Mergers & Acquisitions (M&A)

Cyber Security Due Diligence

During a merger and acquisition (M&A), cyber security due diligence is a critical aspect to identify any weaknesses in the target company’s cybersecurity and supply chain that could pose a risk to the acquiring company and ensure that the target company’s cybersecurity standards align with the acquirer’s requirements and expectations. 

What does it consist of

Key Areas to be Considered:

Risk Identification and Management

Identifying potential cybersecurity risks and vulnerabilities in the target company helps understand and prioritise the implementation of appropriate controls to mitigate the Risks to prevent future security breaches and data losses. 

Compliance and Legal Obligations

Companies are often subject to various cybersecurity regulations and laws. Due diligence ensures that the target company is compliant with these regulations, avoiding legal and financial penalties. 

Financial Impact Assessment

Cybersecurity issues can have significant financial implications. Due diligence helps in assessing potential costs related to fixing cybersecurity weaknesses. Potential fines for non-compliance and the impact of past breaches. 

Evaluating the target company’s preparedness for cybersecurity incidents  

Mergers and Acquisitions often involve the transfer of sensitive data and intellectual property. Due diligence ensures that this information is adequately protected and that the target company has not suffered any breaches that could compromise its assets. 

ACtionable Results

Reputation and Brand Protection

As cybersecurity breaches can harm both the target and acquiring company’s reputation. Due diligence helps in the understanding and mitigating of risks to protect the brand value and customer trust.

Integration Risks

During a Merger and Acquisition, integrating different IT systems and networks can create new vulnerabilities. Cybersecurity due diligence assesses these risks and aids in planning a secure integration process.

Strategic Decision Making

Understanding the cybersecurity posture of the target company can influence the valuation and decision-making process in a Merger and Acquisition transaction.

Insurance and Liability Considerations

Evaluating the cybersecurity posture of the target company helps evaluate the adequacy of cyber insurance coverage and understand any liabilities related to cybersecurity issues.

Supply Chain Review

Reviewing relationships with third-party vendors and assessing their access to the company’s employees identifies the maturity and measures the risk factor of human error and insider threat.

Incident Response Plan Analysis

Evaluating the target company’s preparedness for cybersecurity incidents, including response plans, recovery strategic and communication protocols.

The critically of addressing cybersecurity within the due diligence process of Merges and Acquisitions has increased significantly in recent years die to the rise in digital transformation and cyber attacks because of the pandemic.

Sapphire can assist companies during Mergers and Acquisitions with the following services:

  • Risk Identification and Management
  • Compliance and Legal Compliance Review
  • Security Incident Readiness Reviews
  • Third-Party Risk Management
  • Reputation and Brand Protection reviews
  • Integration Risk Assessment
  • Strategic Decision Making and Governance

Reduce Costs.

Where cybersecurity due diligence is conducted early enough in a Merger and Acquisition it can lead to reduced costs post-acquisition, mitigate damage to reputation, increase customer trust, minimise integration challenges and overevaluation of the target company, ultimately reducing business risks.