M&A Due Diligence for International Trade 

Assessing the international trade compliance of an acquisition target requires a firm with particular expertise in performing such compliance audits within tight deadlines.  We represent both buyers and sellers in M&A due diligence projects.

Liabilities in the supply-chain are often hidden and on-going.  Thus, when liabilities go undetected at the time of purchase, they usually continue undetected and unabated - the exposure becomes further magnified over time, and ultimately comes to light as a critical problem.  Thus, the failure to detect trade law violations at the time of purchase only means that these problems surface  as larger problems later in the life cycle of the company - when it is too late to create a seller's reserve to fund their resolution.

It is better to identify the problems during due dilligence, and to create a reserve to fund correction of the problem during the deal.   

A wide variety of international trade violations may have been incurred (knowingly or unknowingly) by the original owners.  These may include Customs import violations, BIS/OFAC export violations, federal agency violations, and even Foreign Corrupt Practices Act (FCPA) violations.  In some instances, officer and director liability may be implicated, as well as the possibility of criminal charges.  In other cases, the ability of a company to import and export goods may be impacted. 

The danger of successor liability is a real issue in this domain.  While asset purchases are frequently employed to mitigate against a finding of successor liability, even these types of transactions may not fully insulate a purchaser.  Of course, there are many methods under which the government has pursued an purchaser.   Are few of scenarios of successor liability include: (1) an asset purchaser expressly (or implicitly) agrees to assume the debts or liabilities of seller; (2) the transaction amounts to a de facto merger or consolidation; (3) the asset purchaser is a mere continuation of seller; or (4) the transaction is viewed as an effort to fraudulently avoid liability, (4) there is substantial identity between the operations of seller and an asset purchaser; or (5) where asset purchaser manufactures same product line as the seller.