Protect Data in Merger and Acquisition Deals

While M&A deals can enhance the company’s assets, they can also expose it risk. Companies that fail to protect the privacy of their data during M&A deals could face costly fines and loss of trust in the digital world. A well-planned, executed privacy due diligence plan can help mitigate these risk.

Therefore, many M&As include a lot of sensitive data that can be affected by regulatory concerns and legal issues. This is particularly relevant for M&As which involve highly-regulated sectors such as finance or healthcare. In these situations, parties might be required to conduct a separate examination of compliance with regulatory requirements during the due diligence process.

Before closing, the buyer should understand the level 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 important to speak with the personnel of the target company who are responsible for data security and privacy to get a complete picture of their compliance, and also a look at any policies or procedures that could pose a problem in a M&A scenario.

It is important to include in the contract of sale forward-looking covenants that require sellers to improve their data protection practices prior to closing. This will not only ensure compliance with the law applicable to them but also limit liability after closing and minimize the impact M&A activity has on future data breaches.

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