As more companies across the globe engage in mergers and acquisitions (M&A), the need to manage privacy and cybersecurity risks has taken center stage. A vast number of these transactions now involve companies with significant digital assets or those that function within the digital economy. As a result, privacy and cybersecurity considerations have become critically important, often playing significant roles in determining the outcome of these transactions.
According to Lexis Nexis, conducting comprehensive due diligence and implementing effective mitigation strategies are key to avoiding unforeseen costs, hurdles, and negative reactions from post-closing privacy and cybersecurity issues.
Proper due diligence in the context of M&A transactions extends well beyond just reviewing financial statements. It now includes an exhaustive investigation into digital assets, intellectual property, and data privacy practices.
Furthermore, the implementation of mitigation strategies is fundamental to managing the digital risk landscape. These can range from obtaining insurance coverage for cyber risks, including privacy breaches and network disruptions, to negotiating contractual protections, such as representations, warranties and indemnities.
The significance of these considerations highlights not only the importance of these risks in the M&A context but also the broader impact of the digital economy on business transactions. As businesses continue to evolve, privacy and cybersecurity risks are expected to remain central to the strategic decisions around corporate deals.