Cyber Risks Impact Mergers & Acquisitions


  • 02 Feb 2021
  • Business Security, Tech Due Diligence

Mergers and Acquisition processes often have the value of the business as a top priority. However, Cyber Security should be one of the priorities moving forward. Regarding privacy laws and data breach disclosure laws, cyber risk exposure has the potential to affect the valuation massively.

Cyber Security vulnerabilities and weaknesses can have a devastating effect on mergers and Acquisitions. When valuing a business, cyber security should be taken into account sooner rather than later as this has been seen to jeopardize a M&A deal.

Investing in a new business comes with its risks. Carrying out the right processes is important, when acquiring a company, the acquirer is also taking on the cyber security program and cyber security risks associated with the business.

ForeScout Technology conducted a survey with 2,500 information technology and business decision makers and found that 53% of personnel say that cyber security issues or incidents jeopardize M&A deals  

Cyber Due Diligence will ensure that the buyer is well informed about all the risks, weak points of the business or risks that could be inherited from the transaction. Cyber Due Diligence will explore the IT systems, audits, previous cyber history  including data breaches and any weak spots of the network.

 

5  Cyber Risks that come with Merger and Acquisitions: 

  1. Valuation Creation Risks -  Smart technology, artificial intelligence, digital systems all create the value of a business. However something else that needs to be considered is the cyber security of the business. Not many people realise that looking into cybersecurity can also affect the valuation. Digital systems need to be secure in order to hold value within the business, being insecure can result in cyber attacks and hefty fines along with reputational damage.
  2. Integration Risks - Mergers and Acquisitions transactions are the perfect target for a cyber attack. Sometimes when businesses are integrated, the patch work of systems can contain some security blind-spots and vulnerabilities. There may be existing vulnerabilities in a business but have not yet been discovered until a transaction is in progress that should be addressed and mitigated as fast as possible
  3. Weak Tech Due Diligence Practices - Poor Due Diligence can result in inaccurate  valuation, increased risks, increased security threats and poor decision making. On a whole it has a huge negative impact on a deal if due diligence is not carried out with the right experience and expertise.
  4. Threats to Security - It's advisable to use a virtual data room when sharing and reviewing confidential documentation. You need to make sure that the virtual data room is:
  • ISO Compliant
  • Provides strong encryption methods
  • Provides documentation permissions and restriction settings
  • Requires a two-factor authentication
  • Provides a digital watermarking

5. Cyber Security Posture Risk - Review your target's security posture is mature enough for the volume of sensitive data that will be shared. You need to ensure that cyber insurance policies are in place and that they are robust enough. A poor cyber security posture could cause many vulnerabilities to be exploited.

Here at North Cyber Security we offer Tech Due Diligence to ensure you are buying/investing in value for money. We will explore and identify any weaknesses and security holes within an application.  

Contact us today.


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