CI and M&A

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CI and M&A

It is a fact of life that many companies prefer to steal their ideas for products as opposed to license them. Every manager is looking for their edge. Add to that the massive intelligence gathering operations of Chinese, Russian, French and German government intelligence services and Indian Businesses are both trying to militarize commercial technology as well as give their companies an edge with the information stolen from corporations around the world.

There is an old acronym that describes most of what the other side tries to do. MICE, which stands for Money, Ideology, Compromise or Coercion.

People will gather industrial secrets and sell them. Only slightly less subtle, they will be hired by another company and the information will leave with them. The easiest so far has been the mere promise of money. Imagine that a small technology firm has been slaving away for months and years developing an item of interest. All the time these companies are seeking investment capital. Then along comes a serious investor / or buyer and he puts up some real money in an escrow to fund or buy the company. Now he needs to do his due diligence; in short one will need to disclose one’s secrets. Where one gets caught is when one has not done one’s due diligence on the investor. These Trojan Investors typically have a thin background and use small law firms inexperienced in M&A.

Ideology in a commercial operation these days typically reflects an employee’s background and loyalty to a country or an organized group. Many Chinese Nationals have been accused of spying for China, but there have been so, so many more.

Compromise of a company insider is usually subtle. Typically someone who has broad access but is less socially sophisticated will be the target. We have seen sex and money used as means of compromise, but more recently it has been the violation of tax, regulatory or corporate policy. It is especially the case when some of the really stupid corporate policies on gifts have been held over an employee’s head.   As soon as an outsider can find that an employee has potentially accepted gifts, or the employee has been helping the boss violate regulations – this compromise leads to a coercive relationship. The ‘outside’ simply demands what they want or the employee will be exposed. It is very common for younger Personal Assistants, Treasury Clerks, Junior Law staff to get caught in these traps.

Coercion has many facets and instead of compromising someone a person is already compromised when they apply for a position. They are managed through threats to their physical well being or to members of their family.

There are a few other reasons people spy: excitement, personal relationships – or you just have a real ticked off employee that wants to take a company down from the inside.

All of these types of person are sought out when look for weak links to gather information on a company.

The last area to consider is common professional services such as law firms, accounting firms, and other consulting firms. Sometimes they leak information without malicious intent. It could have been in passing conversation – or solving a problem for one company – here is how they can solve the same problems for a competitor of that company.

The M&A process is ripe for obtrusive inspections of a target. The target must do the same for the investor / acquirer and do so before any sensitive information is disclosed.


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