Protect Your Acquisition: Outsourced Compliance Due Diligence
Vigilant Insights
Who Is This Applicable To?
- Firms that are considering acquiring an Investment Adviser.
Introduction
When acquiring an Investment Adviser, conducting a thorough Compliance Due Diligence Review is essential to ensure that the target company meets all regulatory requirements and operates with integrity. While financial and legal due diligence are common components of the acquisition process, Compliance Due Diligence is equally important for identifying potential risks that could affect the transaction’s success or the acquiring Firm’s future operations.
However, compliance reviews are complex and require specialized expertise in the types of Advisers and the specialties/products they have. This is where outsourcing to a Compliance Consulting Firm like Vigilant becomes a strategic advantage. An experienced Compliance Firm can provide an in-depth, objective, and efficient review of the target Firm’s compliance procedures and practices, identifying risks that might be overlooked.
In this Vigilant Insights release, we outline the key reasons why outsourcing Compliance Due Diligence of an Adviser is a crucial consideration for successful acquisitions. We highlight the benefits that can come from leveraging our expertise in ensuring regulatory adherence, mitigating risk, and supporting smoother integration post-acquisition.
5 Reasons to Consider an Outsourced Compliance Due Diligence Review
- Expertise and Specialized Knowledge
- Benefit: Compliance Firms specialize in regulatory requirements, industry standards, and evolving regulatory landscapes. They have deep knowledge of relevant regulations such as the SEC regulations, FINRA rules, and other regulatory frameworks, which ensures thorough due diligence.
- Reason: Compliance experts bring the necessary skill set to identify potential issues that internal teams might overlook, especially given the complexities of the rules and regulations.
- Efficient Use of Resources
- Benefit: Outsourcing Compliance Due Diligence allows the acquiring Firm to focus on core business operations and strategic goals while the experts handle the detailed review.
- Reason: The acquiring Firm does not need to divert internal resources or invest in hiring additional personnel, which can be costly and time-consuming.
- Faster Time to Close the Deal
- Benefit: Outsourcing Compliance Due Diligence allows for a quicker and more efficient process, reducing the time required to complete the acquisition.
- Reason: Experienced Compliance Professionals are well-versed in quickly gathering information and conducting reviews, which helps expedite the deal’s timeline.
- Post-Acquisition Integration Support
- Benefit: Depending on the volume and/or size of acquisitions, utilizing on-going Compliance Support to ensure smooth integration post-acquisition is important to consider.
- Reason: After the acquisition, the integration of compliance systems, processes, and employees can be complex. An Outsourced Compliance Firm can assist in ensuring that both Firms’ operations align with regulatory requirements and can also help with consolidating the ADVs and Compliance Manuals accordingly.
- Avoidance of Reputational Damage
- Benefit: By using an Outsourced Compliance Firm to conduct a compliance review, the acquiring Firm reduces the likelihood of acquiring a business with a tarnished reputation due to non-compliance.
- Reason: Regulatory violations, penalties, or unethical practices by the target Firm can significantly damage the acquirer’s reputation. Identifying and addressing these issues beforehand minimizes the risk.
Vigilant’s Conclusion
Engaging an Outsourced Compliance Firm for a Compliance Due Diligence Review during the acquisition of an Adviser ensures a robust, efficient, and informed decision-making process.
At Vigilant, by leveraging our expertise, objectivity, and in-depth knowledge of the regulatory landscape, the acquiring Firm mitigates risks, ensures compliance, and strengthens its operational efficiency, ultimately resulting in a smoother and more successful acquisition.
If you are in the midst of an acquisition and are looking for an outside look into the target Firm before making the acquisition, contact Vigilant to learn more about our Compliance Due Diligence Process and how we can help.