Leveraging Data and Deal Terms to Meet the Demands of the DOJ's New M&A Safe Harbor

Monaco said that the DOJ did not want to discourage companies with effective compliance programs from acquiring companies with ineffective programs and a history of misconduct. This may be welcome news for companies looking for ways to manage their criminal successor liability risk in M&A deals. But the DOJ is also putting companies engaged in M&A on notice, as Monaco continued: "If your company does not perform effective due diligence or self-disclose misconduct at an acquired entity, it will be subject to full successor liability for that misconduct under the law."

This article describes the DOJ's new M&A safe harbor policy and also provides practical insights on how companies engaged in M&A can meet the DOJ's expectations. Given the relatively short time period acquiring companies will have to identify, self-disclose, and remediate criminal misconduct at the target company in order to fall within the safe harbor, companies should consider leveraging artificial intelligence and other advanced technologies to analyze data in the M&A due diligence process, which could provide efficiencies and increase the effectiveness of both pre- and post-acquisition reviews. Companies should also consider pushing for heightened post-closing protections from the target company in the deal documents because of both the safe harbor's increased incentives for voluntary disclosure of criminal misconduct and what may be a signal that the DOJ will be increasing its scrutiny of M&A deals.