October 16, 2021

How to Ensure Your M&A Deal won’t be compromised?

In a financially turbulent environment for many companies, M&A is an integral part of corporate strategies. So, how to conduct a deal following security measures? Here is more about it.

The economic essence of integration processes

The development of the global economy and its large-scale modernization lead to the fact that companies unite to strengthen their position in the market. However, there is another option for the development of such a process, when a larger and stronger company “absorbs” a smaller and weaker one to minimize the number of competitors. Mergers and acquisitions (M&aAmp;A) have become one of the main growth strategies of companies in the context of the globalized economy.

Thus, the main goal of an M&A deal is to increase the capitalized value of the combined company, providing competitive advantages in the framework of globalization processes. There are several main functions of M&A, which are performed at the same time:

  • defensive – companies are looking for growth opportunities through the acquisition of additional assets or seek to strengthen their positions in the market, including the option of buying competitors and capturing their market share;
  • investment – placement of free funds; participation in a profitable business; buying undervalued assets; use of management skills; acquisition of countercyclical or balancing assets; creating a sustainable advantage through diversification for greater risk control (price, currency, etc.); using the experience of other production areas that are not available to competitors; reducing the time to enter this market; maintaining the stability and capacity of the market;
  • control function – ensuring openness and accountability of corporate takeover processes.

Virtual Data room – a secure background for M&A transactions

M&A deals are strictly confidential business transactions. At the same time, due to Due Diligence, the exchange of information is required. To ensure that this exchange of information is secure, confidential, and efficient, a number of precautions must be taken. So, in this case, Data Room is considered. 

An important condition for information security in the Data Room is not so much secrecy, the confidentiality of information, as its availability, integrity, protection from various threats. Therefore, the system must respond accordingly and guarantee effective activities in this direction.

The Data room protection policy must include the following:

  • access control (prohibition of the user’s access to materials that he is not allowed to use);
  • identification and authentication (use of passwords or other mechanisms to verify user status);
  • accounting (recording of all user actions in the network);
  • control log (the log allows you to determine when and where the breach occurred);
  • accuracy (protection against any accidental violations);
  • reliability (prevention of monopolization of system resources by one user);
  • separation of users` powers who have access to computing resources;
  • encryption of confidential information based on cryptographic algorithms of high stability;
  • the use of a digital signature for the transmission of information through communication channels;
  • data exchange (protection of all communications).

Another task of Data Room protection is to ensure the invariability of information during its storage or transmission. Thus, the confidentiality of information provided by cryptographic methods is not the main requirement when designing information security systems. Performing crypto coding and decoding procedures can slow down data transfer and reduce access to it since the user will be deprived of timely and rapid access to this data and information. That is why the confidentiality of information must be commensurate with the possibility of access to it. The information security system of the Online Data Room must first and foremost guarantee the availability and integrity of information, and its confidentiality if necessary.