While Canadian organizations are quick to take care of the necessary financial due diligence when they expand through mergers and acquisitions (M&A), it’s increasingly important to pay attention to a broader set of risks, including acts of fraud and corruption by the target company.
According to PwC’s 2018 CEO Survey, 44% of Canadian CEOs see M&A as an important strategy for growth. As they become more aggressive in making deals, Canadian companies can find themselves racing to get agreements signed in new and high-risk markets where acquisition targets may operate by unwritten and different rules than organizations in Canada follow.
Before, and even briefly after a deal is signed, dealmakers have the opportunity to add to their M&A checklist by undergoing thorough forensic due diligence to identify fraud, corruption or unethical business practices that aren’t often found in traditional financial diligence.
The risks of not undergoing a thorough M&A due diligence process can be significant: erosion of deal value, legal and regulatory sanctions and reputational damage, to name just a few.
It’s important to minimize those risks by looking deeper into the target company’s operations to examine its internal controls, identify and investigate suspicious payments and transactions and assess compliance. But as our 2018 Global Economic Crime and Fraud Survey found, Canadian businesses perform less forensic due diligence during the acquisition process than their global counterparts. So there’s a significant opportunity for dealmakers to ensure the deal is a success and get even more out of their M&A activities without unduly slowing the process down.