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Author: James Swenson, Managing Director, Ethixbase360
Mergers and acquisitions in the life sciences sector can rapidly expand a company’s scientific capabilities, geographic reach, and market access — but they also introduce significant financial crime, regulatory, and ESG-related risks. Each acquisition brings new intermediaries, suppliers, and distributors whose past conduct or ownership structures may not align with the acquiring organization’s compliance standards.
From undisclosed state-linked ownership and historical sanctions breaches to unethical clinical practices or human-rights issues deep within supply chains, these hidden exposures can undermine the value of a transaction long after closing. As regulators intensify scrutiny of third-party integrity — and as investors and consumers demand stronger ESG performance — the need for proactive, evidence-based risk assessment has never been greater.
This is where Enhanced Due Diligence (EDD) becomes critical. EDD goes beyond standard screening to deliver a deeper, verifiable understanding of third-party relationships and ownership structures. While technology and automation play a vital role in streamlining the process, human oversight remains indispensable for ensuring accuracy and context.
A robust EDD process should include:
- Comprehensive mapping of beneficial ownership to identify ultimate control, financial interests, and potential state-linked or high-risk investors.
- Screening of indirect owners, affiliates, and key personnel for connections to corruption, sanctions, enforcement actions, or adverse media — including prior compliance breaches or misconduct in clinical, regulatory, or manufacturing contexts.
- Identification of politically exposed persons (PEPs) and clear mapping of how third parties interact with government officials, regulators, or state-owned entities — a critical step in assessing bribery and influence risk in markets with significant public-sector involvement.
- Assessment of geographic, operational, and sector-specific risk factors, such as exposure to human-rights violations in supply chains, data-integrity and clinical-trial transparency issues, and ESG-related concerns around product sourcing and distribution.
- Collection and verification of supporting documentation, ensuring all findings are evidence-based, traceable, and auditable for future regulatory review.
- Ongoing monitoring and post-acquisition oversight, as ownership, compliance, and operational risks often evolve during integration — particularly when merging disparate compliance cultures or third-party networks.
Implementing strong EDD enables life sciences organizations to make defensible, informed decisions before completing a deal. It also strengthens post-merger integration by ensuring that all entities within the combined organization adhere to consistent compliance standards.
In a sector where regulatory expectations continue to rise — from anti-bribery and corruption controls to sustainability and human-rights obligations — enhanced due diligence is no longer just a compliance requirement. It is a strategic investment in protecting value, reputation, and long-term success.
Hear from James Swenson, Managing Director at Ethixbase360:
