Consummating a high-profile merger or acquisition these days requires more stringent vetting, according to a special report published today by Intelligize. Our study, The Impact of Social, Political and Data Privacy Issues on M&A Transactions, reveals some of the emerging themes popping up more regularly around M&A deals. In many cases, they’re significant enough to scuttle the transactions.
A thorough analysis of transaction documents from Intelligize’s M&A application provided the data for the study. The Intelligize M&A database covers in excess of 15,000 transactions since 2008, each of which was valued at $1 million or more.
You can read the full report here, but below we offer up a few of our key findings. Given the headlines of recent years, the key sticking points shouldn’t come as a complete surprise.
With allegations—and, frequently, corroboration—of sexual misconduct at the executive level pouring in from public companies, #MeToo situations are being addressed as major risks in M&A transaction documents.
In 2017, just one out of more than 1,200 M&A transactions included a representation involving sexual misconduct allegations or settlements. A year later, 45 such representations came from a similar number of deals.
Risk representations related to cybersecurity in M&A transactions have skyrocketed in the last five years. In fact, they’ve risen steadily from year to year since 2014.
As would be expected, many of the incidents involved deals in the technology sector: Take the Yahoo! data breach that was found by Verizon in the midst of their 2017 deal, for example. It knocked $350 million off the internet company’s price tag.
However, cybersecurity risks also proved to be a factor in other industries, exemplified by Marriott International’s discovery of a data breach at Starwood Hotels and Resorts Worldwide last year after the two lodging companies had merged.
As an inter-agency collaboration chaired by the Treasury Department, the Committee on Foreign Investment in the United States (CFIUS) monitors the national security implications of cross-border investment. In light of China’s expanding role in the global capital markets, CFIUS has become more vigilant in its oversight of M&A deals.
In the last five years, roughly 170 targets with assigned SEC Standard Industrial Classification codes have announced M&A transactions with documents mentioning CFIUS in representations or covenants.
Both acquirers and targets are beginning to accept that the above risk factors, each of which has become somewhat of a sociopolitical lightning rod, are and likely will remain critical components of M&A due diligence moving forward.
For more details on our findings regarding the impact of these issues on M&A transactions, download a copy of our special report today.