The Sarbanes-Oxley Act of 2002 (the Act) is having a profound impact on the way U.S. corporations are governed and managed, and the corporate development function is not immune to its effects. The Act doesn't explicitly mention M&A, making it easy to overlook any impact. However, dealmakers who fail to consider the implications of the Act will be in for some unpleasant surprises. The Act will change the way most public companies execute mergers and acquisitions, since certification and reporting requirements of Sections 302 and 404 apply to the entire company--including acquisitions.
The implications of the Act on M&A transaction was the subject of the PwC transaction services' fourth roundtable discussion, held in Spring 2004. Twelve leading M&A executives participated in the discussion led by PwC Transaction Services' experts on Sarbanes-Oxley. The roundtable focused on three basic themes:
- Strategic implications of Section 404 and how it may affect the timing of deals
- How weak controls, once fixable at later date, could now become a deal-breaker
- Frequently asked questions about the implications of the Sarbanes-Oxley Act
