M&A: The often-overlooked hurdles of international compliance
During the lengthy process associated with an acquisition, whether or not it is an outright purchase of another entity or a carve-out of a larger organization, priorities usually drift towards financial considerations directly affecting the profitability of the exercise.
Nonetheless, many more factors affect the success or failure of an acquisition than just financial considerations. Process analysis, improvement and integration; as well as compliance considerations pertinent for not only the associated domestic operations but also the international entities taking part in the transaction, more often than not take a secondary place among the long list of tasks to be completed as part of a merger and acquisition (M&A) exercise.
If the acquisition is completed through a stock transaction, it then becomes the responsibility of the new owner to take over the compliance obligations for the new entities, involving the following:
- Getting an understanding of the compliance obligations per jurisdiction applicable to the entity
- Determining the current status of the compliance obligations in each jurisdiction
- Obtaining assistance to bring non-compliant entities back into compliance
- Identifying a process by which to handle the compliance requirements going forward
Furthermore, if it becomes necessary to secure entities in order to absorb the assets acquired, the list of tasks grows to account for the incorporation of the new companies as well as the necessary registrations to enable them to operate and to perform the necessary jurisdictional filings in order to remain in compliance.
In short time, the challenges associated to the compliance efforts for the foreign jurisdictions involved in the acquisition may become overwhelming, syphoning resources from more value add activities as well as generating a significant technical hurdle to the teams involved.
Finding a good partner to navigate from start to finish the international compliance challenges originated because of an acquisition is key to alleviate the initial hurdle as well as to secure peace of mind for the handling of the related obligations well into the future.