Five Things You (and Your M&A Diligence Team) Should Know
Recently it was announced that Verizon would pay $350 million less than it had been prepared to pay previously for Yahoo as a result of data breaches that affected over 1.5 billion users, pending Yahoo shareholder approval. Verizon Chief Executive Lowell McAdam led the negotiations for the price reduction. Yahoo took two years, until September of 2016, to disclose a 2014 data breach that Yahoo has said affected at least 500 million users, while Verizon Communications was in the process of acquiring Yahoo. In December of 2016, Yahoo further disclosed that it had recently discovered a breach of around 1 billion Yahoo user accounts that likely took place in 2013.
While some may be thinking that the $350 million price reduction has effectively settled the matter, unfortunately, this is far from the case. These data breaches will likely continue to cost both Verizon and Yahoo for years to come. Merger and acquisition events that are complicated by pre-existing data breaches will likely face at least four categories of on-going liabilities. The cost of each of these events will be difficult to estimate during the deal process, even if the breach event is disclosed during initial diligence.