Report to the Board WB and Other Intended Recipients on Risk and Compliance Regarding
During the Post-Integration Process
It is the goal of every business to grow. Companies in trying to achieve growth expand their
business through mergers and acquisitions and other types of deals. These activities of growth
come with potential risks and threats, some of which attract attention and scrutiny of the
activities of shareholders by various government regulators and agencies tasked with the
investigation of various economic crimes (Scott, 2013) . The increasing attention of regulators to
companies that are engaged in acquisition has made it necessary that companies have teams that
are mainly focused on understanding and evaluation the potential risks. Some of the risks include
not being able to comply with the relevant regulatory laws and regulations. Risk and
Compliance departments have been tasked with working with different departments to ensure
that compliance with regulations takes places.
WB is a company operating in the beverage manufacturing industry producing non-alcoholic
drinks in the United States have recently decided to undertake growth through expansion of their
business operations. The decided to engage in acquisitions to increase their market share. As a
consequence, the company is experiencing a period of change, and restructuring of its operations
to better reflect the needs of the expanded operations. However, there is fear that several
potential negative consequences as likely to be encountered from the expansion. For a company
that has prided themselves over the years of ethical and compliant approach to business, the
company what to ensure that potential risks and identified, evaluated, and compliance
mechanisms highlighted to enable them maintain their ethical and compliant business culture.
The paper is a report on ethical and compliance issues and mechanisms that the board of
directors of the company must take into consideration during this period of change, and
restructurings. Some of the issues that are the focus of the report include the role of compliance
and the compliance functions, and process and effect of change on workforce, that can be
addressed within the remit of compliance activities.
RISK AREAS IN ACQUISITIONS AT WB
Poor due diligence is one of the risk areas in the acquisitions made by WB. WB must have
understood the full picture of the deals in which they are entering into. For example, due
diligence could have enabled them to validate some of the assumptions relating to revenue and
costs synergies (Protiviti Inc., 2018) . This could have helped me know the financial impact of
some of the acquisitions. Although it has been mentioned that WB had conducted their due
diligence, proper due diligence which has identified the potential risks and opportunities, which
include exposure to negative synergies like the fact that some of the companies being acquired
have not must interest in ethical and compliant business. It has been identified that the
acquisitions have brought issues with integration of the workforce; these are some of the issues
that show that poor due diligence was conducted in the acquisitions. There is also potential of
retention of some of the key employees because at some point some of the departments of the
different companies have to merge rendering some of the employees redundant.
Security of Information is another risk area during acquisitions at WB. In any acquisition and
this case of WB, security of information regarding the company and the acquisition is a key
element in discovery and negotiations. Both WB and the sellers need to secure their documents
relating to business operations. It means that any documents that are sensitive as it is either
proprietary or important in the process of acquisition must be secured. There are numerous
instances where companies have had to cancel their acquisition plans because they are key
information that has leaked to the public. Securing documents is important because if they fall in
the wrong hands, such information can be traded and used during negotiation process. Such
instances are prohibited in the United States are they are considered to be insider trading.
Forgetting that organizational culture matters and failing to get the issues of the workforce right
is another risk issue that WB is facing in the acquisition. It has been mentioned in the scenario
that some difficulties are occurring within certain parts of WB which are as a result of the
differences in approach between new and more established staff. Among other things, one of the
issues is the fact that new employees who belonged to a different organizational culture are
coming to disrupt the existing organization culture, thus creating discomfort and conflicts among
It should be noted workforce discomfort and conflict is complex issues that even if efforts are
made to ensure that culture if the two companies engaged in acquisition are compatible enough
to create viability for the transaction, cultural and workforce issues will always be there for
solving (Moeller & Brady, 2014) . However, trying to address them before the acquisition is
important. WB should have considered workforce-related issues and find solutions before
making the final decisions to acquire other companies. Human capital is vital to the success of
any acquisition process because the process entails psychological process of winning minds and
Additionally, identification, incentives, and motivation are necessary for retention of talents, and
it forms part of the key driver in deal value because retention of workforce would make the
business work. Although the leaders of the companies engaged in acquisition have to be
speaking the same language regarding the transaction, its necessary that workforce whose
knowledge and work are critical to the operations are consulted and their issues resolved. Some
of these key workforces include plant operates, engineers, product developers, services
personnel, and salespeople (Sekhon, 2013) . The suggestions for what might have brought
discomfort at WB is because of the issues such the workforce is not being treated well
financially, or there is failure to fit into the entity from a cultural perspective. There is a
possibility that the critical workforce has been denied opportunities for managerial capacities
within the new entity company. The consequence of this is that such employees will develop fear
for their futures.
FOCUS FOR COMPLAINS IN POST-ACQUISITION INTEGRATION
In light of the evolving United States regulators approach to the enforcement of acquisitions, WB
has to emphasize the post-acquisition process. The post-acquisition process is not limited to
ethics and compliance issues. WB as the acquiring company has a long list of activities that need
to be completed for integration of the acquired company. WB, in order to succeed in the post-
integration process, has to dedicate significant resources to the acquisition project, which means
planning and execution early enough (Edwin & Miller, 2008) . There is the option of WB doing
very little as the acquired company is allowed to operate independently of WB. However, it has
been suggested that such decision is disastrous. This does not mean that there are companies that
have taken that route of acquisition and succeeded. In the context above, it should be noted that
there are two main compliance aspects, there are the business aspects of compliance for purposes
of post-acquisition integration, and there is the legal aspect of compliance that if not adhered to
results to legal consequence.
Business Aspect of Compliance for WB
The business aspect of compliance is one that is done to enable a company meets is ethical
standards as have been set, and in this particular case is the standards of compliance. Another
importance of such compliance is it ensures that the acquisition process is done in a manner that
brings sustainability, productivity, and profit-making after acquisition. WB recognized the
importance and role of post-acquisition integration. The department of compliance at the WB
believe the individuals who are in charge of the acquisition project must insist on the broad
representation of every company function in the process, which must include compliance and
ethics. WB has to take a task force approach, which means that the task force will on a regular
basis and come up with assigned responsibilities and tasks, for project participants to execute and
complete within a given strict deadline. In the process WB will be able to plan and address for
vital integration issues.
Compatible ERP Systems
Implementation of compatible Enterprise Resource Planning (ERP) systems is one of the key
post-acquisition integration issues that need to be addressed. The systems aid in business process
management, as it allows an organization such as WB which has just acquired another company
to integrate applications to better manager manage the business and automate several of the
back-office functions related to human resources, services, and technology (Volkov, 2018) . It has
been indicated that WB is reorganising many departments to reflect the needs of the expanded
business operations better. It should be noted that each company has similar departments as they
were operating in the same beverage manufacturing industry. It is prudent to similar marge
departments, which will mean the ERP systems that they have been used must be compatible to
create one chain of management of the various resources of the company.
Corporate Communication Systems
WB has to ensure that connection to corporate communications systems is connected promptly.
Corporate communication is one of the important aspects of successful company. Every business
must ensure that they create a system of communication with the customers, and the public in
general regarding the various issues that might arise in course of the business operations.
Effective communication must have one line of communication channel with proper hierarchy on
how information will flow. In acquisition, there are always two different communication
channels existing that must be harmonised for better and effective corporate communication. The
problems with having two such channels are the problem of the two channels communicating
different things regarding the same issue. Having one channel means that the organizations will
have one stand on issues. Additionally, since different companies have different standpoints o
different issues, having one will ensure they harmonise such standpoints.
The transition of Executives, Managers, employees to the Human Resource Programs
Executives, managers, and some of the employees at WB are critical to post-integration success.
Such human resource must be embraced early and given some insight as to the future of the
company, which includes as an explanation of what their future will be in the company (Deloite,
2013) . This will helps avoid such people panicking, leading to them leaving the company as they
look for other companies that can give them opportunity. Management credibility at WB will be
lessened by the short-sighted reductions in operations costs of operations which brings
termination of critical “functional experts” needed to execute the business plan after the
acquisition deal is done. From labour expert perspective, it is important that during this post-
acquisition integration that informal and advance consultations with the employee unions during
the post-acquisition process, s that execution of some of the reduction risks that are associated
with employee panic. It is also important that a communication plan that targets important
internal and external stakeholders is created so that some of the investors do not become worried
about the situation of the WB during the post-integration era. This will help in proper transition
of executives, managers and employees to the human resource system.
Integration of Physical Facilities, Staff, and Corporate Operations
In the acquisition, it is obvious that the different companies involved in the process have
different physical locations for conducting business operations. As a company, the
manufacturing process can remain at the same physical facilities as they were, however, the
management of the company must relocate to one physical facility where most of the
management issues and decisions will be made. If management is to move to one physical
facility, then it will mean that the staff and corporate operations will also have to be integrated to
ensure that there is harmony in organization and operations in the physical facility. As have
been mentioned earlier, the ERP system that is responsible for the human resource management
will have to be integrated between the different companies that are being acquired so that WB
has one human resource management system (Jain, 2014) .
After the integration of the staff and corporate operations of the companies, the staffing
transitions have to be taken into consideration. Based on the scenario, there is problem of
employee integration at the post-acquisition WB. Such a problem must be solved as fast as
possible, as they can affect productivity of the company negatively. One of how the transition
can be managed is through organization departmental seminars. This will aim to ensure that the
different new staff are familiarised with the organizational culture and management philosophy
so that they do not find their actions to be offensive to the ethical standards of the company. It is
after proper transition of the staff that the company operations can be efficient and effective.
Assumption of Financial Operations
Harmonization of the financial operations is also another critical aspect of the post-integration
era. Assumptions of financial operations include invoice-to-payment process, accounting
controls, financial authorizations, and other critical control (Khazanchi & Arora, 2016) . To avoid
financial challenges, the financial system must have one origin, thus making it easy to monitor
the movements of the various finances to avoid having problems with taxations and misuse of
funds. It means that ERP system for the two finance departments must be merged to ensure that
the financial channel is one for proper monitorization of the movement of the funds.
Regulatory Risks and Compliance at WB
Acquisition, as part of company restructuring, is regulated by several laws in the United States.
Compliance with the regulations is important as the risks of non-compliance are severe and can
result in closure of the operations of the company in the post-acquisition era. Although the issues
have legal consequences, they are mostly financial, health and ethical.
Ethical Regulatory Compliance
From an Ethics and Compliance perspective, the post-acquisition integration will include
creating an Ethics and Compliance Code of Conduct, Policies and Procedures (McKenzie, 2017) .
The acquired company must ensure that they are its code of conduct, compliance policies and
procedures are harmonised as quickly as possible to the business operations and ethical standards
at WB. It will mean that the two companies undertake a prompt integration of the acquired
company into WB’s intranet portal and other ethics and compliance resources.
WB has to prioritize ethics and compliance training of the acquired directors, officers, and
employees. Based on the risk profile of the acquired company, the acquired company should take
considerations regarding the training of third-party business partners and representatives. Such
training should focus on the Foreign Companies Practices Act (FCPA), which is a law in the
United States that prohibits the U.S individuals and companies from paying bribes to foreign
officials for furtherance of business deals such as acquisition. They should also be trained on
other anti-corruption law. Some of the anti-corruption laws are captured in the company’s code
of conduct, and compliance policies and procedures such as gifts, entertainment expenses, due
diligence, and meals.
It is also important that WB as the acquiring company conduct an in-depth and robust FCPA
audit of the acquired company’s operations. It means that the FCPA audit should include looking
into the issues and operations that may have been noted during the pre-acquisition due diligence.
This may require either use of internal or external attorneys and forensic accountants. The audit
has to be detailed, thus entailing a broad review and sampling to ensure that the potential
violations that have occurred or been associated with the company are stopped and prevented
from occurring. This review is important as it will enable WB to uncover any illegal activities
that WB will bear the risk of liability if such discoveries are made after the post-acquisition
process is audit is completed. Therefore, WB ability to secure a declination in such
circumstances is increased.
Occupational, Health and Safety Compliance
The United States has several occupational, health and safety laws that companies working in
different sectors of the economy must comply with for them to be allowed to operate. WB has
been indicated, is operating in the food and beverages manufacturing industry, which means the
health standards are higher for its compliance. WB must ensure that the acquired company has
complied with all the health and safety regulations to avoid such WB being accused unethical
practices that might cause uproar and panic among its potential customers.
Apart from compliance with the health and safety of the products that the acquired company
manufactures, there is the issue of the occupational safety of the employees during their stay at
the company as they work. The United States has enacted several laws to ensure that the safety
and health of the employees are protected and secured as they engage in daily activities around
the company. WB must ensure after acquisition that the acquired company has complied with the
occupational health and safety standards.
WB is a company operating within the United States jurisdiction are regulated by the United
States federal system of government through Securities and Exchange Commission (SEC), and
polices competition matters through the Antitrust Division of the Department of Justice (DOJ),
and the Federal Trade Commission. Other agencies impose additional requirements over
acquisition in certain regulated industries such as food and beverage industry as seen above. WB
must ensure that they comply with the Securities Exchange Act of 1934, as amended (Exchange
Act). WB must ensure the shareholders have complied with the federal rules and regulations on
proxy statements under the Exchange Act.
Additionally, the Committee on Foreign Investment in the U.S has broad authority under the
Defense Production Act of 1950 to identify and mitigate risks to the U.S national security that
arise from foreign investment in the U.S businesses. Sensitive industries, according to the Act
include among other manufacturing industry where food and beverage manufacturing belongs.
A company such as WB that prides in proper Ethical and Compliance practices in its business
operations has an upheaval task to ensure that during acquisition, the acquired company adhered
and maintains the high ethical and compliance standards that have been set. It means that any
ethical issues that are questionable about the acquired company have to be dealt with in the post-
integration process as have been seen. Various legal requirements are required during the
acquisition that WB needs to comply with to maintain its ethical standards of compliance to
ensure that the general attitude towards role of compliance and compliance functions within
some of the acquired firms are positive. It has also been noted that the workforce needs to be
taken into consideration during compliance and harmonization of the business operations to
prevent the differences in the new and established staff.
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