Private equity (PE) sponsors are taking heed of the significant corruption risks posed by their investments. Getting their arms around those risks and the targets’ compliance programs can be challenging and increasingly requires extensive due diligence on a target company’s anti-corruption compliance program and historical dealings. If that diligence uncovers problems, PE sponsors are then forced to grapple with difficult decisions about whether to proceed with a deal or simply walk away. This second article in our three-part series on managing corruption risk in portfolio companies discusses key components of pre-deal assessment and diligence; when to walk away from a deal; and when it may make sense to invest in companies that have had Foreign Corrupt Practices Act problems. The first article addressed the compliance and enforcement climate and the risks a PE firm faces related to its portfolio companies. The third article will examine how to walk the line between control and passivity while monitoring a portfolio company, as well as strategies for handling anti-corruption issues that arise after a deal has closed. For more on how fund managers can mitigate corruption risk, see “ACA 2018 Compliance Survey Examines Electronic Communications, Personal Trading and Corruption Risk (Part Two of Two)” (Jun. 14, 2018); and “WilmerHale Attorneys Discuss FCPA Concerns for Private Fund Managers (Part One of Two)” (May 28, 2015).