New M&A Safe Harbor Policy for Voluntary Self-Disclosures: Weighing the Risks vs. Potential Benefits

Description

On Oct. 4, 2023, the DOJ announced its new M&A safe harbor policy for voluntary self-disclosure of criminal conduct, which formalized a practice that had already been in place in specific M&A cases. The new safe harbor policy applies to criminal conduct discovered by acquirers during the course of M&A transactions. Acquiring companies that qualify under the safe harbor will be entitled to the presumption of a criminal declination, and the acquired company may also be available for cooperation credit if it meets certain criteria.

The safe harbor creates opportunities for buyers to address challenging compliance issues that they might inherit through an M&A deal, while also creating new pressures on buyers to thoroughly diligence the target companies' practices.

To qualify under this new policy, acquiring companies must self-disclose misconduct they uncover within six months from the date of closing, cooperate with the DOJ during their investigation, and undertake full remediation within one year from the date of closing. The policy does not apply to misconduct that was otherwise required to be disclosed by law, is publicly known, or already discovered by or disclosed to the DOJ. The policy also does not affect civil merger enforcement. More prompt disclosure may be required under the policy if it implicates national security concerns.

Meeting the tight timelines under the new policy to qualify for the presumption of declination requires proactive, comprehensive diligence both pre-closing and post-closing. Developing a robust integration plan, including compliance training, and establishing reporting channels for compliance-related issues can help position an acquirer to identify misconduct where diligence was limited during the acquisition process.

Listen as our authoritative panel discusses the DOJ's new safe harbor policy and provides practical guidance for advising M&A transactional parties about their enforcement risks and the potential awards of self-disclosure.