Mergers & Acquisitions Put a Bullseye on Companies 

M&A transactions are a prime target for cybercrime. While executives might think of cyber threats as long-term planned attacks, the truth is hackers become active as soon as a deal is announced, and then start probing for weaknesses. This is because during any complex merger, acquisition, separation or divestiture an immense amount of activity occurs with systems changing, data migrating, and employees/contractors moving between the target companies. This shift in firm governance and risk management is often referred to as “the fog of war” and it is what hackers use to infiltrate. The period from announcement to transaction completion creates heightened risk due to:

  • Increased network activity: Employees from both companies ramp up activity, potentially exposing vulnerabilities.

  • Sophisticated attacks: Hackers use advanced techniques like deepfakes to steal confidential information like intellectual property.

  • Identity fluctuations: New user account are created for consultants & contractors and old users leave creating a flurry of permissions & access changing.

  • Ransomware and extortion: Criminals may lock down systems with ransomware or exploit resources for illegal activities.

  • Undocumented backdoors: Unpatched systems, legacy devices, or forgotten web portals can provide easy access points.

  • Supply chain vulnerabilities: Tens of thousands of system interfaces create opportunities for attackers.

Cybersecurity Due Diligence is Crucial

For a successful M&A transaction, both buyer and seller need thorough Cybersecurity due diligence.

  • Buyers should:

    • Identify security issues early.
    • Estimate costs to address potential problems.
    • Evaluate the target's security systems, policies, and practices.
    • Assess the target's security culture and employee training.
    • Review data security and compliance procedures.

  • Sellers should:

    • Identify and address security issues before negotiation.
    • Develop a plan for integrating their security posture with the buyer's.

Post-Merger Integration Requires Strategic Planning

Successful integration requires a focus on five key areas:

  • Value Capture: Identify areas for security improvement that will enhance return on investment.

  • Vendor Rationalization: Optimize cybersecurity services and potentially adopt cloud-based solutions for efficiency.

  • Integration Mapping: Strategically map critical systems and resources for protection.

  • Target Operating Model: Design a new operating model that considers security risks and resource needs.

  • Separation and Integration Planning: Develop a detailed plan for separating and then integrating the companies' IT infrastructure while minimizing security risks.

Proactive Measures are Key

  • Monitor news and the dark web: Track media coverage and monitor the dark web for leaked information or attempts to sell stolen credentials.

  • Conduct penetration testing: Go beyond basic security measures and implement proactive monitoring to identify and track attempted intrusions.

Conclusion

Cybersecurity is a critical factor in successful M&A deals. By prioritizing cybersecurity due diligence, strategic planning, and proactive measures, companies can mitigate cyber risks and ensure a smooth, secure transaction. As cyber threats continue to evolve, M&A executives who prioritize digital security will be better positioned to achieve their business goals.

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