2021 LS&HC Horizons - Flipbook - Page 40
Post-acquisition integration: a compliance and disputes checklist
Acquisitions represent key opportunities for
life sciences companies. But new distributors,
suppliers, vendors, and other business partners
bring risk as well. Shortcomings in postacquisition compliance integration can result
in successor liability under the U.S. Foreign
Corrupt Practice Act (FCPA) and other anticorruption laws. An essential aspect of ensuring
a smooth and successful integration is creating
a holistic and consistent risk management
regime including compliance and disputes. It is
critical to conduct post-acquisition compliance
and dispute resolution review in tandem, so you
are prepared if compliance requires an exit or
dispute resolution. Here’s our checklist on what
to look for:
• Set-up an integration plan with a layered
and risk-based approach. Not all business
partners can – or should – be reviewed
immediately and with the same intensity.
Assess the key risks and assess higher-risk
• Use objective criteria to categorize business
partners. Previous adverse findings, higher
revenues, riskier geographic regions,
activities beyond mere distribution, etc. The
more discretion the third party has, the
higher the risk.
• Adjust your review to the category.
The higher the risk profile, the more detailed
the review. Key elements of a review can be:
review of prior audits, public source data,
reviewing contracts for commercial terms
and compliance provisions, background
checks, business partner’s compliance
system sufficiency, in-person or remote
interviews, and exercise of audit rights and
• Make efficient use of existing information.
Previous diligence, internal audit/
investigation reports and contract reviews
are a key source. Assess whether prior
findings were addressed and remediated or
they form a pattern.
• Understand legal boundaries. The review at
all points needs to comply with applicable
laws, in particular data privacy and
competition laws. Violations can result in
new risks for the company and the business
• Involve the business. Good relationships
with business partners are a key
goal. Involving business contacts and
communicating the background and goals of
the review helps to increase cooperation and
make the process run smoothly.
• Document your efforts. Draft a report
on the review, its outcome, and the steps
taken. Such report might be needed to make
your case of sufficient post-acquisition
compliance with authorities. Keep in mind
how to ensure privilege applies under U.S.
and domestic laws.
• Review the termination provision.
Understand the grounds for terminating for
cause and not for cause. Be aware of notice
and cure periods.
• Define potential liability. Identify
limitations of liability clauses to assess the
scope of potential claims.
• Analyze the dispute resolution clause. Find
the governing law and check whether the
contract provides for arbitration or domestic
litigation. Be on the look-out for mandatory
negotiation or mediation.