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Volume 31, Issue 4

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Tuesday, 09 October 2018 14:13

Mitigating Data Risk In M&A Transactions

What to Do When a Deal Falls Apart

What happens after a planned deal falls apart? In the process of seeking approval, a wealth of sensitive company information is transferred between entities – from financials to intellectual property. This article explores how a company can properly recover following the dissolution of a merger.

For a company closing an acquisition, it’s a heady time. Months of due diligence, back-and-forth negotiations and organizational strategy gives way to the challenges of integration. But for every company celebrating the next chapter for their business, dozens more are sent back to the drawing board after a potential deal falls apart. This is more common than one might think – if 200 companies hit the deal pipeline, only about 40 will reach the letter of intent stage. Of that 40, just 15 might reach the deal finish line, leaving everyone else trying to put the genie back in the bottle.

Those who are back at the drawing board – whether the deal would’ve been industry-changing or one that simply furthered a company’s goals – all face the same problem. The former buyer – possibly a direct competitor – has just seen a lot of proprietary information. You can’t erase memories, but how can you ensure that they no longer have access to the spreadsheets, financial statements and internal knowledge that are all part of the due diligence process? Data security becomes critical for both the buyer and sellers. The risk of information leaks must be immediately mitigated, particularly if your deal has reached the letter of intent stage – a point in time when vast amounts of sensitive information has been exchanged.

Of course, everyone has signed non-disclosure agreements, but the information is out there and it’s time to eliminate the exposure as quickly as feasible.