Authority Posts for Summit Legal

The SEC just expanded its beneficial ownership disclosure requirements. Most mid-market buyers have not adjusted their diligence timelines.

Here is what that means in practice.

Every deal with a target that has even a partial institutional investor now triggers additional 13D/G filing analysis. What used to be a 2 day check is turning into a 10 day process. And if your buyer's counsel misses it, the deal doesn't just slow down. It risks a post-close enforcement action.

We restructured our diligence workflow 6 months ago to front-load beneficial ownership analysis in week 1. It has saved 3 deals from timeline collapse this year alone.

The firms that adapt their process now will close faster. The ones that don't will spend Q4 explaining delays to impatient boards.

3 things to audit in your current M&A diligence process:

1. When in your timeline does beneficial ownership review happen.
2. Whether your team flags partial institutional stakes automatically.
3. If your outside counsel has updated their 13D/G checklist since the new rules.

The regulatory environment is not getting simpler. Your process has to get faster.

Last quarter we closed a 120 million acquisition where the deal almost died over a single paragraph.

The target company had a legacy vendor contract with an unusual change-of-control clause. It wasn't in the standard diligence checklist. Nobody flagged it until 4 days before close.

That one clause would have let the vendor terminate on acquisition, taking 30 percent of the target's recurring revenue with it. The buyer's valuation model collapsed overnight.

We spent 72 hours renegotiating the vendor agreement in parallel with the main deal. Got a 3 year lock-in that actually improved the original terms. The deal closed on schedule.

The lesson is not "hire better lawyers." Every firm has smart people.

The lesson is that your diligence process needs to treat vendor contracts with the same rigor as IP and employment agreements. Most firms rank them as tier 2. They are not.

If your M&A diligence checklist does not have a dedicated section for change-of-control exposure in commercial contracts, you are one bad clause away from a dead deal.

Unpopular opinion: most compliance programs are theater.

Companies spend hundreds of thousands on compliance frameworks, hire Chief Compliance Officers, run annual training sessions. Then the DOJ comes knocking and the first thing they find is that nobody actually follows the written procedures.

I have reviewed compliance programs for over 50 companies in the last 5 years. The pattern is always the same. Beautiful policies on paper. Zero enforcement in practice.

The problem is not the policies. It is how they are built. Most compliance programs are designed by lawyers writing for regulators. They should be designed by operators writing for the people who actually make daily decisions.

A 60 page compliance manual that nobody reads is worse than a 2 page decision tree that everyone follows. The DOJ's updated evaluation criteria explicitly reward "operationalized" programs over comprehensive ones.

If your compliance program cannot be explained by a mid-level manager without referencing the manual, it does not work.

Stop building compliance for auditors. Start building it for the people doing the work.