How to Prevent Data Leakage during the M&A Process?

Most organizations hold sensitive data and, in line with the expectations of their customers, shareholders, business partners, and supervisors, strive to ensure that it is protected.

Information Leakage Risk Assessment during the M&A Process

The disclosure of confidential information can lead to losses, entail legal liability, as well as damage the company’s reputation through publications in the media and wide publicity. Given the increasing risks of industrial espionage and theft of intellectual property, organizations need to take immediate measures: determine which information from the information they own is confidential, evaluate the effectiveness of existing controls, choose mechanisms to prevent possible data leakage.

Next, data room providers conduct monitoring to identify cases of data leakage in specified areas. The purpose of this stage of monitoring is to quantify the level of risk in relation to data types, storage locations, senders, recipients, and network protocols. As a rule, software installation and configuration takes no more than one working day, and monitoring should be carried out within two to four weeks.

Based on the results of the previous phases, providers will hold a meeting with key employees/information owners and interested managers to discuss the reports on the risk assessment of data loss and work out the next steps. They will prepare the following reports based on the results of the risk assessment:

  • a consolidated assessment of the risks of data leakage based on the organization-defined data criticality and the actual frequency of leakage;
  • comparative analysis of the level of risk in the organization and on average in the industry;
  • assessment of compliance with applicable statutory and legal requirements.

Preventing Data Leakage of Merger or Acquisition

Based on the results of the VDR or data room électronique in French, the goals of the merger or acquisition are determined: who is needed to implement the priority tasks. If it is planned to enter new markets, then the following should be taken into account:

  1. the ratio of risk and return;
  2. business development goals, main areas in which business is and will be conducted, specialization and image of the organization;
  3. requirements for the amount of equity capital and capital adequacy indicators (when entering international markets, the requirements of the regulatory bodies of the countries where it is supposed to do business should be taken into account);
  4. legislative and regulatory framework;
  5. competition in national and international markets;
  6. macroeconomic parameters and conditions;
  7. marketing research of the most important client groups for the business.

It is known that avoiding leakage of merger or acquisition is a very difficult task and is carried out on the basis of a development strategy. Determination of the object of merger or acquisition includes both the collection and processing of information and the analysis of information according to the criteria determined by the bank’s development strategy. This paragraph discusses the main approaches of practitioners and the technology used to select the target of acquisitions. 

After the general strategy of mergers or acquisitions is formulated within the framework of defining clear criteria, they proceed to the selection of a suitable object of merger or acquisition. It is possible that the primary list of objects for a possible deal will be determined by the management team, especially since they have specific knowledge of the business and the market situation. At the same time, the help of external consultants may be required if you need to have special knowledge of products and services, technologies, and the specifics of doing business in a particular region.