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Court of Appeal clarifies data protection claims for non-material damage: A win for claimants - But what are the implications for controllers and processors?
Caroline Sheldon
Criminal risk isn’t the first thing that comes to mind when considering the commercial drivers behind a merger or acquisition. But our recent roundtable discussion at our offices made clear that criminal liability—however peripheral it might seem—can have very real consequences for deal viability and post-completion exposure. Here are five key takeaways from a discussion that brought together legal and business perspectives on how economic crime intersects with transactional work.
1. Corporate crime and M&A don’t naturally mix—but they often collide
M&A is often viewed as a forward-looking exercise, focused on value creation, revenue and cost synergies and future growth. But economic crime can throw a wrench into even the most carefully-structured deals. While such risks are difficult to quantify from a modelling perspective, there are well-documented examples of fraud within target companies—whether artificially to inflate value or benefit individuals at the company’s expense. The message was clear: ignoring this risk isn’t an option.
2. The new 'failure to prevent fraud' offence will increase scrutiny
Alun Milford, a partner in our Crime team (and former General Counsel of the Serious Fraud Office) walked us through the incoming failure to prevent fraud offence, which comes into force this September. Although the UK has not formalised an equivalent to the US Department of Justice’s policy of declining prosecution of buyers who self-report misconduct post-completion, Alun highlighted that UK prosecutors have shown flexibility on a case-by-case basis. The offence will make corporate accountability for economic crime harder to avoid—and proper due diligence all the more important.
3. Buyers can still face criminal liability post-completion
Glafkos Tombolis, a partner in our Corporate/Commercial team, explained that although UK law does not allow for the automatic “transfer” of criminal liability from a target to its buyer, risks remain. Once the transaction completes, the target (and its employees) become “associated persons” of the buyer. If misconduct continues, the buyer could find itself criminally liable under the failure to prevent corporate criminal offences (depending on the nature of the underlying criminality). Buyers should factor this risk into due diligence processes—particularly where the target operates in high-risk jurisdictions or sectors.
4. Suspicion of money laundering may trigger reporting obligations
Glafkos went on to say that a less commonly-appreciated issue is the risk of criminal exposure for the buyer under UK anti-money laundering laws. If due diligence reveals the existence of potential criminal property within the target group, the buyer may be required to submit a suspicious activity report (SAR) and obtain consent from the National Crime Agency before proceeding with the deal. Failing to do so could expose the buyer to prosecution—an outcome that’s not often on the radar of deal teams, but ought to be.
5. Fraud allegations are a common workaround in post-deal disputes
James Glaysher, a partner in our Disputes team, shared insights from commercial litigation involving M&A transactions, particularly in high-risk environments. He noted that fraud allegations are often used tactically by claimants looking to bypass the contractual limitations on claims that are typically baked into the definitive transaction documents. However, the courts are increasingly sceptical of such strategies and alert to their misuse.
Final thought:
Criminal liability might not be front of mind during an M&A process, but it should form part of any serious risk assessment. As legal obligations evolve and scrutiny increases, early collaboration between deal teams and specialists in corporate crime is essential to avoid unwelcome surprises post-completion.
This article was first published in Business Sale Report on 11th April 2025.
How we can help you
Our Corporate/Commercial, Crime and Disputes teams provide an integrated service to clients encompassing standalone economic crime audits and also deal-based economic crime due diligence and risk analysis.
If you’d like to discuss any of the issues raised or how we can support you with criminal risk in M&A transactions, please get in touch with our team.
About the author
Glafkos advises a broad range of corporate and private clients on M&A, joint ventures, private equity and growth capital transactions and general company law matters.
We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
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