GDPR Compliance Stalls EMEA Acquisition Activity

A new survey shows that an increasing number of mergers and acquisitions (M&As) are not going through because of concerns over General Data Protection Regulation (GDPR) compliance.

According to a survey of M&A professionals in the EMEA, conducted by Merrill Corporation, the European Union’s (EU’s) GDPR, which went into effect at the end of May, is seen as a major hurdle for M&A deals. In fact, 55 percent of respondents cited the compliance and data protection implemented by target companies as a main reason why a transaction does not happen, while 66 percent believe the regulation will lead to increased scrutiny of the data protection policies and systems, which can delay the entire process.

“The EMEA M&A environment faces a unique set of challenges as it looks to comply with new regulations and privacy requirements,” said Hilary London, general manager of EMEA at Merrill, in a press release. “As we track transactions, it will be very telling how these challenges will impact organizations’ due diligence processes. Streamlining transactions via increased accessibility of transaction data will support greater transparency and enhance compliance, strengthening M&A activity in this market.”

When looking at what can make an M&A deal a success, 65 percent of respondents said the key to successfully managing the process is conducting thorough due diligence. They also expect that, over the next five years, technology will change that process through greater security (63 percent), support of deeper analytical capabilities (61 percent) and simplification of the process (45 percent).

In addition, 70 percent of those surveyed believe technology could allow for simplified and coherent solutions when it comes “to reviewing and analyzing contract text, running multiple scenario analyses and financial modeling (52 percent), and visualizing financial performance data (41 percent).” As far the technology to have the greatest impact, respondents believe artificial intelligence (AI) and machine learning (46 percent), as well as predictive analytics (37 percent), are most likely to transform M&A due diligence in the long run.