Issues Of Corporate Governance and Ethical Challenges in M&A Transactions
- NLR Journal
- 5 days ago
- 2 min read
By Vidhita Shetty, United world School of Law, Karnavati University, Gandhinagar, Gujarat.
Abstract
Mergers and Acquisitions (M&A) are such complex transactions which has multiple facets involving legal, financial, and operational restructuring. However, beyond these structural elements and legal compliances and documentations to be done, ethical considerations play a critical role in determining the success and integrity of an M&A transaction. These complex corporate events that can reshape industries and impact various stakeholders, including shareholders, employees, and communities. While these transactions aim to create value, they often raise ethical concerns that challenge corporate governance and legal compliance. Both the target company and the acquiring company in case of acquisitions and the merging companies in the case of mergers, have to or ideally do due diligence and take critical note of conducting diligent research into the ethics and compliance programs of all parties involved prior to signing the transaction agreement[1]. Failure to perform such diligence can be fatal to the success of the transaction and can lead to issues in post integration of the companies and leading to failure of the transactions.
Ethical concerns in M&A are multifaceted, ranging from conflicts of interest and insider trading to employee welfare and regulatory compliance. When ethical considerations are ignored and are not considered in the pre-acquisition/merger stages, such M&A deals and transactions often result in corporate scandals, legal disputes, and long-term reputational damage and financial losses. This paper explores the common ethical issues in M&A transactions and examines the role of ethics in decision-making, using real-life cases and legal precedents to highlight corporate governance failures and compliance gaps.
[1] Brian Haney, ‘Ethics Pitfalls in Mergers, Acquisitions’ (www.nationaldefensemagazine.org,13 June 2017) <https://www.nationaldefensemagazine.org/articles/2017/6/13/ethic-pitfalls-in-mergers-acquisitions>.
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