According to research released by Intralinks, the leaking of information regarding mergers and acquisitions has been associated with an extra $21 million being added to the value of those deals. Not only did the research reveal that the leaking of details about M&A deals was being used as a way of inflating the price of an M&A deal, but it also found that leaks are far more common than many of us realize.
In the period that the report covered, the researchers stated that as many as 8.6% of all M&A deals worldwide had their details leaked ahead of time. What’s more, this figure remained static over the years the research covered, increasing at the same rate as M&A deals overall.
Why Do Deals Leak?
There are a number of reasons why the details of a potential business deal might leak ahead of time, despite the best efforts of the parties involved. However, all leaks can be boiled down to two broad categories – intentional leaks and unintentional leaks. An intentional leak involves a deliberate act by someone with knowledge of the deal, although their motives can vary. In some cases, they might be trying to sabotage the deal by throwing an unexpected spanner into the works. However, as the report shows, in a significant portion of cases, leaks are done with the explicit intention of inflating the value of the deal.
Similarly, unintentional leaks can take many different forms. In the simplest of cases, someone might just be careless when discussing details and might be overheard by someone else. Alternatively, businesses that use insecure systems and software to manage their confidential data are bound to leak something eventually.
What is the Impact?
Even if you consider inflating the value of your deal to be a positive, the potential ramifications of leaking information about a deal ahead of time can include regulators taking a keen interest in you. If there is any suspicion that you or your business is trying to manipulate the market in any way, then an investigation is inevitable.
How to Stop Your Business Deals Leaking
Whatever financial gain there might be in leaking details about your M&A deals, it just isn’t worth the potential fallout. Falling afoul of market regulators is no small thing and the potential consequences could bring your entrepreneurial career to an abrupt halt, irrespective of how successful you have been so far.
If you want your confidential information to remain confidential then you need to lead by example. Make sure that everyone in your business appreciates the importance you place on confidentiality and ensure that all your systems are secure. If you need to share sensitive data with other parties then use a secure virtual deal room. Deal management systems exist to facilitate deal-making and to enable businesses to engage with one another more openly without worrying about breaches of confidence.
Confidentiality is vital for any business. If details about your merger and acquisition deals are leaking ahead of time, it makes your whole business look unprofessional. Don’t run the risk of drawing the regulator’s ire or being seen as a leaky ship by other businesses. Even though leaking information might have financial benefits, it isn’t worth the reputational hit.
