti-corruption system, its risk mapping and any potential cases or ongoing sanctions.
Therefore, we understand that it is not only a matter of reassuring oneself on the profile of the target but also of identifying any element likely to favourably influence the conditions of its implementation (cf. the missions: A secret passion or a co-investor) or in the worst case scenario to compromise the planned operation (cf. our mission: A family affair).
In that sense, contrary to an unfortunately widespread opinion, the objective of integrity due diligence is not to “break the deal” but to secure it as much as possible by identifying possible blocking points and/or by removing doubts or grey areas potentially identified during the negotiations with the target.
For that reason, the scope of the integrity due diligence must be adapted according to the phases of the deal, according to precise specifications previously validated by the M&A teams leading the operation. The goal is to ensure the best possible match between the objectives set by the buyer and the resources and costs to be implemented to secure the transaction.
Learn more about Skan1’s M&A Desk and our range of services.
Cécile Nzengu: Skan1’s Operations Director since 2018, Cécile has developed over the last 20 years a strong expertise in the fields of M&A and Business Development (integrity due diligence) as well as in (pre-)litigation (litigation support). Cécile holds a Master’s degree in Business Law (Paris 1 Panthéon Sorbonne), an LLM Magister Legum (Universität zu Köln) and has completed the Master in European Business of EAP/ESCP