Mergers and acquisitions (M&A) have become a stepping stone to corporate growth strategies. Companies worldwide are actively turning to these deals to expand market reach and drive financial performance. The latest data from EY-Parthenon confirms this trend, with M&A activity projected to surge by 12% in 2024. 

While the idea of combining companies is undeniably exciting, a critical yet often overlooked factor that can either make or break a deal is data governance. A strategic approach to data governance and migration is necessary to unlock the value of data involved in M&A, ensuring it is accessible, reliable, and compliant. This approach also helps in mitigating risks associated with outdated or redundant information. 

Understanding Data Governance  

Data governance is the strategic framework organizations employ to manage their data assets effectively. It encompasses the policies, processes, and people responsible for ensuring data is accurate, consistent, accessible, and secure. By establishing clear guidelines for data collection, storage, usage, and protection, data governance helps organizations optimize data value while managing risks. 

Simply put, data governance is about maximizing the potential of an organization’s data while minimizing its liabilities.  

Related: Learn more about How to Build a Data Governance Strategy for Your Organization

Why Data Governance Matters in M&A 

Effective data governance is crucial in M&A for consolidating diverse data assets into a unified, accessible repository. By centralizing data assets into a single, accessible location, acquiring companies can significantly enhance data sharing and accessibility across all operational units.  

This unified data environment ensures data consistency, quality, and security, mitigating risks associated with data silos and disparate systems. In short, it empowers businesses to extract maximum value from their combined data assets, driving growth and profitability. 

The Benefits of Data Governance in M&A 

Focusing on data governance during M&A can present opportunities for long-term value.  

Here are some of those benefits: 

Mitigates Risks and Ensures Compliance 

Data governance helps keep companies out of legal trouble. Many industries have strict rules about how data is handled. By having a solid data governance plan in place, companies can make sure they’re following these rules and avoiding costly fines. Plus, it protects customer information from being stolen, which is crucial for keeping people’s trust. 

With clear data management processes and controls, organizations can effectively manage sensitive information, protect against data breaches, and adhere to industry regulations.  

This proactive approach safeguards the company’s reputation and financial stability. 

Improved Decision-Making 

Data governance helps companies get the most out of their data. By defining clear data ownership and usage rules, data quality improves. Better data means better decisions. 

In the context of M&A, reliable data is crucial for evaluating target companies, identifying areas for cost reduction or revenue growth (synergies), and developing effective integration plans. 

Accelerated Merger Integration 

Merging disparate systems and data can be complex. Data governance streamlines this process by identifying data sources, defining data standards, and establishing data quality controls. 

It helps combine different data systems and processes into one that works well. This saves time and money and helps the new company get off to a strong start.  

Here are some specific examples of how data governance can help M&A: 

Media and Entertainment: In a media merger, data governance ensures seamless integration of content libraries, distribution channels, and subscriber data. By defining clear ownership and usage rights, companies can avoid costly legal disputes and maximize revenue opportunities from combined content portfolios. 

Healthcare: For healthcare organizations merging, data governance is crucial for integrating electronic health records, patient data, and financial systems. By establishing consistent data standards and privacy protocols, healthcare providers can deliver uninterrupted patient care, comply with regulations, and identify cost-saving synergies. 

The Challenges of Data Governance In M&A 

Merging companies means dealing with a whole new set of challenges, listed below.  

• System incompatibility: Merging organizations often utilize disparate ERP, CRM, and other systems, leading to data silos and integration complexities. 

• Data quality issues: Inconsistencies, inaccuracies, and missing data are common challenges in M&A. If not addressed promptly, these can lead to erroneous decision-making and operational inefficiencies. 

• Data harmonization: Discrepancies in data definitions, naming conventions, and structures can impede data integration and analysis. 

• Data security and privacy: Safeguarding sensitive information during and post-merger is paramount to protect corporate reputation and avoid regulatory penalties. 

• Change management: Overcoming resistance to change and fostering a unified data culture can be challenging.  

• Cultural differences: Varying data management practices and priorities between merging companies can create friction and delay integration efforts. 

How to Overcome Challenges of Data Governance in M&A 

To handle the aforementioned challenges, companies need a solid plan for data management. Here’s a step-by-step guide: 

1. Align Relevant Stakeholders

Right from the start, companies should put together a team of experts from different areas, such as legal, IT, tax, finance, and HR. These people will oversee everything data-related and make sure everyone is on the same page about using data to make the merger work. 

2. Map Out the Data Journey

Merged companies need to figure out how to combine the different data systems. They should choose the best way to bring everything together based on their needs and how much risk they are comfortable with. Creating a single, reliable source of important data, i.e., employee, customer, and product, will help everyone make better decisions. 

3. Make the Data Work Together (Data Management and Integration Strategies)  

The acquiring companies must create a clear and detailed plan for managing all their company data after the merger. This includes setting rules, assigning responsibilities for data management, and getting a full picture of what data they have and where it lives—including creating an inventory and a data catalog of all the data assets and technology infrastructure.  

Related: Learn how to manage and control the use of your data in an organization — a data governance framework.  

4. Harmonize Data Via Business Glossary 

A glossary ensures that everyone involved in the integration process has a common understanding of data elements by providing a centralized repository of standard definitions for key business terms. This reduces the likelihood of inconsistencies and errors arising from differing interpretations.  

Also, a business glossary can be used to tag data assets exposed in a data catalog, making it easier for users to discover, understand, and utilize relevant data. This enhances data accessibility and promotes effective collaboration across the merged entity. 

5. Know the Data Risks 

Understanding the data laws and regulations in every place brings peace of mind to the companies involved in M&A. This helps merged entities protect their company from facing legal issues. They should check out what data they are getting from the other company and ensure they’re responsible for any problems. 

6. Keep The Data Clean and Safe 

Acquiring companies must identify and implement relevant data quality metrics based on their system requirements. The continuous monitoring of data quality is crucial for ensuring the reliability of the newly merged venture. 

Companies must prioritize compliance with data protection regulations such as the General Data Protection Regulation (GDPR) throughout the M&A process. To protect sensitive Personally Identifiable Information (PII) like customer name, organizations should implement robust security measures, methods, and documentation. 

7. Adapt and Improve 

Communication is key; companies must ensure that they communicate clearly with everyone involved. They should train people in how to handle the new system. Also, they need to keep checking how everything’s working, i.e., the data management strategies and post-merger assessments, and make changes as needed. This will set them up for success in future mergers. 

Final Words 

Navigating the complexities of data management and governance during mergers and acquisitions is challenging. Challenges such as system incompatibility, data quality issues, and regulatory compliance can significantly impact the success of an M&A deal. A robust data governance strategy is essential to overcome these hurdles and unlock the full potential of combined data assets. 

Organizations require a comprehensive data management platform to handle data migration, integration, and governance. A solution that offers data quality, security, and compliance features is crucial for ensuring data accuracy and protecting sensitive information. 

By partnering with a trusted data management solutions provider, Companies can streamline their M&A journey, mitigate risks, and achieve long-term business objectives by partnering with a trusted data management solutions provider. 

Astera’s Data Management Platform for Mergers & Acquisitions 

Astera’s comprehensive data management suite empowers organizations to streamline their M&A journey. By automating data cataloging, enhancing data quality, and establishing a unified data language, Astera helps businesses gain complete visibility and control over their data. The intuitive platform simplifies data sharing, protection, and governance across the entire enterprise. 

By implementing Astera platform, acquiring companies can expect: 

• Up to 80% reduction in IT requests 

• 70%-time savings in data management processes 

• Over 60% increase in productivity 

Ready to see the difference Astera can make for your M&A? Start your free trial or schedule a demo today.