Importance of Cyber Due Diligence in Mergers

In the current climate, ignoring cybersecurity during M&A due diligence is akin to overlooking a critical structural weakness in a potential acquisition. With the infrastructures of entire businesses relying heavily on IT, cybersecurity due diligence is non-negotiable—it is essential to uncover hidden vulnerabilities and past breaches.   As financial implications are real, unaddressed cybersecurity risks can significantly impact valuation and lead to substantial post-acquisition costs. Therefore, proactive assessment is key. It is important to identify and understand the target's security posture before the deal closes.    From my experience, beyond the technical aspects, a robust cybersecurity assessment reflects the target company's overall operational discipline and risk management culture. A weak cybersecurity posture can be a red flag indicating broader systemic issues. Conversely, a strong security framework often indicates a well-managed and forward-thinking organization.   Furthermore, in our increasingly interconnected manufacturing landscape, where supply chains and operational technology are deeply integrated, the cybersecurity of an acquisition target can have cascading effects on our entire business. It's not just about protecting data; it's about safeguarding our operations, intellectual property, and, ultimately, our competitive advantage.   What are your thoughts on the evolving role of cybersecurity in M&A, particularly within asset-heavy industries like manufacturing? How are you ensuring cyber resilience is a key consideration in your acquisition strategies?    #MergersAndAcquisitions #Cybersecurity #Manufacturing #DueDiligence #RiskManagement #Leadership #TechInManufacturing #MAndAStrategy

😡 We hate to see it, but it’s surprisingly common for an acquisition to get held up by IT compliance and cybersecurity concerns. At Eden Data, we’ve now helped numerous companies prepare for IPO or acquisition, and have also been brought in by acquirers to put out dumpster fires and mitigate risks quickly. If your company is growing fast and an acquisition (or IPO) is on the horizon, keep in mind how much Due Diligence will be performed on your organization specifically related to your security program. If you’ve ever been through a due diligence cycle, you know that they scrutinize the heck out of what you have in place, and they don’t count things that are only in the heads of your team members! When they start digging into your security posture, here are the factors to prioritize: 1. Effective Risk Management: Your cybersecurity strategy should be proactive, not reactive. It should anticipate threats, mitigate risks, and protect your assets with precision and foresight. They’ll want to see that you have a DOCUMENTED risk register with clear ownership and plans of action. 2. Internal Monitoring: Continuous vigilance is paramount. You’ll want to ensure you can prove that you are actually monitoring your critical assets, have alerting established, and have a documented plan to outline what you’re supposed to do with those alerts! 3. Achieving Security Credentials: Trophies like SOC 2, ISO 27001, and adherence to NIST standards aren’t just shiny accolades for your corporate mantlepiece. They are a testament to your dedication to cybersecurity, a tangible proof point that reassures potential acquirers that you take the digital safety of your empire seriously, emphasis on the word ‘proof’! Showcasing a compliance accolade that has been validated by a third party gets you major brownie points with acquirers and overlaps heavily with IPO requirements. I know it’s easy to view investment into cybersecurity as a cost center, but in cases where your company is planning to be acquired or go public, it’s quite literally one of the best ROI initiatives you can put your money towards! #cybersecurity #compliance #duediligence #mergers #acquisition #business

When you invest in tech companies, there’s one extra factor you have to consider: Has their IP been leaked? Has their tech been sold on the dark web? You might already know to run diligence on: - Finances - Litigation records - Leadership reputation But if you're buying a tech company for proprietary IP, you also need to check that it's still actually proprietary. Two things to do here: 1) Do cyber due diligence The risk surface area here is larger than most people expect. It just takes one disgruntled engineer. This is especially the case with companies who have crypto assets. How are the keys stored? 2) Run deep and dark web searches If IP / tech has been leaked, it'll find its way to grey or black markets. Search the dark web to check that the firm's proprietary data (whether it's algorithms, customer data, or whatever it is you're buying them for) hasn't yet been leaked. Whenever I meet with our cyber DD team, I'm always shocked at how many insider threats are going on right under everyone's noses. So when you're investing in tech -- go a little beyond what you would normally do in the pre-transaction stage to make sure the IP you want to own hasn't already been taken by someone else. #cyberduediligence #mergersandacquisitions #privateequity #duediligence

I’ve had countless conversations with CISOs and VPs who are informed about acquisitions just days before they happen. Suddenly, they're expected to assess the new company's cybersecurity posture, often with very limited time. From conducting a posture assessment to evaluating third-party risks, the tech stack, and compliance standards—there’s a lot to cover. Yet, most are lucky if they can check even a fraction of the boxes before the deal closes. But it doesn’t have to be this chaotic. With a proper playbook in place, you can break down the process step by step. From pre-deal assessments to thorough due diligence, and finally, seamless integration, having a structured approach makes all the difference. Even if your company only does one deal a year, this preparation shows you're proactive and ready to lead the process. Cybersecurity due diligence is crucial in M&A, and it's time we give it the focus it deserves.

Mergers and acquisitions (M&A) are heating up. A key question to ask before doing a deal, though: what type of cyber risk am I buying? That's why I put together a quick due diligence checklist for investors and buyers. This won't be applicable 100% of the time, and you should of course tailor it to your needs. But this should give you a start: --- BEGIN DEPLOY SECURELY INVESTOR CHECKLIST --- 1. Access to: - company risk register. - asset inventory (with disclosure of known gaps). - software bills of material (SBOM) for all assets, in CycloneDX format. At a minimum include all known vulnerabilities in the relevant field and complete at least the analysis-state and analysis-justification field for every entry. 2. Copies of all: - security policies. - information security risk assessments. - attestations (audit reports, questionnaires) received from or provided to third parties in the past 2 years. - penetration test reports from the past 2 years and remediation actions taken. - cyber insurance claims made in the past 5 years. 3. Lists of all: - security incidents in the past 5 years (a security incident is any known or suspected violation of a security policy) and all documented steps taken following each incident. - data access provided to third parties and its classification (exclude anything authorized for public release). 4. Business continuity/disaster recovery (BC/DR) plan, including: - documentation - after-action reviews - all drills in the past 2 years. --- END DEPLOY SECURELY INVESTOR CHECKLIST --- What else should be here?

The thrill of mergers and acquisitions is undeniable—they signal growth and fresh opportunities. Yet my recent experience has taught me that beneath this excitement lies a complex web of often-overlooked risks. An eye-opening audit of our M&A practices revealed challenges we hadn't initially anticipated. The lesson was clear: when an acquisition ventures further from your core business, understanding the details becomes exponentially more critical. This experience highlighted three crucial insights that have changed some of our processes: First, expect the unexpected. Each acquired business brings its own technological DNA—complete with unique security challenges and potential vulnerabilities that could affect your entire organization. Second, invest in expertise, or third party subject matter experts. Surface-level risk assessments won't cut it. You need dedicated specialists who can dive deep into the nuances of each acquisition's security landscape. Third, resist the urge to rush. Hasty system integrations can create security blind spots. Taking time to thoroughly understand what you're inheriting is invaluable. In an era where cyber threats evolve daily, every M&A should enhance, not compromise, your security foundation. I'm curious: What's your approach to managing security during M&A? Which strategies have proven most effective in identifying hidden risks? Are there any third parties that stepped up to help your organization? Let's exchange experiences and grow stronger together. Some great partners I have enjoyed working with: Synopsys Inc, Cobalt, Renatio #MergersAndAcquisitions #CyberSecurity #RiskManagement #Leadership

What’s worse than a deal falling through? Selling at a discount due to poor cyber hygiene which causes a breach or ransomware incident. Imagine leaving millions on the table because of something as fixable as cybersecurity gaps. For private equity investors, the cyber health of portfolio companies has become a critical factor in valuations. With strategic buyers and acquiring PE sponsors scrutinizing risks like never before, it’s time to put cybersecurity on your pre-deal checklist. Improving cyber posture isn’t just defensive—it’s a growth opportunity for your next exit. #valuation #privateequity #mergerandacquisition #diligence

In the wake of UnitedHealth Group's Change Healthcare unit falling victim to a cyberattack, the incident casts a spotlight on the often-overlooked cybersecurity risks inherent in mergers and acquisitions. Meaningful, data-driven due diligence is a long-overdue necessity. This breach underscores the critical need for more rigorous cybersecurity due diligence in the M&A process, challenging the industry's current reliance on outdated risk assessment models. As we navigate the complexities of integrating disparate systems and cultures, the incident serves as a stark reminder of the vulnerabilities that can emerge. This article delves into the broader implications of the breach, advocating for a paradigm shift towards real-time, continuous compliance and risk management in the corporate world. #compliance #cybersecurity #riskmanagement #breach