Data defence: top five private company M&A tips from a data protection perspective

Data protection is an important aspect of the disposal and acquisition of a company. Mishandling sensitive information can lead to significant legal and financial repercussions and, as non-compliance with data protection laws will likely be picked up as part of the buyer’s due diligence, may lead to complications and delays.

Here are five tips for managing data protection during a sale transaction:

1. Protect data during the sale process

Each party must safeguard data throughout the sale process and should implement stringent security measures to prevent unauthorised access and data breaches.

Sellers should use secure methods, such as encrypted virtual data rooms, to share sensitive information and ensure that all data transfers are protected by non-disclosure agreements (NDAs). It is best practice to anonymise personal data where possible.

Buyers should ensure that any data received is handled securely and that access is restricted to authorised personnel only.

2. Identify data protection risks

Identifying data protection issues early on in the sale process helps mitigate them effectively.

Sellers should conduct a thorough data protection audit to identify and address any vulnerabilities before the transaction, such as ensuring that privacy notices, data protection policies and other key documents are up to date.

Buyers should conduct appropriate due diligence to evaluate the target company's data protection policies and practices, looking for any red flags that could pose risks. This is particularly important where the target company processes high volumes of special category data or where there is significant value in data assets such as marketing databases.

3. Assess security of data

Evaluating the security measures in place to protect personal data is crucial. This involves reviewing the target company's systems and cybersecurity protocols, including data encryption, access controls, and incident response plans.

Sellers should ensure that their data security measures are robust and up to date, and consider addressing any weaknesses identified during the audit.

Buyers should assess the effectiveness of the target company's security measures and consider conducting penetration tests or vulnerability assessments to identify potential risks.

4. Review historic data protection compliance and breaches

Understanding the target company's history of data protection compliance and any past breaches helps assess the potential liabilities and risks associated with the transaction.

Sellers should be aware that they will be required to disclose any data breaches and provide documentation on how they were addressed and resolved.

Buyers should review the target company's compliance history and investigate any past breaches to understand their impact and the measures taken to prevent future incidents.

5. Address cross-border data protection concerns

Cross-border data transfers can complicate data protection compliance and may require the production of data transfer agreements and transfer risk assessments.

Sellers should identify any cross-border data transfers and ensure that appropriate safeguards, such as standard contractual clauses or other lawful mechanisms for the transfer, are in place.

Buyers should evaluate the target company's cross-border data transfer practices and ensure that they comply with applicable regulations.

It is common for data protection issues to arise during the sale process, and it is important for the parties to take a pragmatic and informed view of the actual risks. However, by addressing these five areas, both sellers and buyers can reduce the data protection complexities of M&A transactions.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, June 2025