Anti-Bribery Due Diligence in Mergers and Acquisitions
Mergers and acquisitions, which involve integrating two or more companies and their assets into one, are strategic steps that are common in the business world. The purpose of the merger and acquisition, among others, are to reduce competitors, synergize, and increase supply-chain pricing power.
However, combining two or more companies carries various risks. Therefore, it is normal for every company that will undergo a merger and acquisition to conduct due diligence (Legal Due Diligence/LDD) of their target company. LDD would involve the buyer company to conduct a thorough inspection of their target company, this would obtain material information or facts that describe the actual condition of their target company.
The presence of ISO 37001 strengthens the existing risk management system. The standard anti-bribery system requires companies to conduct due diligence related to the level of risk of bribery in connection with certain transactions, projects, activities, business partners, and personnel that fall into these categories.
Unlike LDD, Winarso S.H, M.H, an ISO 37001 consultant and experienced legal practitioner, said that ABMS due diligence tends to be directed for partners rather than the company’s prospective partners. In other words, ABMS due diligence is done commonly after the target company becomes a part of the buyer company or post-merger / acquisition integration.
“Due diligence (LDD) needs to be done if the company will merge and acquire other companies. If we apply anti-bribery management system (ABMS), due diligence is carried out based on the level of risk of target companies’ activities,” explained Winarso.
“ABMS due diligence is more for partners, or due diligence is done after the purchase has occurred, or when the target company has become a part of the buying company,” he continued.
According to him in the ISO 37001, there is no clause that states that a company should conduct due diligence before making a purchase. However, the company can expand the scope of the definition in the anti-bribery policy.
By conducting anti-bribery due diligence, the company can assess the level of risk of bribery based on the company’s activities after the target company has integrated and, therefore, can create an anti-bribery system that matches the magnitude of the assessed risk.