We invite you to read the opinion column written by our partner Álvaro Rosenblut on the challenges of the new Economic Crimes Law in M&A matters.
The implementation of the new economic crime law in our country marks a turning point in the regulation of the business environment, with significant repercussions for the field of mergers and acquisitions (M&A).
This legislation, designed to strengthen transparency and combat corruption, introduces a number of challenges that companies must carefully consider before embarking on these complex processes.
One of the pillars of the new law is the obligation for greater transparency in financial and business operations. This implies that, during the M&A process, the companies involved will be required to provide a much deeper and more comprehensive level of detail in their reports and audits. Due diligence, already a crucial process for assessing risks and opportunities, now requires even closer scrutiny.
Buyers should investigate not only the financial aspects, but also the ethical and legal background of the target company, to ensure that there are no implications of economic crimes that could have a negative impact post-acquisition.
In addition, data management becomes an even more fundamental aspect, especially in view of the impending new personal data protection regulations. Companies are facing increasing pressure to safeguard personal data and ensure compliance with strict privacy regulations.
Also, the requirement for more rigorous due diligence inevitably leads to an increase in the costs and time associated with the M&A process. Companies will need to invest in specialized consultants, auditors and lawyers who can ensure compliance with the new legislation.
This increase in the resources required may discourage some companies, especially smaller ones that may not have the financial capacity to bear these additional costs.
What risks should I consider?
The new law also raises the reputational risks associated with mergers and acquisitions. Companies must be extremely cautious not to partner with entities that may have a history of financial misconduct or corruption. A mistake in this regard can not only result in severe legal penalties, but also irreparable damage to corporate reputation.
Social networks and the media can amplify any controversy, making public perception management an essential and ongoing task.
To adapt to this new reality, companies must establish robust compliance and monitoring mechanisms. This includes the creation of dedicated risk management and compliance departments, and the implementation of advanced technological systems that enable continuous monitoring of all financial operations.
In addition, it is crucial to foster a corporate culture of integrity and transparency, where all employees understand the importance of compliance.
Source: e-Banking News, June 12, 2024.
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