Information sharing in mergers and acquisitions ... what happens later ??

Mergers and acquisitions (M&A) form an inherent part of a maturing industry. Information breaches before and during M&As pose intellectual property, financial & regulatory risks and also could affect business competetiveness.

The risks are enhanced because M&A activity typically involves almost all confidential informaiton of the company i.e. Financial information, customer contracts, intellectual property details, R&D & litigation information amongst others.

The risks during M&As start even before the actual activity. Intent to acquire or be acquired itself could have drastic effects on the company's stock price, employee morale & revenues. Such information leakage could get individuals and companies in trouble. In the case of Aviall and Boeing where pre-merger insider trading based on non public information was alleged by the SEC, employees Robert Tedder and Brian Carr along with a whole chain of relatives and friends were questioned

The risks continue as the intent is converted into active discussions involving many people and companies i.e. 2 sets of management teams and board, 2 sets of lawyers, 2 sets of investment bankers, due deligence firms, ... As more and more people get involved, it becomes almost impossible to monitor or control the flow of confidential information. As discussions come to an end, term sheets governing the prospective merger are exchanged and signed giving go ahead for the due deligence.

The due deligence phase represents the most vulnerable period for the two companies. For the prospective acquiree, the information shared with the prospective acquirer and its investment bank represents the most confidential information. For the prospective acquirer, the information shared by the acquirer comes with great responsibility and liability and the acquirer needs to make sure that it has the processes and systems in place to handle this information

A lot of people are of the view that the not-very-old acquisition of Sahara airlines by Jet airways could have done with some information security. The two companies' ON ( Jan 2006 ) - OFF ( June 2006 ) - >ON AGAIN ( April 2007 ) relationship and the subsequent reduction of the acquisition value from INR 22 Billion to INR 15 Billion could have been averted if Jet did not already knew "too much" about Sahara's operations.

Overall, monitoring and controlling the flow of information during any M&A activity is critical and Information Rights Management solutions like Seclore FileSecure can help achieve this. Seclore FileSecure can also help in reduction of costs associated with costly physical or online data rooms.