M&A can boost the value of a business, but they can also expose them to significant risks. Companies that fail to safeguard the privacy of their data in M&A deals can face expensive penalties and lose trust in the digital world. The good part is that a well-planned and implemented privacy due diligence process can help reduce the risks.
Many M&As are marked by the presence of sensitive data, which can be affected by regulatory and legal issues. This is particularly relevant in M&As that involve highly regulated industries such as healthcare and finance. In these cases, parties could be required to conduct webdataroomcenter.net/an-efficient-board-meeting-agenda-template-for-nonprofits a separate review of regulatory compliance during the due diligence process.
Before closing, the buyer should be aware of the degree and type of risk that is associated 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 like the California Consumer Privacy Act. It’s important to interview those at the company that are accountable for privacy and security of data to get a clear picture of their situation, including a look at any policies and procedures that could be problematic in an M&A scenario.
In this regard, it’s essential to include forward-looking covenants in the sale contract, which require the sellers to improve their practices for protecting data prior to closing. This will not only assist in ensuring compliance with the law and regulations, but it’s also an excellent method to decrease post-closing liabilities and mitigate the impact of M&A activity on future data breaches.