top of page

Why Information Governance is Key to Promoting M&A Due Diligence Success for Private Equity Firms

The success of mergers and acquisitions (M&A) by private equity firms relies heavily on comprehensive due diligence processes, where information governance plays a critical role. Best practices in information governance ensure that all data related to the target company is accurate, accessible, and compliant with relevant regulations. Additionally, they promote post-acquisition success by helping the parent organization eliminate junk data at the source and facilitating the efficient integration of the target company's records. The result is increased efficiency and insight, reduced risks, and minimized costs.

Various studies highlight the importance of due diligence in M&A transactions. A recent study by the Deloitte Center for Board Effectiveness emphasizes the board's role in overseeing the due diligence process to ensure robust risk assessment and valuation. The EY-Parthenon Deal Barometer predicts a 12% increase in M&A activity in 2024, underscoring the importance of strategic data governance. Furthermore, a 2021 report from Bain & Company found that companies conducting rigorous due diligence are 50% more likely to achieve successful integration post-merger, and a PwC survey indicated that 73% of failed M&A transactions could be attributed to inadequate due diligence and poor information governance.

Information governance, which encompasses the policies, procedures, and standards for effective data management, is critical in M&A due diligence for private equity firms. These firms must ensure data accuracy and completeness quickly and accurately, relying on reliable data for risk assessment and valuation. Deploying information governance tools prevents inaccuracies and omissions that could lead to financial losses or legal issues post-acquisition. Comprehensive, well-governed data facilitates informed decision-making by providing insights into the target company's financial health, operational efficiency, and compliance status.

Mitigating risks is another crucial aspect of information governance. By identifying potential risks related to legal, financial, and operational aspects, information governance helps private equity firms mitigate exposures that could jeopardize the transaction's success. Supporting regulatory compliance is also essential, as adherence to data protection laws such as GDPR and CCPA is critical to avoiding legal penalties and reputational damage. Accurate data uncovered through robust information governance can reveal hidden liabilities or opportunities, providing leverage in negotiating better terms, such as adjustments to purchase price or indemnities.

Best practices for information governance in due diligence include:

  • Establishing a transition team with representatives from legal, IT, finance, and HR to manage the data transition, ensuring all relevant areas are covered and any issues are promptly addressed.

  • Evaluating data maturity by assessing the target company's data governance framework to identify potential risks and integration challenges.

  • Creating a comprehensive data inventory to ensure nothing is overlooked during the integration.

  • Securing data ownership and transfer rights to verify that data access rights are transferable and compliant with contractual obligations.

  • Implementing robust data security measures to protect sensitive data with encryption, access controls, and regular monitoring.

  • Develop a detailed data migration plan that includes timelines, responsibilities, and contingency measures to ensure a smooth and effective data transition.

  • Conducting data quality assessments to regularly evaluate and rectify any issues related to accuracy, consistency, and completeness.

  • Developing and implementing policies and procedures for post-acquisition data management, including data retention schedules and access controls.

  • Setting up mechanisms for ongoing monitoring and reporting of the integration process to identify and address issues early.

  • Offering training and support to employees involved in the integration process to ensure they understand and can manage the integrated data effectively.

Information governance is indispensable in the due diligence process for private equity firms engaged in M&A transactions. It ensures data integrity, supports compliance, mitigates risks, and ultimately enhances the value derived from acquisitions. By adopting best practices in information governance, private equity firms can navigate the complexities of due diligence with greater confidence and success.


Rated 0 out of 5 stars.
No ratings yet

Add a rating

Get in Touch

Knowledge Preservation, LLC
567 Woolf Road, Milford, NJ 08848

(973) 494-6068

  • LinkedIn
  • Youtube

Thank you for contacting us. We look forward to connecting with you soon and providing the assistance you require.

bottom of page