April 26, 2023
Do Buyers Need to Change their Approach to Cross Border Due Diligence?
The DOJ has recently commented on rewarding buyers that engage in careful and detailed diligence on a target company’s compliance efforts and address post-acquisition issues promptly and properly. Citing these comments, this Morgan Lewis article argues that the typical risk-based approach to due diligence in cross-border transactions may need to be reexamined:
One thing is clear: maintaining the status quo of using template language, relying on representations or certifications, and conducting post-closing “clean up” carry new risks for investors. Within this environment, it would be prudent for investors and US targets preparing for investment to update their diligence approach—whether checklists, questions, document collection, or deal documents.
The article also points to the Biden administration taking an expansive approach to national security—encompassing topics like corruption, healthcare, biotechnology, telecommunications, public welfare, financial well-being, and climate change—and recommends that buyers consider updating diligence efforts and collecting related supporting documentation on a long list of topics identified in the article, if the goal is to minimize national security risk to any cross-border transaction.
– Meredith Ervine