Is your company considering a transaction to become acquired or to take in additional financing? If so, the time is now to upgrade your privacy and information security practices before you are in serious discussions or receive a term sheet for the transaction. One obvious question is: why now? Aren’t data protection issues something for the lawyers to handle later in negotiating the agreement and during due diligence? In answer to the question why now, I have 350 million reasons why now is the best time to tackle data protection challenges.
The 350 million refers to the transaction in which Verizon purchased the web business of Yahoo. After Verizon found out that Yahoo was in the midst of a data breach at the time of the purchase transaction, Verizon went back to Yahoo and shaved off $350 million from the purchase price. Simply put, the ongoing weakness in Yahoo’s data protection program reduced the valuation of the business and Verizon wanted to slash the transaction value to reflect that reduction in value.
Executives of a target company that want to avoid taking a haircut later in the value of their M&A transaction or valuation during a financing transaction can prepare now to avoid problems later. Taking care of data protection concerns now not only preserves valuation for the target company but also: