7 Strategies for Effective Compliance Monitoring and Integration Post-Merger

Mergers and acquisitions are popular ways to rapidly grow, consolidate, and expand to new markets, but the success of an M&A goes beyond signing the papers and shaking hands. The most successful mergers and acquisitions are realized post-merger through meticulous compliance monitoring and risk assessment.

As a business owner or legal expert, you can ensure a smooth post-merger transition by ensuring the systems of the resulting institution are compliant and efficient. You can do this by building a comprehensive compliance monitoring framework. Here is how:

1. Conduct thorough due diligence

Due diligence is a foundational practice of compliance monitoring. As the person in charge of onboarding the acquired company, you must familiarize yourself with all its operational details. This includes client relationships, financial stability, employment framework, contractual commitments, company culture, brand identity, and more.

Failure to conduct thorough due diligence can weaken the company’s relationships with existing employees, clientele, and partners. You must understand how the other company works, identify possible disparities, and propose strategies to mitigate conflict between the merging businesses. This assessment can also help you identify possible compliance pitfalls.

Here’s a concise, skimmable version of a post-merger compliance monitoring checklist:

• Regulatory compliance: Confirm adherence to all industry regulations and antitrust laws
• Contractual obligations: Review and align all existing contracts from both entities
• Policy Integration: Standardize corporate policies and ensure effective internal communication
• Financial compliance: Align accounting practices and ensure accurate financial reporting
• Employment law: Check compliance with all applicable employment and labor laws
• Data privacy: Ensure all data handling complies with GDPR, CCPA, and other relevant data protection laws
• Intellectual property: Secure and manage all intellectual property rights post-merger
• Cybersecurity: Assess and fortify IT systems against cyber threats
• Tax compliance: Ensure accurate tax filings and adherence to international tax laws
• Continuous monitoring: Establish routine compliance audits and regular reporting mechanisms

2. Formulate a comprehensive risk management policy

Businesses must continue to comply with regulations, even post-merger. Mergers and acquisitions present a compliance dilemma because each company carries different risks and compliance frameworks. If you do not plan for a new, overarching compliance framework, you risk losing stakeholder confidence, heavy fines, litigation, and financial failure.

Conducting due diligence gives you a clear view of the target company’s compliance framework. You can identify potential or existing compliance issues, such as pending lawsuits, regulatory violations, unethical practices, or insufficient data protection policies.

With this information, you can conduct a rigorous risk assessment, identify possible compliance risks, and take steps to mitigate the risks. This should help you avoid expensive non-compliance errors.

See also: Managing Payroll in M&As: How a Global Solution Can Help

3. Assign a dedicated compliance monitoring team

Because many businesses forgo post-merger integration, so few create a compliance monitoring team. This is where you and your business can stand out from the competition.

As the business owner, risk management expert, or head of the legal team, curate a dedicated team to help you oversee and coordinate compliance efforts throughout the integration process. Include representatives from both companies with expertise in business operations, legal matters, and regulatory compliance.

This team will keep track of all issues arising from the merger and address them before they become major compliance problems and threaten the company.

4. Create a post-merger integration framework

Your team needs direction. A post-merger integration framework can guide both companies toward 100 percent integration.

Create a comprehensive plan that addresses key issues, such as company leadership, existing workplace cultures, technology, operational processes, communication, and regulatory compliance frameworks.

Involve members from both companies to get a clearer picture of how you can integrate existing policies with minimum friction. Where possible, retain key employees and customer relationships. This will help you maintain momentum and provide a smooth transition for the clients, employees, and stakeholders.

Your post-merger integration plan can be as simple or comprehensive as you want. Some items you can include in it are data protection policies, foreign recruitment programs, and remuneration policies.

Try to remain objective in your planning. You cannot onboard everything from the target company into the current organization, but you can also not ignore all of it and provide a smooth transition.

See also: The Enterprise Guide to Global Compliance Management in 2024

5. Automate the merger and acquisition process

The business landscape today is widely digitized and connected. Even with a dedicated team on the job, you cannot predict every compliance pitfall before it happens, especially not with manual spreadsheets.

Harness the power of technology and data by automating your compliance monitoring and risk assessment processes. Use tools to analyze your data, identify potential compliance risks, and provide actionable insights.

Deel’s Compliance Monitor is an excellent tool that monitors and provides updates on regulatory changes for over 150 jurisdictions. It is one way to track how the current regulatory framework should inform your tax habits, data protection policies, employment practices, and more.

6. Open clear channels of communication

A lot happens post-merger, and it is easy for information to get lost in the process, especially between two companies with different communication frameworks. However, keeping key stakeholders in the dark during integration can cause resistance, misunderstandings, and distrust.

Establish clear communication channels during this time to ensure stakeholders, employees, regulators, investors, and other key parties are up to date on the process.

You can employ more tools to optimize this process, including real-time dashboards and collaboration software with reporting functions. You can also conduct regular workshops, meetings, and training sessions to create a shared comprehension of the company’s future.

As you do this, create a reporting channel for possible compliance violations. This ensures employees and other parties can seek guidance on or report compliance breaches. It also helps you maintain regulatory compliance during the transition period.

7. Perform regular financial performance and regulatory checks

The final cornerstone of compliance monitoring is continued assessment. Like the business landscape, the regulatory landscape is always changing, and it is your job to stay up-to-date and compliant.

This means establishing robust evaluation and monitoring mechanisms to evaluate the effectiveness of your compliance programs. You can conduct periodic employee surveys, risk assessments, and compliance audits to identify successful strategies and areas of improvement.

Apply this approach to the institution's financial performance, too. Closely monitor growth, progress, and ROI. The financial health of a post-merger company often reflects its compliance status. You can gain important insights from this analysis.

Unlock the power of continuous compliance with Deel

Regulatory compliance and risk assessment are fundamental processes that help a business maintain profitability and market industries. Adopting these compliance monitoring strategies can help you achieve a successful merger. By monitoring compliance post-merger, you can help build your company’s reputation, build trust with employees, satisfy stakeholders, and retain your clientele.

But compliance monitoring is not a one-time job. It is an ongoing process. Because regulatory frameworks regarding data protection, employment, taxation, production and packaging, and service delivery are always changing, you must adopt a dynamic compliance monitoring approach.

Deel’s Compliance Hub delivers continuous compliance, actively monitoring and updating you on changes and risks crucial to your business.

Contact us today to learn more about how this tool can help your business stay compliant post-merger.