Social media – why is it a risk in a business sale.

Posted on August 5, 2018 by andrewwatkin in Finance

We all know something about Social Media but how can it affect a business when it is sold?

Due diligence by a buyer starts as soon as it knows the name of the seller. A buyer will seek to limit his risk and will want the process to be as hassle-free as possible.

Due diligence is like kicking the tyres. But we are not talking about buying a car, here. The similarity stops there. Social media is a now an area a buyer will be reviewing because a poor social media policy could:

  • Risk the reputation of the business and goodwill affected
  • Breach of regulations and penalties charged
  • An inappropriate leak of the business sale before it is completed.Theft of Data

So what are some of the risk areas?

Theft of Data

There have been several examples of popular Facebook pages and Twitter profiles being “lost” when an employee leaves or worse “stolen” when an employee is poached by a competitor. A page with many fans provides a valuable contact data list.

Audit trails

Posts may be made from unidentified sources. A great danger. To avoid this happening, passwords must not be shared and the trail robust enough to pinpoint who or where the post came from.

UK Data Compliance

If data is stored overseas, then there could be a breach of UK data storage policy and UK law.

Defamation and the Law

Posting, tweeting or re-tweeting a libellous message may leave the person or organisation involved open to prosecution.

Reputational Risk and response Times

If mistakes happen and they do, a business needs to respond quickly.

This requires investment into social media management tools especially when the error may have occurred overnight.

Even if you are not in the process of considering a business sale and do not have an exit plan this is still an area you should consider.

It is not one I would claim to know much about, but I do know someone who does.

So, if you are concerned then please contact me, Andrew Watkin on 07860 898452, or by email: awatkin@assyntcf.co.uk

Assynt Corporate Finance Limited, Chartered Accountants, is a member of The Corporate Finance Network. It means we access resources, particularly in the areas of advertising businesses for sale discreetly and accessing those lists for our clients who want to acquire business.

The information contained in this briefing is based on information available at the date of posting and may be subject to amendment.  It is written as a general guide and is not a substitute for professional advice.  You are strongly recommended to obtain specific professional advice from us before you take any action.  No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this briefing can be accepted by Assynt Corporate Finance Limited or its director.

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