Cyber Due Diligence is Essential in Mergers and Acquisitions—Here’s Why

Revenue is usually the driving factor behind a merger or acquisition. But M&As come with hidden costs, the most important one being the cost of bad cybersecurity. If the company you’re merging with has big holes in its security, you’ll be footing the bill to get them up to speed—and that could be extremely expensive.

That’s why it’s so crucial to do your due diligence and make sure the company you’re merging with is secure before signing on the dotted line.

What Is Cyber Due Diligence?

If you’ve bought a home, you’ve probably completed due diligence before. You have an inspection done, you check to see if there are any liens or other issues with the title, and you review any relevant documents.

If the house has a crack in its foundation or the owners used lead paint in the past, that information factors into your decision on whether you’ll purchase the house or not. The same thing should happen with your M&As. 

Cyber due diligence is a process of evaluating the cybersecurity posture of the company you’re merging with. It gives you a comprehensive view of the security risk that comes with the merger and helps you decide whether it’s worth taking on or not.

It usually involves a security assessment of their compliance programs, technical controls, personnel policies and procedures, and other security-related processes. This should include both an external and internal assessment of the target company’s data protection practices.

How Does Cyber Due Diligence Affect Mergers and Acquisitions?

Just like doing your due diligence on a home can help you avoid a $5,000 foundation repair bill, proactive cyber due diligence can help you avoid expensive (and sometimes irreparable) security issues.

It allows you to get a clear view of the company’s cybersecurity posture before merging and provides you with insight into any areas that need improvement, as well as any potential liabilities they may bring with them.  Cyber due diligence also helps ensure that both companies are on the same page about security best practices and policies for their newly merged entity.

With the average cost of cyberattacks constantly rising—it’s currently at $120,000 to $1.24 million—it’s important to have a clear picture of the security risks you’re taking on with any M&A. Cyber due diligence can help make sure that the merger is successful and your business remains secure.

Bottom line? Don’t skip the cyber due diligence in your next M&A—it may save you a fortune.

10 Best Practices for Cyber Due Diligence

  1. Assess the target company’s compliance posture and current security operations
  2. Evaluate the technical security controls in place for data protection measures
  3. Review any existing personnel policies and procedures related to cybersecurity
  4. Conduct external and internal assessments of their data protection practices
  5. Verify that they’re compliant with current industry regulations
  6. Confirm that they have a strong cyber risk management plan in place
  7. Ensure that all confidential data is being held securely by both parties
  8. Perform regular audits of their system security to identify any potential vulnerabilities 
  9. Prepare an incident response plan prior to the merger/acquisition in case of an attack or breach
  10. Develop clear guidelines for post-merger security protocols and requirements. This should include roles and responsibilities for everyone involved in the incident response plan

Have a Successful Merger or Acquisition With Nexus IT

Performing your cyber due diligence with a cybersecurity consultant will ensure that both parties are well-protected before signing the deal. Here at Nexus IT, we offer comprehensive proactive IT services to help you make sure your merger or acquisition is successful and secure.

From helping you assess their security posture and compliance programs to developing post-merger protocols, our team of experts can help ensure that your M&A is off to a good start.

Schedule a consultation with Nexus IT so you can have a stress-free and successful merger or acquisition.