Data Security Checklist for Life Sciences M&A Transactions

Life sciences M&A transactions require meticulous attention to data security at every stage. From initial interest through closing, sensitive information flows between multiple parties, each with different access requirements. This checklist covers the essential security measures that should be in place before sharing any documents.

1. Encryption Requirements

• At rest: All documents should be encrypted with AES-256 or equivalent encryption. Verify that your data room provider encrypts files at the storage level, not just during transit.
• In transit: TLS 1.3 should be the minimum standard for all data transmission. Ensure that older TLS versions are disabled, not just supplemented.
• Key management: Encryption keys should be managed separately from the data they protect. Ask your provider about their key rotation schedule.

2. Access Control Configuration

• Folder-level permissions: Set up folder hierarchies that align with your disclosure strategy. Not all bidders should see all documents.
• Document-level overrides: For particularly sensitive materials (e.g., employee contracts, litigation details), apply per-document restrictions that override folder-level settings.
• User groups: Organise investors into groups with shared permissions. This simplifies management when multiple investors from the same firm need identical access.
• Time-based expiry: Set access expiry dates for each investor or group. Access should automatically terminate when the due diligence window closes.

3. Audit Trail Configuration

• Page-level tracking: Ensure that every page view is logged with timestamp, user identity, and duration. Aggregate document-level tracking is insufficient for regulatory purposes.
• Immutability: Audit logs must be append-only. No user, including administrators, should be able to modify or delete audit entries.
• Export capability: Confirm that audit logs can be exported in standard formats for regulatory review. Test the export function before the transaction begins.
• Retention period: Configure audit retention to meet your regulatory requirements. Life sciences transactions typically require three to seven years of retention.

4. Document Protection

• No-download policy: Documents should render in a secure viewer without providing download capability by default. If downloads are necessary for specific documents, they should be explicitly enabled per document.
• Dynamic watermarking: Every page view should display a watermark with the viewer's identity. This deters photography and screenshots by making every captured image traceable.
• Screenshot deterrence: While no technology can fully prevent screenshots, active deterrence measures (such as detecting developer tools) raise the barrier significantly.

5. NDA Management

• Version tracking: Maintain a clear version history of your NDA. When terms change, all investors should be required to accept the updated version before continuing access.
• Acceptance records: Record the IP address, timestamp, and user agent for every NDA acceptance. These records may be needed if disputes arise after closing.
• Enforcement: NDA acceptance should be technically enforced, not just requested. Investors who have not accepted the current NDA version should be unable to view documents.

6. Data Residency

• Jurisdiction: Determine where your data will be physically stored. For cross-border transactions, this may have regulatory implications.
• Provider controls: Verify that your data room provider offers configurable data residency and that data does not replicate to jurisdictions outside your control.

7. Post-Transaction

• Access revocation: Immediately revoke all investor access upon transaction completion or abandonment.
• Data retention: Define and document your data retention policy. Most organisations retain data room contents for a period after closing for reference, then securely delete.
• Audit archive: Export and archive the complete audit trail before decommissioning the data room. This archive may be needed years later.

This checklist is not exhaustive, but it covers the security foundations that every life sciences M&A transaction should have in place. The cost of implementing these measures is negligible compared to the risk of a security incident during a transaction.