M&A can boost the value of a company However, they also expose them to serious risks. Companies that do not take care to safeguard data during M&A deals are at risk of paying costly fines and a loss of digital trust. The good part is that a well-planned and implemented privacy due diligence process can help to reduce these risks.
As a result, many M&As include a lot of sensitive data that could be impacted by regulatory issues and legal issues. This is especially true in the case of M&As that involve highly-regulated industries like healthcare or finance. In these instances, parties may be required to conduct a separate review of compliance with regulatory requirements 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 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. Interviewing the target’s personnel responsible for security and privacy is important to get a true picture of their current situation, including any policies or procedures that could be difficult to follow in an M&A scenario.
Therefore, it’s essential to include forward-looking covenants in the sale contract, which oblige sellers to improve their data protection practices prior to closing. This will not only help ensure compliance with applicable laws, but it’s also an effective way to cut down on post-closing liabilities and mitigate the impact of M&A activity on future data breaches.
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