Protect Data in Merger and Acquisition Deals

While M&A deals can bring value to a company’s assets, they also expose it to a significant risk. Companies that fail to safeguard the privacy of their data in M&A deals may be subject to costly penalties and a loss of trust in digital technology. A well-planned and implemented privacy due diligence can aid in reducing the risk.

Many M&As are characterised by the presence sensitive information, which could be affected by legal and regulatory issues. This is particularly true for M&As that involve highly-regulated fields such as healthcare or finance. In these cases, the parties may be required conduct a separate audit of regulatory compliance as part of the due diligence process.

Before closing, the buyer must understand the extent and nature of risk that comes with the transaction. This includes any regulations that are specific to the sector like the Gramm-Leach-Bliley Act, the Health Insurance Portability and Accountability Act or even consumer privacy laws, such as the California Consumer Privacy Act. It is essential to speak with the personnel of the target company who are responsible for privacy and security of data to get an accurate picture of their current status, which includes a look at any policies and procedures that could be problematic in an M&A scenario.

Therefore, it’s imperative to include forward-looking provisions in the sale contract that require the sellers to improve their data protection practices prior to closing. This will not only ensure compliance with the law applicable to them, but also reduce liability after closing and minimize the impact M&A activities have on future data breaches.

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