The U.S. Department of Justice has announced a new Mergers & Acquisitions Safe Harbor Policy for companies that voluntarily and timely self-report misconduct discovered during the due diligence of an acquisition target or the integration of an acquired entity. The policy offers substantial benefits—including the presumption of a declination of prosecution—to acquiring companies that self-report misconduct, regardless of whether the misconduct was discovered pre- or post-acquisition. This policy will likely have a significant impact on how companies engage in diligence and how they allocate risks associated with disclosure of misconduct to the DOJ.

The policy has several important requirements about which companies need to be aware, including:

  • Voluntary self-disclosure to the DOJ must occur within six months from the date of the transaction closing, regardless of whether the misconduct is discovered pre- or post-acquisition.
  • Only misconduct of a target or acquired entity that is discovered by the acquiring company during the preacquisition due diligence phase or during the post-closing integration process is eligible for a declination of prosecution.
  • Following disclosure, companies need to cooperate with the ensuing DOJ investigation and engage in timely and appropriate remediation, restitution, and disgorgement. Remediation must be completed within one year from the date of closing the M&A transaction.
  • The Safe Harbor Policy does not apply if the misconduct was otherwise required to be disclosed, already public, known to DOJ, or involves civil merger enforcement.
  • Moreover, if the misconduct “threatens national security or involv[es] ongoing or imminent harm,” it must be disclosed immediately upon discovery (and not within the six-month closing window).

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