Whether you’re a private equity firm or an investment bank, a substantial allotment of your time and energy is spent on quality deal sourcing. Naturally, these processes involve a hefty amount of research and data collection in order to identify and then vet potential deal sources. Success hinges on doing your due diligence; if you base your decision on unreliable data, you will very likely end up wasting months of time and millions of dollars with nothing to show for it.
Do you have consistently reliable data sources to inform your deal sourcing efforts? If not, you should. Below, we’ll discuss the role that data fidelity plays in your firm’s success and how to ensure data quality and integrity with M&A software.
How to Achieve Data Integrity in Deal Sourcing
In 2017, Fresenius, a European healthcare company, was considering a billion-dollar merger with Akorn medical. During the two-month discovery process, Fresenius sought to investigate Akorn’s data integrity and soon realized that there were several glaring issues with compliance, transparency, and accountability. As a result, Fresenius walked away from a merger once it discovered Akorn had a variety of data protection and integrity concerns.
Investors said the company and execs “knew or recklessly disregarded widespread institutional data integrity problems” at Akorn facilities, while making misleading statements and omissions of material fact concerning the company’s data integrity at these facilities in order to attempt to market and sell Akorn. As penance, Akorn has agreed to issue about 6.5 million shares and contingent cash payouts that could be worth up to $60 million over five years. Further, plaintiffs could get up to $30 million in director and officer liability insurance proceeds.
Although these types of processes cost both companies, in the long run, Fresenius was able to rely on its data sources and likely saved itself billions by avoiding the landmine and saying no to a toxic deal. So, if you wish to emulate Fresenius rather than Akorn, data integrity procedures need to be at the forefront of your sourcing efforts.
What is Data Integrity?
Simply put, data integrity is the concept that a company’s data must be accurate and reliable throughout the duration of its lifecycle. And, if you want to know how to achieve data integrity or how to improve data integrity, then the security of that data needs to be one of your foremost concerns. Data protection through strong cybersecurity efforts and other procedures are effective in helping secure sensitive data. Such procedures must go hand in hand in order to prevent the data from being corrupted; by protecting your data, you ensure its integrity.
The FDA uses an acronym ALCOA to set its data integrity standards:
- Attributable – Data needs to have clear records of who observed and then recorded it, as well as when it was observed and recorded, and who it was in regard to.
- Legible – Data needs to be easily understood and then recorded in such a way as to preserve it permanently.
- Contemporaneous – Data needs to be recorded when and how it was observed rather than ipso facto.
- Original – The data source must be accessible and kept in its original state.
- Accurate – Data should be error-free and follow the various protocols and standards put in place.
There are several factors that can impact the integrity of data kept in any database. These include:
- Human error
- Transfer errors
- Bugs and viruses
- Compromised hardware
How to Minimize Risks to Data Integrity
If you’re wondering how to achieve data integrity, these days, there are several steps you can take to ensure that you are entering potential deals with clear eyes.
With your own data you can do the following:
- Back up data
- Change permissions
- Conduct internal audits
- Limit access
- Use error detection software
- Use tracking logs
- Validate data
Frankly, ensuring your own company’s data integrity is a hard enough task as is, let alone when you need to verify it as you research extraneous businesses for deal sourcing. What you need is a data research management solution such as SourceScrub, which allows you to streamline the process of target identification by scrubbing thousands of:
- Industry conferences
- Buyers guides
- Award publications
Such efforts augment your firm’s internal deal sourcing efforts and provide you with accurate corporate data that can be used to locate companies that fit into a targeted investing sector, market, or niche. In addition, CRM platforms like Affinity, DealCloud, SalesForce, and SugarCRM have spot-checking and record-validation processes preventing the user from encountering potential data integrity issues.
Data Integrity Matters
Simply put, data integrity is an incredibly important consideration for any deal and should be at the forefront of your deal sourcing efforts. Although this is no easy task, there are tools such as SourceScrub that can facilitate the process. This powerful Business Intelligence platform provides you with visibility, clarity, and accountability, thus ensuring that deals from wealth management prospecting to boutique investment bank deals are always established on solid ground.
- Sagonowsky, E. FiercePhrama. After Fresenius deal collapse, Akorn inks $74M settlement with investors over data integrity woes. (2019). https://www.fiercepharma.com/pharma/after-fresenius-deal-collapse-akorn-inks-74m-settlement-investors-over-data-integrity-woes
- FDA. Current Expectations and Guidance, including Data Integrity and Compliance With CGMP. (2016). https://www.fda.gov/media/99556/download
- Vaisala. 8 Ways to Ensure Data Integrity. https://www.vaisala.com/en/8-ways-ensure-data-integrity