Newspaper article The Journal (Newcastle, England)

New Risks Ahead as M&A Activity Returns

Newspaper article The Journal (Newcastle, England)

New Risks Ahead as M&A Activity Returns

Article excerpt

Byline: Debra Halcrow

IN SPITE of remaining economic uncertainty, the M&A market displays signs of resurging activity. However, with this fragile recovery comes a new risk in the form of new legislation. The Bribery Act is due to come into force in April 2011. Are deal doers prepared? Much has been written on the Bribery Act. It consolidates various pieces of existing legislation, much of which relates to offences for individuals involved in bribery and corruption and it adds some new significant requirements. The Act strengthens UK law and should make it easier to enforce, resulting in heavy fines or even imprisonment.

However, less attention has been drawn to the significant development for the M&A market. The Act introduces a new offence for an organisation which fails to prevent bribery. Let's pause to consider this. For the first time, not only will the individual perpetrator be liable, but the organisation itself will face unlimited financial exposure, including being disbarred from tendering for Government contracts, and reputational damage.

What's more, this organisational exposure arises not just from errant employees. Any person "associated" with the organisation puts it at risk, which means anyone providing a service. So, manufacturers, suppliers, distributors and agents also pose a serious risk, particularly those that interface with foreign public officials. But consider who else would be caught. Accountants, lawyers, off-shoring providers, recruitment consultants, shipping agents. The list goes on.

As if that wasn't enough, the Act turns a blind eye to geographical boundaries. Not only are UK companies caught, but so are foreign companies who happen to conduct business in the UK (regardless of where in the world the offence takes place).

Those looking to acquire better take note. Liabilities can be inherited. Take heed of a recent prosecution in the case of US v Bourke under the Foreign Corrupt Practices Act (a watered down version of the Bribery Act). Bourke had failed to identify that the venture he was investing in was involved in bribery and corruption. Consequently, and despite losing his $8million purchase price, he was subsequently deemed to have been a participant in those offences even though, allegedly, he had no knowledge. …

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