Undertaking M&A? Put compliance at the top of your to-do list
Article 3 minute read

Undertaking M&A? Put compliance at the top of your to-do list

26 October 2018

Compliance is often the last thing on the agenda when going through an acquisition, and it can result in overloading an already-stretched in-house legal team.

If you’re shooting for a fully-integrated and legally sound compliance programme for your newly-merged or acquired company, the groundwork must be done well before the ink has dried on the M&A deal.

The most common mistake we see companies make when it comes to legal functions during M&A - is inaction. Typically the focus is on the financial aspects of the deal, and little thought is given to the legal structure that underpins it all. But knowing this structure is compliant is crucial, because if it’s not, it can directly affect your ability to do business and severely devalue the company you have just purchased. In some countries, your directors can also face serious personal liability.

If you want a strong international compliance programme for your newly acquired company, here’s where to begin.

Health checks

In cases of a full acquisition, checking the ‘health’ of your new entities is vital to ascertain compliance. Have the sellers kept up with all necessary filings in recent years? Do we know who the directors are? An entity compliance healthcheck is recommended to ensure the entities that you’re taking on are in good shape. Health checks conducted by TMF Group can match and review all entity information from local public records, local statutory records and internal corporate databases, so you get the complete picture.

Legal support

There are many essential tasks that come with acquiring new entities; company name and address changes, updating director information, Ultimate beneficial owner (UBO) registrations and making all the necessary filings in line with local regulatory requirements. Some companies may have the in-house resource to absorb the work, but if you have a limited international footprint, an acquisition could easily increase the number of entities in your portfolio by 30 to 50 per cent. Does your internal legal department have the bandwidth and know-how to manage all your new entities and update all necessary information within the timeframe set out in the transition services agreement (TSA)? Or will they be quickly overwhelmed?

We worked with a real estate company in Luxembourg that acquired 30 entities in six countries. They were faced with the task of updating address and directorship details at the same time as needing to transfer corporate, accounting and tax files, all within a strict, four-and-a-half-week period. Tasks such as this are perfect to package up and allocate to a third party provider, as the scope of work can be pre-determined and there are clear deadlines. The benefit of partnering with TMF Group is our global footprint. No matter where in the world your new entities exist, we have legal experts on the ground who understand the regulatory nuances and can help you meet all local requirements.

Integration with your existing compliance programme

If a compliance programme already exists with the parent company, integration of new entities should be a relatively smooth process. Where the programme already involves a provider such as ourselves and dedicated software, we can oversee the entity additions and continue to manage the database and all necessary future filings. When your international compliance programme involves multiple vendors an acquisition is a great time to consider bringing those all under one provider who can help gain efficiencies

If you are building your international compliance programme from scratch, consider whether you have the headcount and local corporate secretarial knowledge to establish and maintain it internally. If not, a third party provider once again becomes the ideal solution. Our experts neatly fill any knowledge and support gaps in your required jurisdictions, complementing your in-house teams and giving them a much-needed support buffer for times when work piles up.

Ongoing support

Newly-acquired entities need to be maintained long after the end of the TSA, and for many companies it’s unrealistic to dedicate internal resource purely to overseeing compliance.

TMF Group’s full range of corporate secretarial services allows for standardised processes during and post-M&A. We can take of recurring filings, corporate changes and retrieval of corporate documents from official registries. We can even act as your partner to help coordinate with other service providers around the globe.

Need more information? Contact us today.

Meet our experts at Compliance Week Europe 2018 – 12 & 13 November in Amsterdam.

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Written by

Mike Morroni and Yvette van Loon

Sub Regional Director, Business Development, Americas, and Regional Commercial Director

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