The Department of Justice (DoJ) has announced a new voluntary safe harbor policy for self-disclosures made in reference to mergers and acquisitions. This revelation was made public by Deputy Attorney General, Lisa Monaco, last Wednesday.
Under the guidelines of this new policy, companies that voluntarily report potential violations occurring within an acquisition target’s business will not face prosecution. This marks a strategic shift in the DoJ’s approach to dealing with potential legal violations in M&A deals, giving corporations a safeguard while keeping the justice system informed of any potential breaches.
This policy will no doubt contribute to a clearer and more transparent environment for entities involved in mergers and acquisitions, offering them protection against unforeseen legal consequences if they choose to disclose any potential wrongdoings. Moreover, by fostering an environment that values self-disclosure, the DoJ is encouraging honesty and accountability within corporate M&A activities, ultimately promoting trust and integrity within corporate law culture.
The specifics of the policy, and a more detailed analysis, can be found here: JD Supra.
In practical terms, this policy means that companies in the process of acquiring another business can continue with the deal, even if they discover violations, as long as they report these violations to the DoJ. This might significantly change business behavior, making it less of a risk to acquire businesses in sectors known for frequent legal issues.
This policy will have a broad impact on how M&A deals are executed, the risk assessment process involved in due diligence, and ultimately, the type of deals that get the green light.