Due diligence on personal data protection in M&A transactions

In the context of increasingly complex mergers and acquisitions (M&A) transactions, due diligence related to personal data protection has become a crucial factor. Due diligence concerning personal data protection is particularly important in M&A transactions conducted through asset purchase or acquisition of a business segment of the target company. This process not only helps the buyer accurately assess the value and potential risks of the target company but also ensures compliance with increasingly stringent legal regulations on personal data. Through thorough examination of policies, procedures, and infrastructure related to personal data, participants can identify and mitigate legal, financial, and reputational risks. Simultaneously, this process also provides an opportunity to evaluate and optimize data management, thereby enhancing the transaction’s value. 

1. Key Issues in Conducting Legal Due Diligence on Personal Data Protection

When conducting legal due diligence on personal data protection in the M&A process, the main tasks to be performed include: 

• Evaluation of data protection policies and procedures: Examine the adequacy and effectiveness of the target company’s existing policies and procedures related to the collection, processing, storage, and sharing of personal data. 
• Review of technological infrastructure: Assess the security systems, software, and hardware used to protect personal data, including measures to protect against cyber attacks. 
• Compliance check: Determine the target company’s level of compliance with data protection regulations such as GDPR, CCPA, Decree 13 (in Vietnam), and other local data protection laws. 
• Risk assessment: Identify and analyze potential risks associated with personal data processing, including legal, financial, and reputational risks. 
• Contract and agreement review: Examine contracts with suppliers, partners, and customers to ensure appropriate data protection clauses are in place. 
• Incident management process assessment: Review procedures and plans for responding to data security incidents. 
• Review of past data breaches: Investigate any data-related incidents that have occurred and how they were handled. 
• Employee training assessment: Review data protection training programs for employees and their level of awareness regarding privacy issues. 

Through this thorough due diligence process, M&A transaction participants can accurately assess the risks and opportunities related to personal data, thereby making comprehensive decisions and developing effective post-transaction integration strategies. This not only helps protect the interests of stakeholders but also ensures compliance with increasingly stringent legal regulations on personal data protection. 

2. Common Risks in Conducting Legal Due Diligence on Personal Data Protection in Vietnam

Full compliance with personal data protection regulations is becoming a major challenge for businesses. The complexity and diversity of the global legal framework, including regulations such as GDPR, CCPA, and regulations in each country, such as personal data laws and Decree 13 in Vietnam, require organizations to have a comprehensive and flexible approach to managing personal information. 

In Vietnam, Decree 13 has established a legal framework for personal data protection, creating many challenges for businesses. Currently, Decree 13 sets out specific requirements for processing and protecting personal information, including regulations on cross-border data transfer. Businesses must conduct impact assessments and obtain permission from competent authorities before transferring data abroad, or face severe sanctions. However, the complexity lies in assessing cases considered as transferring personal data abroad in each specific method. This is particularly important in the context of globalization and the complexity of modern data supply chains. 

Additionally, collecting and processing data inconsistent with the stated purpose or without the consent of the data subject is also a concern. This is also one of the most complex obligations when implementing Decree 13. Failure to comply with this can lead to complaints from users and sanctions from state regulatory agencies. 

Another significant risk is the issue of cybersecurity. Increasingly sophisticated attacks can lead to personal information leaks, causing serious consequences. Decree 13 requires organizations to apply appropriate technical and management measures to protect data, and to promptly report to the authorities when incidents occur. Non-compliance can result in severe penalties and adversely affect the company’s reputation. 

The issue of storing data beyond the permitted period or lacking a mechanism to delete data upon request is also a notable risk. Decree 13 clearly stipulates the rights of data subjects, including the right to request deletion of personal information. Businesses need to have clear procedures to respond to these requests in a timely and effective manner. 

To mitigate the above risks, organizations need to develop a comprehensive data protection strategy. This includes regularly updating policies and procedures, organizing training for employees, and investing in advanced security systems. Conducting periodic risk assessments and developing incident response plans are also important measures. At the same time, businesses need to closely monitor changes in legal regulations and adjust compliance strategies promptly to ensure business operations always comply with legal requirements on personal data protection. 

3. General Principles in the Due Diligence Process 

When conducting due diligence on personal data protection, it is necessary to ensure respect for the main principles in due diligence issues and risks. Important principles include legality, fairness, and transparency in data processing; purpose limitation; data minimization; ensuring accuracy; storage limitation; and maintaining data integrity and security. Simultaneously, it is necessary to carefully consider the technical and organizational measures applied to protect data from cybersecurity threats. 

Regarding the rights of data subjects, it is necessary to ensure that the organization respects and fully implements rights such as: the right to be informed about data collection and processing; the right to access one’s data; the right to request correction of inaccurate information; the right to request data deletion (“right to be forgotten”); the right to restrict data processing in certain cases; and the right to object to data processing. The assessment should focus on the effectiveness of the processes and mechanisms that the organization has established to respond to requests related to data subject rights in a timely and complete manner. 

Conclusion 

Legal due diligence on personal data protection in M&A transactions is an important and complex process. It requires a deep understanding of the legal framework, especially Decree 13 in Vietnam. Businesses need to focus on comprehensively assessing policies, procedures, and infrastructure related to personal data. At the same time, it is necessary to develop a comprehensive data protection strategy, including updating policies, training employees, and investing in security systems. Finally, respecting and fully implementing the rights of data subjects is a key factor in ensuring legal compliance and building trust with customers. 

Key Recommendations: 

• Regularly update knowledge of data protection laws. 

• Conduct periodic risk assessments and develop incident response plans.

• Ensure transparency in data processing and respect for the rights of data subjects.

See more:

1/ A brief overview of Vietnam’s legal framework on Personal Data Protection

2/ Personal data processing impact assessmen

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