Why you need to consider PoPI during M&A deals

Before considering the data protection compliance of the target company, you’ll need to consider what information you require from the target for due diligence purposes. No doubt you will be requiring data containing personal information of their staff, potentially their suppliers and their customers. This particularly rings true in South Africa, where PoPI applies to personal information of juristic persons (e.g. companies) as well. One can then only hope that the target has included in their privacy notices to relevant data subjects that their information may be shared in the future for merger or corporate restructuring purposes. Updating the privacy notices could alert persons to the proposed transaction and so it is key to ensure that your target’s ducks are in a row. It’s also important for post-merger integration purposes to make sure that the target’s privacy notices make provision for sharing information amongst group entities.

Apart from the usual due diligence aspects on a target, running a PoPI compliance due diligence will become part and parcel of any acquisition going forward. PoPI due diligence investigations should cover, amongst other things, whether the targets’ privacy notices are compliant and cover all personal information of all of their data subjects, whether the target has the correct consent mechanisms in place in instances where consent of the data subject is required (e.g. direct marketing via electronic means), whether the target has in place the required contractual measures with operators processing personal information on their behalf, what policies and procedures they have in place regarding document retention and destruction, IT security as well as data breaches.

Further considerations include the technical measures in place to ensure protection of personal information, particularly around security of your target’s systems and whether any breaches have previously occurred. Just ask Marriot Hotels, who last year were fined an impressive GBP18.4million by the UK Information Commissioner Office for failing to keep customer data secure. The breach occurred by way of a cyber-attack of Starwood Hotel and Resorts Worldwide in 2014, which was prior to Marriot Hotels acquiring Starwood, but remained undetected until 2018, hence Marriot being fined. Marriot is also now facing a class action lawsuit by individuals affected.

It is clear that when considering an M&A deal, engaging a data protection specialist at the outset – and even prior to the due diligence phase – is paramount.