While M&A deals can enhance the assets of a company, they also expose it to significant risk. Businesses that fail to secure the privacy of their data in M&A deals could face costly fines and a loss of digital trust. A well-planned, executed privacy due diligence can help reduce these risks.

Many M&As are characterized by the presence of sensitive information, which could be affected by legal and regulatory issues. This is especially true in the case of M&As that involve highly-regulated industries, such as healthcare and finance. In these instances, parties might be required to conduct a separate examination of regulatory compliance as part of the due diligence process.

Before closing, the buyer must be aware of the amount 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 is essential to speak with the personnel of the target company who are accountable for privacy and data security to get a clear picture of their status, including 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 which require sellers to improve their data protection procedures prior to closing. This will not only ensure compliance with the law applicable to them but also limit liability post-closing and lessen the impact M&A activities have on future data breaches.

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