Mergers & Acquisitions Compliance Flashcards

What is a 'clean team' in the context of M&A due diligence?

Answer: A restricted group of advisors who access competitively sensitive information under a firewall protocol

A clean team is a firewalled group that reviews competitively sensitive data so that gun-jumping and antitrust concerns are minimized during pre-closing diligence.

What is 'gun-jumping' in M&A antitrust compliance?

Answer: Prematurely coordinating operations or sharing competitively sensitive information before HSR clearance

Gun-jumping occurs when parties coordinate business operations or exchange competitively sensitive information before antitrust clearance, violating Section 1 of the Sherman Act and HSR rules.

Which post-merger integration step is most critical from a compliance perspective to reduce inherited regulatory risk?

Answer: Harmonizing compliance policies and training employees on the acquirer's Code of Conduct

Harmonizing compliance policies and training ensures employees understand the acquirer's standards, reducing the risk of continued violations under old practices.

In the context of CFIUS review, what is the primary national security concern evaluated during a foreign acquisition of a US company?

Answer: Whether the transaction threatens to impair national security, including access to critical technology or infrastructure

CFIUS evaluates whether a foreign acquisition could impair US national security by granting foreign control over critical technology, infrastructure, or sensitive data.

A target company has an existing DOJ deferred prosecution agreement (DPA). How does this affect the acquiring company's compliance obligations?

Answer: The acquirer must notify the DOJ, honor the DPA's terms, and may need to negotiate amended obligations

DPAs typically include change-of-control notification requirements, and the acquirer generally inherits the compliance obligations unless the DOJ agrees to modify the agreement.

What is the significance of a 'material adverse change' (MAC) clause in an M&A agreement from a compliance standpoint?

Answer: It allows a party to terminate the deal if a significant adverse event occurs between signing and closing

A MAC clause permits deal termination if a material adverse change—such as a major regulatory action or fraud discovery—occurs between signing and closing, protecting both parties.

Which practice best demonstrates compliance program effectiveness during the integration of an acquired company?

Answer: Conducting a gap analysis between the acquirer's and target's compliance programs and creating an integration roadmap

A gap analysis identifies differences in compliance program maturity and creates a prioritized roadmap to bring the acquired entity up to the acquirer's standards.