The New York Times reports today that the $13 billion merger between medical device manufacturers Biomet and Zimmer may fall apart because of potential FCPA liability. Biomet is under investigation by the Department of Justice and the SEC for allegedly paying bribes to foreign officials. According to the report, Biomet disclosed the potential liability during its negotiations with Zimmer and is fully cooperating in the Government's investigation. Nevertheless, the outcome of the investigation could affect the transaction:
"Still, the repeat nature of Biomet’s crime could expose it to stiffer-than-expected federal penalties, which may prompt Zimmer to seek a price cut. For example, if prosecutors suddenly demand that Biomet and its subsidiaries plead guilty to criminal charges, they might set off a temporary ban on Biomet’s participation in federal health care programs, a blow that could sour Zimmer on the deal."
As this situation demonstrates, having a robust FCPA compliance program is crucial for any company contemplating a future merger or buyout.