Role of Specialized Investigative Agencies of Europe in Corporate Compliance & Due Diligence

2009
AMITY INSTITUTE OF COMPETITIVE INTELLIGENCE
Utkarsh Kumar Singh,

MBA (competitive intelligence & corporate warfare),
IInd sem AUUP roll no.- A0602408007
ROLE OF SPECIALIZED
INVESTIGATIVE
AGENCIES OF EUROPE
IN CORPORATE
COMPLIANCE &DUE
DILIGENCE
Role of specialized investigative agencies of Europe in corporate compliance
&due diligence: Utkarsh Kumar Singh 2
009
ACKNOWLEDGEMENTS
I would first of all, like to thank all the faculty members of Amity Institute of
Competitive Intelligence for providing me an opportunity to work on the topic
& for their sincere support.
I would again like to thank all our batch mates for all the necessary help &
cooperation during the preparation of the report.
I would like to thank all our family members for all their kind support.
I am highly obliged to Major General Ashok Krishna & Mr. Vivek Raghuvanshi
for having faith in me for handling the project.
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CONTENTS
S. Subject Page no.
No.
1. Cover Page Cover
2. Acknowledgements 1
3. Introduction 5
4. Management consultancy agencies of Europe 8
 Organization & structure
 List of agencies approved by the European

Union
5. Law firms of Europe 17
 Organization & structure
 The future ahead
6. Private detective agencies of Europe 20
7. Due diligence agencies of Europe 24
 Requirements for conducting due diligence
 Conducting due diligence
 Need for proper diligence
 Due diligence firms of Europe
 Due diligence firms of France
8. Corporate compliance 31
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 Corporate compliance program
 Compliance mechanisms
 Modern trends
9. Conclusion 35
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CHAPTER-1
INTRODUCTION
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INTRODUCTION
With the advent of globalization, businesses as well as the various business

procedures have changed drastically. For any company that wants to launch
its operations in any new territory, there lay different barriers, be it in the
form of the government regulations, in the form of business environment,
cultural barriers etc. To overcome these barriers, the foreign multinational
companies initiate their operations in entirely new territories mainly by either
Mergers & Acquisition or Joint ventures. Since the multinational is entirely
new to the place, it does not really know whether the companies they are
going to acquire or their potential partners are really worth what they boast
of or if they show their values in inflated amounts. Thus, a background check
of the future partner becomes inevitable. Besides, there may be instances
when an individual or a firm may land into controversies while going for the
purchase of new properties, whether it is in the purchase of land & assets, or
be it during the purchase of machinery & technology. All this may be as a
result of the differences in the norms of the land as well as due to cultural
differences. Thus, for a multinational company, it becomes compelling to go
for multiple background checks of their partners as well as their investments.
This is where the specialized investigative agencies’ role comes to play.
Specialized investigative agencies may thus, be defined as the agencies
having proficiency in a specific field of investigation, and especially meant
for the corporate houses, though they may offer their services even to the
needy individuals.
There are various types of specialized investigative agencies located all

across the globe & depending upon the service they provide, they may be
classified into:
 Management consultancy services,
 Law enforcement agencies,
 Private detective agencies,
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 Due diligence companies
 Corporate compliance advisors/ agencies
These agencies have a great role to play in free trade regions such as NAFTA,
The European Union, APEC, ASEAN, Orient etc. This is because of the
multiplicity of the regulations (e.g., the firms operating in The European
Union have to meet the standards of both that of the host country as well as
that of the European Union as a whole). This multiplicity of regulations acts
both as a boon as well as a Bain to the firms operating in these regions.
Thus, another role of these specialized investigative agencies comes into
play, wherein, these agencies advise the different firms about the
concordance of their activities in relation to the host country as well as the
European Union. Thus, the role of the specialized investigative agencies in
today’s business is ever increasing, fostered by the promotion of the free
trade zones/regions.
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CHAPTER-2
MANAGEMENT CONSULTACY AGENCIES
OF EUROPE
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MANAGEMENT CONSULTANCY AGENCIES

OF EUROPE
This industry consists of establishments primarily engaged in furnishing
operating, counsel and assistance to management of private, nonprofit, and
public organizations. These establishments generally perform a variety of
activities, such as strategic and organizational planning; financial planning
and budgeting; marketing objectives and policies; information systems
planning, evaluation, and selection; human resource policies and practices
planning; and production scheduling and control planning.
ORGANIZATION AND STRUCTURE
Individual Firms. The most common organizational structure for a

management consulting firm is that of a corporation. A typical consulting
firm might employ research associates at the lower level, with consultants
and senior consultants at the next level. Managing consultants are next in
the hierarchy. At this level, individuals typically have greater degrees of
client interaction, as well as responsibility for the success of consulting
projects. Finally, at the top of a typical firm's hierarchy are partners. In
addition to running the operations of the organization, partners are generally
responsible for bringing new business into the firm.
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Management consulting firms usually operate in project teams. Depending
upon the firm and assignment, consultants on project teams often spend
more time at the site of the client's offices than they do at their own. There,
they gather data and interact extensively with personnel from the client
organization, make recommendations, and often work on implementing
solutions. Often, client personnel will work as part of the consulting team for
the duration of the project to ensure that the organization has input into the
process. Client participation increases the likelihood that the solutions will be
implemented effectively.
Management consulting firms generally operate on a project fee or hourly

fee basis. Fees in the consulting industry tend to run very high, due to the
significance of the problems that consultants help their clients to overcome.
Industry Structure. Management consulting firms range in size from sole

practitioners to large businesses. As far as areas of expertise, some firms are
devoted to specific practice areas while others offer a broad range of
services to varied clientele. For example, a consulting firm might specialize
in providing clients with compensation and benefits packages, to the
exclusion of all other services. Yet other firms might provide a broad range of
advisory services—combining such varied forms of advice as consulting the
chief executive officer on general business strategy and consulting a
management information systems (MIS) executive on a new computer
network. A major segment of the consulting market is occupied by consulting
organizations that are part of Certified Public Accountant (CPA) firms. Such
firms attempt to serve their tax and audit clients with management
consulting services as well. Another type of consulting function is one that
exists within a non-consulting organization. Such internal consultants provide
specialized services for their corporations. An example is an internal human
resources consulting department within a Fortune 500 corporation that
serves the varied divisions of the organization as if they were external
clients.
In addition to providing expertise or advice, many management consultants

perform in the role of process consultant. This approach recognizes that the
client firm already possesses knowledge of its own industry and internal
corporate environment that exceeds the knowledge available to the
consultant. Therefore, the role of the management consultant is one of
facilitating the process of pulling solutions out from within the client
organization and providing insight with an objective point of view.
Because the management consulting industry is unregulated, any individual

or company that offers advice in exchange for compensation may be
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classified as a consultant. For this reason, the definition of a management
consulting firm often varies, depending upon the source of information.
Nonetheless, an understanding of the industry can be ascertained by
separating consulting firms into distinct categories and contrasting the
categories.
The following breakdown describes the most common and most widely
recognized types of consulting organizations, first by organizational
structure, and then by consulting specialty (also known as "practice area"
within the industry).
Large Consulting Firms. This classification represents the largest players

in the management consulting industry whose primary service is providing
expertise and consultation to management. The broad heading of large
consulting firms encompasses the larger of the generalist consulting firms
and strategy consulting firms.
Big Five Accounting/Consulting Firms. A handful of large public

accounting and consulting firms lead the industry on an international scale.
These include the so-called Big Five: Andersen Worldwide,
PricewaterhouseCoopers, Ernst & Young, Deloitte & Touche, and KPMG Peat
Marwick. Consulting divisions of the Big Five are especially strong in
information technology (IT) and management information systems (MIS)
consulting. These firms typically offer strategic or generalist management
consulting services as well. As of the late 1990s, though, the marriage of
public accounting, particularly auditing services, and consulting was a
troubled one; most of the top firms attempted to wall off their accounting
and consulting practices to avoid appearing to have conflicts of interest.
Small Firms/Boutiques. Small firms or boutiques often provide specialized

services or offer expertise that focuses on one industry or a single business
practice area. These firms tend to be small, lesser-known niche players that
do not regularly compete directly with the larger consulting organizations.
Many of these firms operate in a single, geographic region. Some small or
boutique firms service only one client.
Sole Practitioners. Perhaps the most difficult segment to define in the

management consulting industry is that of the sole practitioner. This group
encompasses many outplaced or retired executives and part-time
consultants who offer expertise in areas where they have a great deal of
experience. Sole practitioners are often engaged by smaller firms and even
their previous employers. This classification of the consulting industry also
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includes university professors who provide consulting in their areas of
teaching expertise.
Internal Consulting Organizations. Large corporations may have

recurring project work for which the expertise of external management
consultants would be required on an ongoing basis. Many such firms have
developed internal consulting staffs in order to deal with this demand in a
more cost-effective manner. Such internal organizations may be generalists
or may specialize in corporate strategy, human resources issues, information
technology, or other areas that are critical to the company's operation.
IT/MIS. The information technology segment is the largest segment of the

consulting industry. The Big Five all provide expertise in this area and draw
substantial revenue from it as well. Firms that specialize in information
technology tackle business problems by applying technology to provide
solutions. For example, a firm specializing in information technology might
help a corporation to become more efficient in their order fulfillment
operation by installing computers and equipment that automates the
process. One of the firms that is best known in IT/MIS consulting is Andersen
Consulting.
Compensation/Benefits Consulting. Compensation/benefits consulting

firms represent the second largest independent segment of the industry in
the United States. Firms that specialize in compensation/benefits consulting
offer services related to human resource management with specific expertise
in practices such as developing corporate grading and compensation
schemes, titling plans, and benefits packages. Examples of firms that
practice primarily in the compensation/benefits consulting practice area
include the Hay Group and Hewitt Associates.
Generalist Consulting. Generalist management consulting firms typically

provide advice on strategy to their clients but may also have internal
expertise in specific industries, such as banking or health care, or in
particular practice areas, such as new product development or operations.
Generalist consulting firms often provide consulting in IT/MIS and
compensation/benefits as well. Examples of generalist firms include
McKinsey & Company, Inc.; Booz, Allen & Hamilton, Inc.; and Arthur D. Little,
Inc.
Strategy Consulting. Strategy consulting firms specialize in providing

advice on corporate strategy to senior executives—answering such questions
as, "How can our firm improve profitability?" Strategy firms compete with
generalist firms for strategic engagements but do not provide the non-
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strategy services of the broader, generalist firms. However, the larger
strategy firms, as they have expanded their lines of business, have become
more difficult to distinguish from the generalist firms. Examples of firms that
have traditionally been regarded as strategy firms include the Boston
Consulting Group and Bain & Company.
Specialty Consulting Practice Areas. This segment is by far the most

difficult to define, for it encompasses so many different possible practice
areas. Specialty consulting firms are often boutiques or small to medium size
organizations that service a niche in the consulting market.
Marketing Consulting Firms. These firms provide marketing research,

product test markets, target market selection, and other services directly
related to the marketing of client products or services. Perhaps the best
known marketing consulting firm is Yankelovich, Skelly and White/Clancy
Shulman Inc.
Business Re-engineering/Organizational Effectiveness. This specialty

in management consulting refers to the radical redesigning and rebuilding of
the processes and functions of a business to recreate the company as a
highly effective, cohesive whole that performs optimally. The concept of
"Business Re-engineering" was originated by the Index Group (Now
CSC/Index, Inc.). Increasingly, other consulting firms are also developing this
line of business—most notably, Andersen Consulting.
Environmental Consulting Firms. With increased public attention on the

environment, and increased governmental concern over hazardous waste,
environmental consulting firms have seen increased demand for their
services in recent years.
Health Care Consulting. There are two primary specialties that fall under
the heading of health care consulting. The first practice area is providing
general advisory services such as strategy consultation or cost-containment
studies for health service agencies (e.g., Health Maintenance Organizations)
and hospitals. The second practice area is in helping corporations to select
employee health benefit plans that minimize costs and provide the best
health care coverage for the organization.
As health care costs continue to rise in the United States and concern for
health coverage increases, this consulting specialty has been experiencing
growth as well. In addition to specialty firms that provide health care
consulting, many of the larger consulting organizations also service this
industry.
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Changes in the economy can affect firms in different ways. For instance, if
the economy slows and businesses become more concerned with the bottom
line, they may put off decisions such as automating. This negatively impacts
the information technology segment of management consulting. At the same
time, however, executives of corporations in hard times might be more prone
to call upon a consulting firm that can help them to find ways to increase
their revenues, contain their costs, or reduce their head count.
For consulting firms, approximately 20 percent of their costs are consumed in

new business development. Costs for marketing activities include the
production and distribution of promotional materials, salaries of partners who
are responsible for client development and new business, and association
memberships. The area in which firms may expend the greatest amount of
resources, however, is in the competitive bidding process, also known in the
industry as the "bake-off."
A bake-off occurs when a client with a problem approaches several

consulting firms. These firms each spend time and money becoming
acquainted with the client's organization, attempting to develop internal
champions for their firm. The bake-off often involves several personnel from
each consulting firm, all dedicating their time, without pay, at the site of the
potential client in order to gather a better understanding of the problem. At
the end of the competitive bidding process, the client chooses one of the
firms, or none, and the remainder have invested resources without
remuneration.
Because of the expense involved in acquiring new clients, consulting firms

try to become the "house consultants" for their existing clients. In doing so,
the firm may become so trusted by the client that it can bypass the
competitive bake-off and be engaged directly by client management. This is
an enviable position for a consulting firm to be in, as it can minimize
business development costs and ensure a more steady flow of income.
Industry Associations and Accreditation. There is no central licensing

agency for management consultants. Nor are there any industry guidelines
or regulations as standards for operating practices. The only form of
acknowledgement for consulting expertise is the Certified Management
Consultant designation that is granted by the trade association, the Institute
of Management Consultants.
Another primary industry association is ACME (formerly Association of

Consulting Management Engineers). Both ACME and the Institute of
Management Consultants operate as divisions of the Council of Consulting
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Organizations (CCO). Other industry associations include the Society of
Professional Management Consultants, the Association of Management
Consulting Firms, the Association of Management Consultants, and the
Association of Internal Management Consultants.
Some 19 management consultancy agencies of EU have been accredited as

EU consultancies. These are:
 ACASA (TM)
LocationChisinau,Moldova
ConsultancyType-Management
Specialisation Agriculture
 UKROM
LocationLondon,UK
Consultancy Type Management
Specialisation Romania
 Frattempo limited
LocationBerkhamsted,UK
ConsultancyTypeManagement
Specialisation Consumer
 Meta Suchmaschine
LocationBerlin,Germany
ConsultancyType:Other
Specialisation IT
 International Intelligence on Culture

LocationLondon,UK
Specialisation Other
 DAYS2Do Ltd
LocationNewMilton,UK
ConsultancyType:Management
Specialisation Telecommunications
 RAMS Risk Analysis and Management Services
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LocationIstanbul,Turkey
ConsultancyTypeManagement
Specialisation Environment
 Joseph A. de LA CUETARA
LocationMalaga,Spain
ConsultancyType:Law
Specialisation Law
 International Law firm

LocationNice,France
Consultancy Type Law Firm
 Lucian BUZEA
LocationBraila,Romania
 CI Communications Ltd
LocationLarnaca,Cyprus
Consultancy Type Public Affairs
 Ocio Dinamico
LocationMadrid,Spain
 Bufete de abogados scarante

LocationVALENCIA,Spain
ConsultancyType:Law
Specialisation Law
 International law offices (Ukraine)

LocationOdessa,Ukraine
ConsultancyType:Law
Specialisation Law
 Moonlight Environmental Ltd.

LocationFolkestone,UK
ConsultancyType:Law
Specialisation Food + Drink
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 ManagAir Europe Ltd

LocationBrussels,Belgium
Consultancy Type Public Affairs
 Andreas Neocleous & Co

LocationLimassol,Cyprus
ConsultancyType:Law
Specialisation Competition
 The PAC Group

LocationKoeln,Germany
 Mundo Capital Link

LocationBelgrade,Serbia
In the above list, agencies from United Kingdom lead the pack, closely
followed by Spain & Belgium. Only one French agency has been
included in the list. According to the European Union, the number of
elite agencies is soon about to be increased from 19 to 25 or 30. The
French agencies have a great chance in this regard. The French
government is also promoting these agencies in the long run, & they
have a great opportunity in their hands, & their future seems to be
bright.
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CHAPTER-3
LAW ENFORCEMENT AGENCIES OF
EUROPE
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LAW ENFORCEMENT AGENCIES OF

EUROPE
Due to extreme globalization, companies originating at North Pole have
efficient business interests at the South Pole & vice-versa. The rules &
regulations of the businesses vary from one place to the other. The
concept of global village made the situation even more dearth as
people belonging to one nation work in the firms of the origin of other
nation, & that too, in a third nation, the situation becomes
complicated. As the customs, traditions & ethics keep on changing
from place to pace, so does the rules & guidelines. What is ethical in
US might not be ethical in India, & ethical practices of India may not at
all be ethical in Europe. Besides ignorance of law is no excuse. So,
there must be someone to guide about the legal & ethical procedures
of businesses in this “Global Village”, & it is where the law enforcement
agencies fit in.
Law enforcement agencies (sometimes also known as law firms) are

those agencies/organizations that directly & actively assist in the
enforcement of law. Earlier only the police & the related agencies were
called as the law enforcement agencies, but as the developments
proceeded with the advent of various private detective agencies & the
law firms coming into the market, the definition of law enforcement
also changed. It now includes the agencies & organizations that assist
the governing bodies to provide governance as well as to maintain
social control.
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Thus, in other words, we can say that the law enforcement agencies
also function as the legal advisors for a firm & guide them about the
legal & standard procedures of doing businesses in any part of the
world. These firms may also undertake the work of addressing & filing
the legal suites of a company/organization/individual. Their job is,
hence vital in the businesses as they affect the running of businesses
in an efficient manner. Any mistake on their part may give a death
blow to their client. Thus, the field requires serious & efficient
personnel with a vision in their mindsets.
ORGANIZATION & STRUCTURE
Nature of the work:

For this purpose, these agencies hire a varied range of professionals
such as the lawyers, attorneys, tax consultants, charted accountant,
CPAs etc.
Today’s scenario:
According to a research report jointly prepared by Lexis Nexis,
Martindale-Hubbel & European Lawyer, the law firms are quite
profitable organization the median profit of the law firms across the
Europe stood at 406,300 Euros, in 2005; up from 337,900 Euros in
2004 & a major chunk of this income came from UK & Italy. Spain
followed them closely, but France was far too behind. Most of these
profits came from M&As work & are hoped to rise in the near future.
THE FUTURE AHEAD:

With the economic slowdown of 2008, the profits of these firms are
expected to increase as law firms are bound to get many cases of
insolvency, bailouts etc & after the crisis gets over (i.e. in mid-2009),
and the markets will tend to consolidate. All this will happen through
M&As, joint ventures etc, which in turn, will not occur in the absence of
the various law firms. Thus, the law firms are bound to get more &
more profits in the future & their business will keep on flourishing. The
French firms can gain in the future by increasing their competency &
promoting themselves.
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CHAPTER-4
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PRIVATE DETECTIVE AGENCIES OF
EUROPE
PRIVATE DETECTIVE
AGENCIES
Business today revolves around four main things; money, ideology,
compromise & ego. When any product is marketed in any part of the world,
these factors play an important role. Money, as we all know is the main
concern for any business, with each firm trying to earn the maximum amount
of market share so that they can earn more capital, leading to more profits,
& hence, more money. Followed by money is the ideology. Some products
could not be sold in some parts of the world simply because the ideology of
the people in those places is quite different. Taking Middle East nations for an
example, one can not sell large volumes of alcohol in those areas simply
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because the product clashes with the ideology of the local population.
Compromise also has a lot to do with the sale of the product. E.g. those who
cannot afford an expensive car, but can afford $1000 car, will have to
compromise with Tata’s Nano, as no other car is available at such cheap a
price. Ego also has a lot to do with the sale of the products. Some products
cannot be sold in some parts of the world simply because the country of their
origin is that region which they dislike. If we take with us the point of Israel,
does anyone hope that they will purchase any product originating from
Palestine?
As the time has proceeded, there have been many instances of frauds. The
corporate world is the worst affected by the frauds occurring all over. Every
year, corporate frauds are seen in one part of the world or the other. If no
action is taken to prevent as well as investigate these types of frauds, then
tampering with the organization security of different companies will become
a cakewalk for all these frauds. Besides, the business community will keep on
suffering from one type of fraud or the other. The above listed four factors,
which are responsible for the sale of products in the market, are responsible
for the various types of corporate frauds as well. Money is the prime
motivational factor, wherein one may indulge in wrongdoings, if he/she is
motivated to earn more amounts of money with the least effort possible. This
is sometimes due to the distorted mentality of the involved person, but many
times, it has been seen that the people involved in this type of work do it
simply for their own benefits. Thus, to investigate such types of cases,
someone must be there, who can keep a track of all the frauds that have
taken place besides, to find out the links between two different types of
frauds, if available. This function is well performed by the various detective
agencies present all round the globe. Ideology today is the main reason for
various types of clashes all round the globe. Even the root of the world’s
biggest menace, i.e. terrorism, has its roots in the ideological differences.
Thus, we can say that when ideological differences spur in an organization,
the organization becomes too vulnerable. To prevent such a vulnerability of
the organization, there may arise a need to prevent such cases & detective
agencies may come in handy for the purpose. Whenever one is made to
compromise with anything, the other person tries to make the best utilization
of every opportunity possible. In such cases, the person involved may
indulge in frauds & the companies/firms may have to suffer a lot.
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Thus the time has proceeded, need for a detective is also increasing. This is
because as the technology has advanced, it has become even more difficult
to track the notions of the people. In the corporate world, the role of
detectives is also important. This is because despite many efforts,
organizations simply are not immune to the ‘black sheep’. Thus, there arises
a need for the security of the various documents, that there must be
someone who can find out the person that has leaked the precious
information out of the organization. Any piece of information that an
organization contains, may be useful for the others, especially the
competitors. This ‘inside information’ becomes very handy for the competitor
to find out what we are doing & what we are planning to do in the future.
Thus, securing the information of the organization is nowadays gaining
priority among various organizations, whether it is government departments,
private or public companies, any small organization, any firm etc.
Despite many measures to prevent such cases, an organization may not be

completely immune to ‘traitors’ who may leak out the ‘sensitive documents’
outside the organization. This is because competitors, to gain any piece of
information from our employees may use unethical methods such as bribing
the employees, especially the low class employees that have the access to
documents. Thus, there exists a need to employ the private detective
agencies by the big corporate houses to keep a track of all the existing as
well as possible ‘corporate traitors’ within & outside the organizations.
Another aspect of the detective agencies is to find out how secure we are &
what are the loopholes within the security system of our organization, not
only in the technological environment but in physical setups as well.
With the advent of civilization, coupled with the advanced technology, the
nature of crime has also changed. It has become difficult to identify the main
person behind the crime scene. This concern has increased since the
increase in the terrorist activities taking place all round the globe.
Sometimes it also does occur that the real culprit walks away freely into the
public, while an innocent bears the burnt of his crimes. Thus, detective
agencies may come handy at such times.
In Europe, the concept of detectives is not too new; there have been
instances of detectives being used even before the 1900s. The tales of
Sherlock Holmes are famous even today. Earlier, most people adopted the
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profession of detectives as amateurs, but as the capitalistic economies
began to emerge, they saw profits in this profession, & the profession
gradually took the shape of what it is today. Besides, the science of forensics
also helped the profession a lot.
Sometimes, the private detectives may be used for the international

intelligence purposes also. It comes in handy to do the background checks of
the organizations with which any organization is going to have liaison with. In
other words, they may help us in the due diligence work by finding out the
status as well as the physical existence of our future partner, his existence &
the truth behind the claims that he makes. They are quite useful in
international M&As, joint ventures etc. They might prove extremely helpful
when we want to do the due diligence of our partner, & do not want that the
other party comes to know about it. Nowadays, in many of the countries, the
state detective agencies also perform the due diligence for the firms of origin
in those states. Nations such as France, Germany, USA, and Israel etc. are
already providing such services to the companies originating from/ registered
in their lands. Thus, the role of private detectives is also quite important in
the corporate houses.
Private detective agencies of Europe provide a wide range of services to their

clients. A list of the services provided by one of such agencies (ALMA
detectives)at France is:
 Tracing lost people
 Advise for genealogy
 Industrial espionage
 Private investigations etc.
Thus, there exists a continuous need for the continuous monitoring of the law
& order situation prevailing around us as well as to prevent & investigate the
various types of frauds/espionages etc. that may be taking place within our
organization. As a corporate executive, it is be our duty to prevent such
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cases & take such type of cases very seriously, if occurred. Thus, detective
agencies come handy in for the purpose. Some 168 such agencies exist in
Europe of which a significant no of agencies are of French origin.
CHAPTER- 5
DUE DILIGENCE AGENCIES OF
EUROPE
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DUE DILIGENCE
Among the various functions of any competitive intelligence personnel, due
diligence is one of the most important function. It is mainly used to
investigate and evaluate a business opportunity.
The term due diligence describes a general duty to exercise care in any
transaction. As such, it spans investigation into all relevant aspects of the
past, present, and predictable future of the business of a target company.
Due diligence sounds impressive but ultimately it translates into basic
commonsense success factors such as "thinking things through" and "doing
your homework". Competitive intelligence personnel have got various
reasons to perform due diligence & these can be listed below:
• To confirm that the business is what it appears to be;

• To identify potential "deal killer" defects in the target and avoid a bad
business transaction;
• To gain information that will be useful for valuing assets, defining
representations and warranties, and/or negotiating price concessions;
and
• To verify that the transaction complies with investment or acquisition
criteria.
• To verify the credentials of the other party
Requirements for conducting due diligence:

Lead and co-investors, corporate development staff, attorneys, accountants,
investment bankers, loan officers and other professionals involved in a
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transaction may have a need or an obligation to conduct independent due
diligence. Target management typically assists these parties in obtaining due
diligence information but because it is unwise to totally rely on management
third party consultants such as Astute Diligence are often brought in to
conduct due diligence.
Initial data collection and evaluation commences when a business

opportunity first arises and continues throughout the talks. Thorough
detailed due diligence is typically conducted after the parties involved in a
proposed transaction have agreed in principle that a deal should be pursued
and after a preliminary understanding has been reached, but prior to the
signing of a binding contract.
Conducting due diligence:
The parties conducting due diligence generally create a checklist of needed

information. Management of the target company prepares some of the
information. Financial statements, business plans and other documents are
reviewed. In addition, interviews and site visits are conducted. Finally,
thorough research is conducted with external sources -- including customers,
suppliers, industry experts, trade organizations, market research firms, and
others.
The amount of due diligence to be conducted is based on many factors,

including prior experiences, the size of the transaction, the likelihood of
closing a transaction, tolerance for risk, time constraints, cost factors, and
resource availability. It is impossible to learn everything about a business but
it is important to learn enough such that you lower your risks to the
appropriate level and make good, informed business decisions.
Need for proper diligence:
Like everything in life, proper diligence should also be restricted as it may

have its own side effects that may range from minor to major ones,
sometimes even affecting the prospects of the company. Too much due
diligence can offend a target company to the point where they walk away
from a deal. It can also result in "analysis paralysis" that prevents us from
completing a transaction or provides time for a better competing offer to
emerge. Accordingly, it is important that due diligence be prioritized and
executed expeditiously. Appropriate investigation and verification into the
most important issues often must be balanced by a sensible level of trust
concerning lesser issues. Some firms even allocate a given time for due
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diligence. This time allocated for completion can vary widely with each
situation. Many preliminary agreements define the timeframes in which due
diligence must be conducted. Time schedules through the closing of a
transaction are typically tight -- parties should ensure that adequate time is
allocated to due diligence.
Every transaction has different due diligence priorities. For example, if the
main reason you are acquiring a company is to get access to a new product
they are developing to accelerate your own time to market, then the highest
priority task is to ensure that the product is near completion, that there are
no major obstacles to completion, and that the end product will meet your
business objectives. In another transaction, the highest priority might be to
ensure that a major lawsuit is going to be resolved to your satisfaction.
Due diligence in business transactions
In business transactions, the due diligence process varies for different types
of companies. The relevant areas of concern may include the financial, legal,
labour, tax, IT, environment and market/commercial situation of the
company. Other areas include intellectual property, real and personal
property, insurance and liability coverage, debt instrument review, employee
benefits and labour matters, immigration, and international transactions.
Due diligence in philanthropy
With origins in the private-sector world of business and finance, the term
“due diligence” refers to the process through which an investor (or funder)
researches an organization’s financial and organizational health to guide an
investment (or grantmaking) decision. The decision to fund or not to fund is
based upon a balance of objective data analysis, insight into the general
state of organizational health and stability, and intuition. A sound and
thorough due diligence review is the process through which all the factors
that make up that equation are uncovered and understood. It is the process
in which a program officer seeks the “truth” about an organization.
Due diligence for hedge funds
Due diligence investigation with regard to hedge funds refers to an in-detail

review of a hedge fund’s activity, conducted in order to ensure that the fund
is in compliance with its prospectus. It is a roadmap for existing and potential
investors in understanding whether a specific fund will meet his or her
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investment horizon, risk tolerance and investment strategy. In a non-
exhaustive list, due diligence would consist of an examination of:
• A Fund snapshot
• Disclosed Investment Strategy
• Historical returns
• Assets under Management (A copy of the funds portfolio from the
custodian is usually requested)
• Audited Financial statements if the Fund is SEC regulated
• Fund's terms and Details
• Regulatory registration if any
• Risk Factors
• Valuation
Every investor is going to have different investment horizons and risk

tolerance, as well as a strategy preference. It thus follows that there is no
"best" hedge fund, but a fund that most closely matches investors'
preferences. An investor should almost always:
• Request consultation from a professional

• Read the fund's prospectus or offering memorandum
• Understand how a fund's assets are valued
• Understand how fees are charged
• Understand any limitations towards the redemption of shares
• Research the backgrounds of hedge fund managers
As a concept in civil litigation
Due diligence in civil litigation is the effort made by an ordinarily prudent or

reasonable party to avoid harm to another party. Failure to make this effort
may be considered negligence. This is conceptually distinct from
investigative due diligence, involving a general obligation to meet a standard
of behavior. Quite often a contract will specify that a party is required to
provide due diligence.
It is not correct to confuse due care and due diligence. Due care should be
spelled out in full as duty of care. It is a legal concept by itself. Duty of care
may be very wide, far reaching, and also a grey area subject to argument.
Basically, parents owe their infant a duty of care in everything. As the infant
grows to be a child, to be an adolescent, an adult, the duty of care and its
scope become less and less. Fundamentally, a duty of care is a moral duty to
care. When legal acknowledgment is extended to this moral obligation, then
this duty becomes a legal requirement. Inversely, the legislature sets the
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duty in the statute. Then we consider this duty as legal and amoral ["a-",
without, not having to consider the moral aspect].
When read carefully, care is the passive mode; diligence is the active mode.
First the duty of care (due care) arises, making it a requirement. In order to
fulfill this duty, due diligence is exercised. The flow may be continuous, but
these two concepts are different. When due diligence is called for, then there
will be a set of demands to be complied with, depending on the context. For
example, before a surgery, what should be done and who should be present
in the theater? After the surgery, what must be done to the patient,
equipment, facilities?
As a matter of independent inquiry, whether by a court of law or professional

body, the line of investigation is:
(1) Is there a duty of care? How is this duty of care imputed? (Previous case
law, statute, new case)
(2) If the duty of care exists, what are the applicable standards? In other
words, what due diligence (and the components that go to make it a
comprehensive due diligence) is required?
The last issue is always considered in light of specific circumstances of the

case. If brain surgery is involved, the standards are those required of
competent brain surgeons. If deep sea welding is involved, the standards are
those required of competent deep sea welders. In an auction of a Picasso,
due diligence standard must be comparable with an international auctioneer
to authenticate an art object. In the sale of a diamond, due diligence may be
necessary from human rights and political aspects. As such, expert opinions
are often considered.
For supplier quality engineering
Due diligence is a term used for a number of concepts involving either the
performance of source inspection or source surveillance, or the performance
of quality duties such as PVA (Process Validation Assessment) or System
Audits with a certain standard of care.
Due diligence in Supplier Quality (also known as due care) is the effort made
by an SQE (Safety, Quality and Environment) professional to validate
conformance of product provided by the seller to the purchaser. Failure to
make this effort may be considered negligence. This is conceptually distinct
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from investigative due diligence, involving a general obligation to identify
true, root cause for non-compliance to meet a standard or contract
requirement.
As a criminal defense
In criminal law, due diligence is the only available defense to a crime that is
one of strict liability (i.e. a crime that only requires an actus reuss and no
man’s area). Once the criminal offense is proven, the defendant must prove
beyond a reasonable doubt that they did everything possible to prevent the
act from happening. It is not enough that they took the normal standard of
care in their industry - they must show that they took every reasonable
precaution.
Environmental due diligence
Environmental due diligence during commercial real estate and transactions

can include Phase I and Phase II Environmental site assessments Such
assessments are often undertaken in the Europe to avoid liability under
various acts.
Information security due diligence
Information security due diligence is often undertaken during the information

technology procurement process to ensure risks are known and managed,
and during mergers and acquisitions due diligence reviews to identify and
assess the business risks.
Due diligence companies of Europe
The different companies that perform due diligence in Europe is:
Corus Group plc.
ADAMAS consulting UK
Westchester Technology Advisors, LLP
Bain Capital
IBS Research & Consultancy
Due diligence in France
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Due diligence is very common in France & the various companies involved in
the business focus upon the following:
 Contracts of sale or purchase of French real estate businesses,

planning documents, easements, leases
 French companies’ legal status, their constitutional documents,
shareholders, licenses & certificates
 Ownership rights & intellectual property rights
 Business agreements
 French employment contracts, & their compliance with the labour law
 Compliance with environmental law
 Other legal aspects of the audited property or business
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CHAPTER-6
CORPORATE COMPLIANCE
CORPORATE COMPLIANCE
As the business has progressed, many new companies have seen the light of the day. With the
increase in the no of companies & corporations in the business, there is a rat race among the
different firms & organizations to earn the maximum amounts of profits. This has led to an
increase in the defaults of the companies. The cases of default have increased manifolds since the
globalization took place. The governments across the world are targeting the companies whose
employees are violating the civil as well as criminal laws & rules formulated under their
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jurisdictions. Organizations that come under scrutiny face potentially staggering fines
and penalties, as well as the prospect of "corporate probation" (which
involves intrusive federal monitoring), and even criminal liability of corporate
employees, officers and directors. Under the Guidelines, an organization
which has such a program may receive a substantially reduced fine, and may
be able to avoid corporate probation and criminal prosecution altogether.
The corporate compliance program
A corporate compliance program is a system which is designed to detect and

prevent violations of law by the agents, employees, officers and directors of
a business.
Although we use the general term "corporate compliance", the need for an
effective compliance program is not limited to corporations. Any form of
business entity is well served by having an effective compliance program.
Penalties under the guidelines include fines and imprisonment, as well as

"corporate probation", which is mandatory in the case of a business which
does not have an effective compliance program in place. Probation involves
intrusive federal monitoring of the organization and adoption of a
government authored compliance program, which can be far more expensive
and invasive than a voluntary compliance program could have been.
The Guidelines take a carrot and stick approach in order to encourage

businesses to police themselves. Each crime or violation is assigned a base
fine, which is either increased or decreased based upon the presence of
certain aggravating and mitigating factors. One such mitigating factor is the
existence of an effective corporate compliance program.
Under the Guidelines, an organization which has such a program may receive
a substantially reduced fine, and maybe able to avoid corporate probation
and criminal prosecution altogether.
Among the penalties which apply to organizations are:
• prison
• fines
• restitution
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• sanctions
• forfeiture
• Corporate probation.
The compliance mechanisms:
There are compliance mechanisms which correspond to the "7 Steps" of

compliance due diligence.
The hallmark of an effective program to prevent and detect violations of law

is that the organization exercised due diligence in seeking to prevent and
detect criminal conduct by its employees and other agents. Due diligence
requires at a minimum that the organization must have taken the following
7steps:
1. The organization must have established compliance standards and

procedures to be followed by its employees and other agents that are
reasonably capable of reducing the prospect of criminal conduct.
2. Specific individual(s) within high-level personnel of the organization
must have been assigned overall responsibility to oversee compliance
with such standards and procedures.
3. The organization must have used due care not to delegate substantial
discretionary authority to individuals whom the organization knew, or
should have known through exercise of due diligence, had a propensity
to engage in illegal activities.
4. The organization must have taken steps to communicate effectively its
standards and procedures to all employees and other agents, e.g. by
requiring participation in training programs or by disseminating
publications that explain in practical manner what is required.
5. The organization must have taken reasonable steps to achieve
compliance with its standards, e.g., by utilizing monitoring and auditing
systems reasonably designed to detect criminal conduct by its
employees and other agents and by having in place and publicizing a
report system whereby employees and other agents could report
criminal conduct by others within the organization without fear of
retribution.
6. The standards must have been consistently enforced through
appropriate disciplinary mechanisms, including, as appropriate,
discipline of individuals responsible for the failure to detect an offense.
Adequate discipline of individuals responsible for an offense is a
necessary component of enforcement; however, the form of discipline
that will be appropriate will be case specific.
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7. After an offense has been detected, the organization must have taken
all reasonable steps to respond appropriately to the offense and to
prevent further similar offenses - including any necessary modifications
to its program to prevent and detect violations of law.
RECENT DEVELOPMENTS IN CORPORATE COMPLIANCE REGULATIONS:
The recent European competition law reform abolished more than 40 years
notification regime according to which companies routinely notified to the
European Commissions all kinds of envisaged commercial agreements &
cooperative practices other than Mergers & Acquisitions(M&As). A new
system of self-enforcement of European competition law will come into place
which hinges upon two dimensions: enhanced emphasis is given to private
self assessment & the felicitation of legal actions by private entities before
the national& the European courts. This shift in private enforcement reflects
an incremental change of competition control. It represents a convergence
towards the US competition enforcement law system. This reliance of the
market intelligence in spotting anti-competitive practices indicates a
regulatory transformation from a clear cut, formal & supervisory public
control towards a more insecure & laissez-faire market-based solution.
Although it remains to be seen what future impacts the reform will cause,
this is a rather risky endeavor with regard to regulatory stringency as it may
stimulate a claimant’s culture driven merely by profit motives.
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CHAPTER-7
CONCLUSION
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CONCLUSION
As the business has evolved, so have the different basic concepts involved in
doing it. The global economic slowdown that we are facing today has
exposed many flaws in various business procedures. It has brought limelight
the points where we lacked & it has also brought to the fore various
malpractices that various firms were following, in an attempt to derive
maximum profits from the markets. This led to fall in various market indices
as well as reduction in the economic progress of various parts of the world.
Billions of Euros virtually disappeared from the market within a single day.
The impact of such practices was seen in each & every part of the world,
thanks to the concept of globalization. Now, the question arises what were
the different governments doing when these companies were earning huge
profits through unethical and/or fraudulent procedures. These governments
seemed to be helpless in the situation & they had no clue about how to solve
the problem out. Before the governments could take any step, inflation was
acting as a deterrent.
Many of the democratic governments started rolling bailout packages to the

companies originating in their territories. When the governments are ready
to shed a heavy chunk of the public money to various companies, it is
natural that some companies may, in the lust of earning extra capital may
also queue up in the line. Thus, performing the due diligence as well as
identifying the compliances of a company is a tough task for the
governments as the number of companies operating inside a nation is too
high.
Specialized investigative agencies have a major role to play in such scenario.

These agencies are competent enough to find out the hidden reality behind
the tall claims made by any company. These agencies can be of important
use for various purposes and their significance as specialized investigative
agencies can be gauged from the fact that they are the main agencies that
are responsible for the external audits of a company, they provide vital legal
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advisory functions for a company, and they are also responsible for
indicating any violation of the code of conduct, if done by any firm; they are
responsible for doing the background checks of the firms besides many
others.
These agencies have now acquired a great significance in the developed

parts of the world, especially Europe & the United States. This is because
these states are highly developed & a high degree of business activities keep
on taking place in these regions. Thus, these agencies have major role to
play. After the economic slowdown will be over, markets in these places will
enter in the consolidation phase and this will require a lot of job to be done
by these agencies. Thus, the future of these agencies seems to be bright.
These agencies will tend to get a lot of jobs to be done during the M&A
procedures, when the merging entities will need legal advice from them,
notwithstanding the background checks to be performed. Besides, the focus
of various regulatory authorities of business in Europe will mainly be on the
compliance front. This will because of the more stringent norms that will be
enforced once the economic crisis gets over.
France is home to some of the very best specialized investigative agencies.

Besides, increased awareness of the business environment will lead to an
upsurge in the number of specialized investigative agencies of French origin
to gain focus at the global arena & their future seems to be bright.
40

Role of Specialized Investigative Agencies of Europe in Corporate Compliance & Due Diligence

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Role of Specialized Investigative Agencies of Europe in Corporate Compliance & Due Diligence

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2009

AMITY INSTITUTE OF COMPETITIVE INTELLIGENCE

Utkarsh Kumar Singh,

1. Cover Page Cover

4. Management consultancy agencies of Europe 8

 Organization & structure

 List of agencies approved by the European

5. Law firms of Europe 17

 Organization & structure

 The future ahead

6. Private detective agencies of Europe 20

7. Due diligence agencies of Europe 24

 Requirements for conducting due diligence

 Conducting due diligence

 Need for proper diligence

 Due diligence firms of Europe

 Due diligence firms of France

With the advent of globalization, businesses as well as the various business

There are various types of specialized investigative agencies located all

 Management consultancy services,

 Law enforcement agencies,

 Private detective agencies,

 Corporate compliance advisors/ agencies

MANAGEMENT CONSULTANCY AGENCIES

ORGANIZATION AND STRUCTURE

Individual Firms. The most common organizational structure for a

Management consulting firms generally operate on a project fee or hourly

Industry Structure. Management consulting firms range in size from sole

In addition to providing expertise or advice, many management consultants

Because the management consulting industry is unregulated, any individual

Large Consulting Firms. This classification represents the largest players

Big Five Accounting/Consulting Firms. A handful of large public

Small Firms/Boutiques. Small firms or boutiques often provide specialized

Sole Practitioners. Perhaps the most difficult segment to define in the

Internal Consulting Organizations. Large corporations may have

IT/MIS. The information technology segment is the largest segment of the

Compensation/Benefits Consulting. Compensation/benefits consulting

Generalist Consulting. Generalist management consulting firms typically

Strategy Consulting. Strategy consulting firms specialize in providing

Specialty Consulting Practice Areas. This segment is by far the most

Marketing Consulting Firms. These firms provide marketing research,

Business Re-engineering/Organizational Effectiveness. This specialty

Environmental Consulting Firms. With increased public attention on the

For consulting firms, approximately 20 percent of their costs are consumed in

A bake-off occurs when a client with a problem approaches several

Because of the expense involved in acquiring new clients, consulting firms

Industry Associations and Accreditation. There is no central licensing

Another primary industry association is ACME (formerly Association of

Some 19 management consultancy agencies of EU have been accredited as

 International Intelligence on Culture

 RAMS Risk Analysis and Management Services

 International Law firm

 Bufete de abogados scarante

 International law offices (Ukraine)

 Moonlight Environmental Ltd.

 ManagAir Europe Ltd

 Andreas Neocleous & Co

 The PAC Group

 Mundo Capital Link

LAW ENFORCEMENT AGENCIES OF

Law enforcement agencies (sometimes also known as law firms) are

ORGANIZATION & STRUCTURE

Nature of the work: