In October, the U.S. Department of Justice (DOJ) made a significant announcement, aiming to provide a degree of assurance to firms involved in mergers and acquisitions (M&A): acquiring firms will face no penalty for timely voluntary disclosure of any criminal conduct of the organizations they have acquired. This Safe Harbor Policy was unveiled by U.S. Deputy Attorney General Lisa Monaco to bring a sense of clarity to corporate America and their advisers who are in the throes of M&A transactions.
JD Supra reports on the notable implications this policy may have for companies concerned about the legal risks and ramifications associated with M&A. The policy bolsters the case for rigorous environmental due diligence in the M&A process. Given the potential liability for legal violations by the acquired company, such diligence can illuminate those risks and enable potential buyers to take preventive measures. Particularly in industries or cases where environmental concerns are especially pronounced, these steps could make a meaningful difference.
A primary result of this Safe Harbor Policy seems to be inducing a stronger emphasis on thorough due diligence investigations, especially in relation to environmental matters. While due diligence has always been an integral part of M&A transactions, the DOJ’s Safe Harbor Policy increases its importance by potentially exempting acquiring companies from certain penalties – providing, of course, cases are disclosed in the proper manner and timeframe.
The twists and turns of M&A transactions necessitate a comprehensive understanding of all facets of the target company, including its potential liabilities. The Safe Harbor policy not only reemphasizes this point, it might also offer a lifeline to companies that are proactive and transparent about the legal risks associated with those they acquire.
In conclusion, this DOJ policy may serve as a valuable incentive for companies to invest time and resources into a more careful scrutiny of potential acquisitions, thereby mitigating potential future legal issues. Medicating a stronger culture of transparency and accountability within an often volatile M&A landscape could be a valuable side-effect of this Safe Harbor Policy.