Data Privacy: Addressing The Risks of Third-Party Vendor Data in M&A

Businesses rely extensively on third-party data service providers for many essential business operations, data processing and technology services.  For companies engaging in M&A transactions, this reliance raises complex privacy threats associated with the integration and transfer of sensitive data controlled by networks of third-party vendors. A recent paper by Esther Arokun of Seattle University School of Law discusses these threats and offers a compliance framework for addressing them.  Here’s the abstract:

Mergers and acquisitions (M&A) present complex challenges in data privacy and risk management, particularly concerning third-party vendor data. As companies consolidate, they inherit not only assets and liabilities but also vendor relationships that may introduce privacy vulnerabilities. This paper examines privacy risks in M&A transactions, focusing on third-party vendor data management. It explores regulatory frameworks such as the GDPR, CCPA, HIPAA, and other industry-specific requirements, highlighting compliance challenges in crossborder transactions.

Through case studies of successful and failed privacy risk mitigation strategies, the paper underscores the need for robust compliance mechanisms, vendor risk assessments, and structured post-merger integration strategies. Ultimately, it proposes a comprehensive compliance framework to manage vendor data privacy risks effectively, ensuring regulatory adherence and mitigating financial and reputational harm.

While we’re on the subject of data-related M&A risks, this CSO Online article highlights the fact that the most dangerous time for enterprise security is the period after the deal has closed but before the acquired company’s systems have been integrated with those of the buyer.  The article offers advice from experts – who have competing views – on ways to manage this problem.