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6 Safe and Secure File Transfer Approaches for Mergers and Acquisitions

by Bob Ertl updated April 13, 2023 Secure File Transfer

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In today’s fast-paced business world, mergers and acquisitions (M&A) are a common occurrence. They help companies expand their reach, acquire new customers, and improve their bottom line. However, with M&A comes the transfer of sensitive data, making secure file transfer a critical part of the process. In this blog, we will explore the risks of unsecured file transfer during M&A, the factors to consider when selecting a secure file transfer protocol, and best practices for secure file transfer during M&A.

Understanding the Importance of Secure File Transfer for M&A

Mergers and acquisitions involve the transfer of large amounts of sensitive data, such as financial information, customer data, and intellectual property. This data must be transferred securely to prevent data breaches and protect the interests of both companies.

Unsecured file transfer during M&A poses significant risk. Attackers can intercept sensitive data during transfer, leading to data breaches and financial losses. The consequences of a security breach during M&A can be severe, including legal liabilities, regulatory fines, and reputational damage. Therefore, it is essential to understand the risks associated with unsecured file transfer during M&A.

During file transfers, attackers use various attack vectors to intercept data. These attack vectors include phishing attacks, malware attacks, man-in-the-middle attacks, and brute-force attacks. Additionally, attackers may exploit vulnerabilities in the file transfer protocol or software being used.

It can be challenging to know if your files have been compromised during a transfer. However, there are some signs to look out for, such as unusual network activity, unexpected file changes, and unauthorized access to files. To protect sensitive data during transfers, it is crucial to use secure file transfer protocols and implement best practices for secure file transfer.

Factors to Consider for Secure File Transfer

When selecting a secure file transfer protocol for M&A transactions, it’s important to consider a variety of factors. These include the level of security provided by the protocol, ease of use, compatibility with existing systems, and compliance with industry standards and regulations.

There are different secure file transfer protocols available, each with its benefits and drawbacks. These protocols include SFTP (Secure File Transfer Protocol), FTPS (File Transfer Protocol Secure), HTTPS, and AS2. The protocol you choose will depend on your specific needs, such as the volume of data to be transferred, the level of security required, and the technical expertise of your team.

FTPS is a popular choice for organizations that require a high level of security and need to transfer large files. SFTP is another popular option, as it provides strong encryption and user authentication. HTTPS is often used for web-based file transfer, and MFT is a comprehensive solution that includes features such as automated file transfer and workflow management.

It is also essential to consider any industry standards or regulations that must be followed when transferring files during M&A. For example, HIPAA, GDPR, SOX, and PCI DSS have specific requirements for the secure transfer of sensitive data.

Overview of factors to consider when selecting a secure file transfer protocol:

Security: Security should be the primary consideration when selecting a file transfer protocol. The protocol should offer end-to-end encryption, which ensures that data is protected during transit and at rest.
Scability: A secure file transfer protocol should be able to handle large file sizes and high volumes of data transfer.
User-friendliness: The protocol should be easy to use and understand, with a clear user interface that simplifies the file transfer process.
Compability: It is important to ensure that the file transfer protocol is compatible with existing systems and software.
Reliability: The protocol should be reliable and offer high uptime to ensure that data transfers are completed on time.

The primary differences between secure file transfer protocols lie in the type of encryption used, ease of use, and transfer speeds. Organizations should carefully evaluate each protocol’s benefits and drawbacks to determine which is the best fit for their needs.

1. Virtual Data Room

A virtual data room (VDR) is a secure online repository used to store, share, and manage confidential data during M&A transactions. It allows buyers and their advisors to access the due diligence documents needed to assess their potential investment. VDRs provide users with enhanced security, control, and manageability over their data, enabling them to securely access, manage, and monitor documents and file transfers throughout the entire M&A process. VDRs are increasingly being utilized to streamline the M&A process and reduce the risk of data leakage.

VDRs use various security measures, such as encryption, multi-factor authentication, access controls, and audit trails, to ensure the security of the data. VDRs also provide features such as document watermarking, digital rights management, and expiration dates to prevent unauthorized access and sharing of the data.

Using a virtual data room room greatly streamlines the M&A process and keeps all documents in one secure, centralized location. This helps to ensure that data is secure, reliable, and up to date throughout the entire process. The data room also allows all involved parties to view and review the documents in a secure and confidential environment, aiding the overall negotiation process.

Despite the above, it is important to call out that not every virtual data room is the same. Organizations should look for virtual data room solutions with advanced security features, an intuitive user interface, extensive customization, seamless collaboration tools, and a commitment to compliance. Following are capabilities organizations need to seek out:

Security Controls

As a starting point, a virtual data room must include robust encryption protocols, multi-factor authentication, and granular access controls. These features ensure that sensitive data remains protected from unauthorized access, while allowing authorized users to easily share and access information as needed.

Ease of Use

To facilitate adoption, a virtual data room must have a user-friendly interface, enabling users to effortlessly navigate through the tool, upload files, and manage folders. This needs to include drag-and-drop functionality and file versioning.

Customization of Governance and Interface

Organizations need to be able to tailor the virtual data room according to their specific requirements. This includes the ability to white label the virtual data room to create a unique branded experience for external users.

Collaboration at File and Folder Levels

Collaboration requires an integrated toolset, such as real-time document editing, secure communication channels, and a built-in activity log that tracks user actions. These features promote transparency and efficient collaboration among team members.

Integration of Compliance

As data privacy continues to receive greater attendance, governments and industries have passed a series of different data privacy regulations, including the General Data Protection Regulation (GDPR), Health Insurance Portability and Accountability Act (HIPAA), Payment Card Industry Data Security Standard (PCI DSS), and numerous others. Organizations must be able to track and control file sharing and collaboration within the virtual data room.

2. Peer-to-Peer (P2P) File Transfer

Peer-to-peer (P2P) file transfer is an increasingly popular way of transferring files over the internet. P2P file sharing is based on the idea of sharing resources among multiple parties and allows users to share data between each other without the need for a central server. This means that the data is transferred directly from one party to another, making the process much faster and more secure than traditional server-based file transfers.

Pluses of P2P File Transfer

P2P file transfer works by establishing a connection between two parties, and then the file is transferred directly from one to the other. This connection is established through networking protocols and is typically secured using Secure Sockets Layer (SSL) encryption. This ensures that the data is transferred securely and that only the intended recipient can access the data. The transfer process can be automated and can even include features such as file compression and encryption.

Disadvantages of P2P File Transfer

While P2P file transfer has many benefits, such as faster download speeds and greater privacy, there are also several notable deficiencies that can make it a less than ideal option for many users. One of the biggest deficiencies of P2P file transfer is the risk of malware and other security threats. Because users download files from other users rather than a trusted server, there is a greater risk of downloading malicious software that can harm their device or steal sensitive information.

Another issue with P2P file transfer is that it can be unreliable. Because files are shared among a network of peers rather than being hosted on a single server, there is no guarantee that the file will be available for download when a user wants it. This can result in frustrating delays and lost productivity.

P2P file transfer can also be slow and inefficient in some cases. While it can be faster than traditional downloads in some circumstances, such as when many users download the same file, it can also be slower if there are few users sharing the file or if those users have slow internet connections.

P2P file transfer can also be difficult to set up and use for those who are not tech savvy or who are not familiar with the specific software or protocol being used. This can create a barrier to entry for some users who would otherwise benefit from this technology.

3. Secure File Transfer Protocol (SFTP)

SFTP is a secure method of transferring files over the internet. SFTP uses encryption to protect the data in transit, and the authentication process ensures that only authorized users can access the data. SFTP also provides a way to verify the integrity of the transferred files using message authentication codes.

4. Managed File Transfer (MFT)

Managed file transfer (MFT) solutions can play an important role in the M&A process. The complexity of the M&A process can cause significant delays and costs if not properly managed. By automating the transfer of confidential and sensitive files between companies during the M&A process, MFT solutions can drastically reduce time and costs associated with the process.

MFT solutions also provide greater security for documents exchanged during the M&A process. They use secure encryption for data transfers and can also be configured to detect and prevent malicious attacks on transferred files. All files exchanged using an MFT solution are tracked, audited, and monitored to ensure that all files are sent securely and in compliance with organizational policies.

In addition, MFT solutions can provide the ability to track and monitor the progress of the M&A process. This can be hugely beneficial, as it allows the different parties involved to get real-time updates on progress, which can help them make more informed decisions and ensure that the process is carried out correctly. Overall, MFT solutions can be an invaluable tool for companies going through an M&A process. They provide greater security for sensitive data being exchanged, reduce the time and costs associated with the process, and allow for real-time updates and reports on the progress of the process.

5. Secure Email

Secure email is a method of sending encrypted emails that can only be accessed by authorized recipients. Secure email uses encryption and digital signatures to protect the content and ensure the authenticity of the email. Secure email also provides features such as message expiration dates, read receipts, and delivery confirmations to improve the security of the email.

But with most M&A activities, file and folder collaboration is a requisite between the different parties. Email, in this case, is an inefficient way to facilitate collaboration. And due to different encryption standards in existence, recipients will face challenges if senders use an encryption standard different than the one used by their organizations. This can lead to inefficiencies and even security risks.

6. Physical Transfer

In some cases, physical transfer of data may be necessary for the M&A process. This method involves physically transporting the data in a secure manner, such as using courier services or secure transportation methods. The data is usually stored on encrypted devices, and access is restricted to authorized personnel only.

Best Practices for Secure File Transfer for M&A

Implementing best practices for secure file transfer is critical to ensuring the confidentiality, integrity, and availability of sensitive data during M&A. These best practices include:

Using strong authentication methods, such as multi-factor authentication
Encrypting all data in transit and at rest
Using access controls to limit access to authorized personnel only
Implementing proper documentation and audit trails
Regularly testing and updating security measures to ensure they are effective
Implementing a disaster recovery plan in case of data loss or breach

Secure M&A File Sharing With the Kiteworks Platform

Kiteworks is an exceptional platform for managing sensitive content communications across various channels—including email, file sharing, managed file transfer, SFTP, SMTP, and web forms—particularly during high-stakes processes such as mergers and acquisitions (M&A) activity. Key attributes that make Kiteworks an excellent choice for M&A activity include its robust security features, centralized data management, seamless collaboration tools, user-friendly interface, and compliance with relevant regulations.

Following are some of the M&A capabilities of Kiteworks:

1. Hardened Security Layers

Kiteworks provides a secure environment for exchanging sensitive content during M&A transactions. Its advanced security features, such as end-to-end encryption, granular access controls, and multi-factor authentication, safeguard crucial data against unauthorized access, ensuring the confidentiality and integrity of proprietary information. In addition, Kiteworks’ customizable security policies allow organizations to tailor their security measures to their specific needs and risk profiles.

2. Unified Content-defined Policy Management

Centralized content-defined policy management is another crucial aspect of Kiteworks, particularly for M&A activity. The platform provides a unified environment for securely storing, accessing, and sharing information across various channels. This centralization streamlines the process of data sharing and management during M&A transactions, minimizing the risk of data loss or mismanagement, and fostering more efficient collaboration among stakeholders.

3. Collaboration to the Level of Files and Folders

Seamless collaboration tools offered by Kiteworks enable efficient communication between involved parties during M&A processes. With real-time document editing, secure communication channels, and detailed activity logs, Kiteworks promotes transparency and streamlines the coordination between internal and external teams. These tools allow stakeholders to focus on critical aspects of the M&A process while minimizing the administrative burden.

4. Ease of Use and Seamless Deployment

Kiteworks’ user-friendly interface ensures ease of use for all parties involved in an M&A transaction. The platform’s intuitive design allows users to navigate effortlessly, regardless of their technical proficiency. Additionally, its compatibility with popular email clients and file formats facilitates seamless integration with existing workflows and communication systems, further enhancing user experience.

5. Facilitating Adherence to Regulatory Compliance

Kiteworks’ commitment to compliance ensures that the platform adheres to global data protection regulations, including GDPR, HIPAA, PCI DSS, PIPEDA, and numerous others. It also is compliant with various cybersecurity frameworks, such as FedRAMP Authorized to Moderate Level Impact, SOC 2, and ISO 27001, 27017, and 27018. With Kiteworks, organizations can be confident that their sensitive content communications are managed in accordance with industry standards, reducing the risk of regulatory penalties or reputational damage.

To learn more about how Kiteworks can help you send, share, receive, and store information securely during an M&A process, schedule a custom demo.

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