Anti-corruption Due Diligence In Cross-border Merger And Acquisition

In an M&A transaction,the acquirer is likely to bear responsibility for the previous illegal activity of the target company and this is called successor liability.If the acquirers do not make a comprehensive understanding of the compliance risk in the target company before the acquisition,they are likely to fall into an unexpected trap.At the same time,many Chinese companies that initiated cross-border mergers and acquisitions,due to factors such as cultural differences,language barriers,and geographical distance,were unable to take control of the target companies' anti-corruption compliance and did not have in-depth understanding.If the acquirers want to make a successful M&A transaction decision and avoid taking legal liabilities of the target company,they need to conduct effective anti-corruption due diligence activities to fully understand the anti-corruption compliance and past fraud of the target companies.Traditional legal due diligence mainly focuses on the legal risks on the target company's surface.It mainly depends on the documents provided by the target company and does not consider the possible fraudulent behavior of the company.However,some illegal acts such as overseas corruption are often difficult to identify in traditional legal due diligence because the target company or its employees cover up illegal activities through fraudulent means.The anti-corruption due diligence is a special in-depth investigation.It punctures fraudulent cover-ups to understand the high corruption risk and internal control systems of target companies,and is crucial for measuring the legal compliance risk of target companies and the risk of asset loss after acquisition.However,in the cross-border mergers and acquisitions transactions,only a few Chinese companies realized to conduct anti-corruption due diligence.Other companies later discovered that they inherited the responsibility of the unknown target company and failed to establish a compliance system in a foreign company in time to avoid illegal activities.It caused serious problems such as the loss of assets.Therefore,this paper attempts to examine the importance of the anti-corruption due diligence in cross-border mergers and acquisitions from the perspective of foreign corruption legal supervision in the United States and the UK,and summarizes the process of anti-corruption due diligence in practice,and then sorts out the problems in the practice of the anti-corruption due diligence.Finally,this paper aims to provide lessons for Chinese companies in cross-border mergers and acquisitions.