Mergers & Acquisitions in the Digital Age – Legal Considerations for Lawyers
In an age of technological innovation, legal professionals must rethink their approach to their work. This involves integrating ethical considerations with adopting new tools and platforms.
From data privacy concerns to the potential for biased algorithmic decision-making, this article will explore several different ethical dimensions that lawyers must address during digital M&A transactions.
Data Privacy & Security
In the technology sector, M&A is a significant driver of innovation and growth. Companies seek to acquire assets with unique intellectual property, gain access to new customers, and expand their product offerings. Tech giants frequently pursue M&A deals to strengthen their market position.
Companies seeking to acquire tech startups with cutting-edge technologies, such as artificial intelligence, blockchain, and edge computing, also drive M&A activity. Mergers & acquisitions lawyer Denver knows the regulatory landscape, including data privacy laws. This includes advising on compliance, data transfer, international privacy issues, and managing data breach incidents and related litigation.
Due Diligence
“due diligence” refers to a company’s duty to thoroughly research possible commercial partnerships and investments. It can be found in various contexts, including real estate purchases, employer background checks on prospective employees, and mergers and acquisitions.
Due diligence ensures that a company only makes good purchases and is aware of all potential risks associated with those purchases. For example, a company conducting due diligence on a prospective foreign supplier might review the country’s political stability and its compliance with international treaties.
For M&A transactions, due diligence often includes thoroughly investigating the target firm’s financial statements, potential litigation risks, intellectual property issues, and employment law liabilities. It should also include a thorough assessment of the target firm’s data privacy and security protocols and its ability to anticipate cybersecurity and data privacy risks that may transfer post-acquisition. This is known as complex due diligence.
Integration
In addition to evaluating compliance with data privacy laws and cybersecurity protocols, due diligence must be tailored to consider digital elements of M&A transactions. This is particularly true for M&A in the technology sector, where integration and data transfer are critical factors.
The lengthy Transaction Services Agreements (TSA) typically negotiated in traditional M&A may be a thing of the past in digital M&A, as companies can manage the transition through automation and other technologies. This can streamline the process, eliminate unnecessary costs and risks, accelerate time to value, and enable businesses to scale.
Having an M&A team with experience and knowledge of the particular difficulties in technology M&A is crucial. This includes ensuring proper due diligence, addressing intellectual property issues, and understanding the importance of change management. For example, a merger of two technology companies often requires a complex integration of disparate systems. This requires a strategic plan that addresses both cultural and technological change.
Ethical Considerations
M&A is a significant part of the business landscape, especially in technology. Companies seek to differentiate themselves and acquire cutting-edge technologies, intellectual property, and specialized expertise through M&A. However, M&A can pose severe ethical and compliance concerns.
A vital issue in M&A is accurate valuation, a complex and subjective process. Inaccurate valuation can lead to various problems, including fraud and regulatory scrutiny. Consequently, legal teams must conduct thorough and effective due diligence during the M&A process.
In addition to conducting ethics and compliance due diligence, M&A lawyers should consider partnering with other functional groups in the organization (e.g., HR) to perform much of the grunt work for this process. Failure to do so could result in a deal that may create legal, reputational, branding, and other concerns.
