Several processes are involved in businesses and investments. However, Mergers and Acquisitions (M&A) stands out as one of the most popular business processes. Some other business processes include Initial Private Offering (IPO), Intellectual Property (IP), as well as Private Offering which also are all effective exit strategies. M&A, as it is often called, is a due diligence process that involves sorting out, storing and sharing vital and confidential information relating to a business deal or investments with parties involved.
As a result of the several issues facing the safety and privacy of sensitive company data, it is imperative to find a lasting approach to tackling cyber-attacks and potential hacks of vital business data. DealRoom as one of the virtual data rooms serves to attain the objective of ensuring data privacy and cybersecurity while carrying out Mergers and Acquisitions (M&A).
Virtual data rooms (VDRs) are online repositories used in virtually every business and organization to securely store sensitive data. The cyber-world is full of a potential launch of cyberattacks at businesses in the bid to have possession of their sensitive data. To curb this threat and menace, the virtual data room has come to ensure data security. It is indeed a perfect replacement for the conventional and physical data room which was susceptible to many cyber attacks. Nonetheless, mergers and acquisition deals are faced by certain issues such as cyber-attacks, risks of a data breach as well as an invasion of data privacy during M&A deals.
The effects that such issues have on M&A deals could lead to unsuccessful transactions as well as having disastrous effects on the businesses and organizations involved. A data breach will affect the business, clients and investing parties involved in the M&A.
Effects of Data Breaches and Cyberattacks
There are a lot of effects on Mergers and Acquisition deals that result from data breaches and cyber attacks during any deal. Some of such effects and risks associated with data breaches during M&A include these:
1. Businesses may lose the confidence of their clients
When a business is affected by cyber-attacks and ends up losing sensitive data such as customer profile, financial statements, address and location of clients, clients may find it hard to rely on such a company. By losing out such confidential information to a data security breach, customers and even prospective investors will lose their faith in such business, investment or organization. This will, in turn, lead to a reduced customer base as well as reduced revenues.
2. The business or company may be levied with fine payment
A data breach or eventual data loss as a result of cyberattacks could render a company leaving the market. The effects of data loss cannot be predicted as there may be fines or payments levied on businesses who have been successfully attacked. The fact that there is a data breach and that the sensitive information about parties involved in the M&A means that the affected business will be held accountable. Some regulatory boards and agencies are saddled with the responsibility of ensuring that transaction details and profiles of clients and investors remain confidential. Once during Mergers and Acquisition, your customers’ sensitive information is breached, your business will be liable to pay for the damages that result from the data breach or loss.
3. Startup company value may be affected
For most startup companies who develop new technologies, estimating the value of the company has great importance to the success of the company. Such estimations are done in the form of patents, trade secrets, intellectual properties, logos, and the likes. By the time a startup company loses this vital information as a result of cyber attacks, the value of the company reduces and it affects how such businesses stand with prospective buyers and investors as a result of the data compromise.
What are the Effective Means of Tackling Issues relating to Cybersecurity in M&A?
Since issues about data privacy and cybersecurity are a big threat to the sustenance of businesses, there is a need to provide a lasting solution to such threats. Ensuring data privacy can be done by both the parties involved in the Mergers and Acquisition deals (acquirer and selling company).
As part of solving cyber-attack and data breach issues in M&A, a virtual data room serves as the perfect platform for due diligence processes during mergers and acquisitions. Its network is online, virtual and secure which makes it suitable for sharing and storing sensitive information about deals, clients and the deal team. In addition, the acquiring company should investigate and carry out appropriate research on the probable risks and issues that could come with the transaction. Through this, previous reports of hacks or data breaches can be drawn to ascertain the extent of possible issues that may arise during the M&A. In essence, data privacy and cybersecurity remain the duty of both the acquiring party and the selling company.
Author’s Bio: Lori Wade is a writer who is interested in a wide range of spheres from business to entrepreneurship and new technologies. If you are interested in M&A or virtual data room industry, you can find her on Twitter & LinkedIn or find her on other social media. Read and take over Lori’s useful insights!
