How does data governance affect mergers and acquisitions?

Data governance significantly impacts mergers and acquisitions (M&A) by influencing the feasibility, cost, and success of integrating systems and processes. During M&A, companies must assess the quality, structure, and compliance of the target organization’s data. Poor data governance in the target company can lead to hidden risks, such as inconsistent data definitions, undocumented ownership, or noncompliance with regulations like GDPR. For example, if a company being acquired lacks clear data lineage or has unmanaged duplicate records, merging customer databases could become error-prone, delaying integration timelines or increasing cleanup costs. Developers and technical teams often face unexpected workarounds to align mismatched schemas or resolve conflicting access policies, which strains resources.

The complexity of integrating data systems is another critical factor. M&A often requires merging databases, analytics pipelines, or cloud environments governed by different standards. For instance, if one company uses strict role-based access controls while the other relies on ad-hoc permissions, reconciling security policies becomes a technical hurdle. Developers might need to rebuild pipelines to normalize data formats or retrofit APIs to ensure interoperability. A real-world example is merging customer support systems where one company stores user data in a relational database with strict GDPR compliance, while the other uses a NoSQL system with minimal audit trails. Without aligned governance frameworks, such discrepancies can create security gaps or operational inefficiencies post-merger.

Finally, data governance affects regulatory and legal outcomes. Acquiring a company with poor data practices—such as inadequate consent management or weak breach detection—can expose the merged entity to fines or reputational damage. For example, if an acquired healthcare provider lacks proper audit trails for patient data, the combined organization could violate HIPAA regulations. Developers may need to retrofit compliance mechanisms like encryption or access logging into legacy systems, which is time-consuming and costly. Proactive governance assessments during due diligence help identify these risks early, allowing teams to budget for fixes or negotiate terms to offset liabilities. In summary, robust data governance reduces integration surprises, ensures compliance, and streamlines technical workflows during M&A.