Protect Data in Merger and Acquisition Deals

While M&A deals can enhance 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 can face expensive penalties and a loss of trust in the digital realm. The good reason is that a properly planned and implemented privacy due diligence process can help reduce the risks.

In the end, many M&As include a lot of sensitive data that can be impacted by regulatory issues and legal issues. This is particularly applicable to M&As that involve highly regulated industries like healthcare and finance. In these instances, parties could be required to conduct a separate examination of compliance with regulations during the due diligence process.

Before closing, the buyer must be aware of the amount and type of risk involved with the transaction. This includes any sectoral regulations such as 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 targets’ personnel who are accountable for privacy and security of data to get an accurate picture of their situation, including the policies or procedures that could pose a problem in a M&A scenario.

It is essential to include in the contract of sale forward-looking provisions that require the sellers improve their data security practices before closing. This will not only ensure compliance with applicable law and reduce the liability after closing and reduce the impact M&A activity has on the likelihood of data breaches in the future.