The value of cyber security for mergers and acquisitions

Mergers and Acquisitions (M&A) transactions are often primarily driven by financial, legal, and operational considerations. However, times are changing, and there is growing recognition of the necessity for cybersecurity, as technology is at the heart of most organisations.

Developing a robust cybersecurity strategy is essential to ensuring value retention, securing sensitive data, minimising risks and a seamless transfer during and after the merger or acquisition.

Cyber Risks in the M&A Process:

Cybercriminals typically target sensitive data such as financial information, customer data, intellectual property and personnel files — data that is common in M&A transactions. Emails and other means of communications used during a transaction are rich grounds to launch a payment diversion fraud. The key cyber risks in a transaction include:

• Vulnerable IT infrastructure – This can very quickly deplete the value of assets being acquired/sold.
• Insider Threats: Disgruntled employees, particularly during periods of organisational change, can pose significant risks resulting from malicious damage and IP theft.
• Phishing Attacks: Cybercriminals often use phishing emails to deceive employees into revealing sensitive information or re-routing large payments involved in a transaction.
• Supply Chain Attacks: Weaknesses introduced by third-party suppliers may serve as potential entry points for cyberattacks.
• Diverse IT ecosystems: Integrating disparate IT systems can create vulnerabilities that cybercriminals can exploit.

Cybersecurity Best Practices: Before, During and After M&A

Before the Deal:

• Cyber Due Diligence: Conduct a comprehensive IT and cybersecurity assessment to identify potential opportunities, risks and vulnerabilities.
• Risk Assessment: Evaluate the overall cyber risk profile of the combined organisation and develop a detailed risk mitigation plan.
• Data Inventory: Compile a detailed inventory of sensitive data assets to prioritise protection efforts.

During the Deal:

• Secure Communication Channels: Utilise secure communication channels to protect sensitive information during negotiations and due diligence.
• Data Protection Protocols: Implement clear data protection protocols to safeguard sensitive data during the integration process.
• Incident Response Planning: Develop a robust incident response plan to manage potential cyberattacks.

After the Deal:

• Integrated Security Posture: Combine the cybersecurity teams and technologies of both organisations to establish a unified security posture.
• Employee Training and Awareness: Conduct regular cybersecurity awareness training for employees to mitigate risks associated with human error.
• Continuous Monitoring and Assessment: Implement ongoing monitoring and assessments to identify and address emerging threats.

Conclusion

By prioritising cybersecurity best practices throughout the M&A process, organisations can protect their valuable assets, mitigate risks and ensure a smooth transition. A proactive approach to cybersecurity not only safeguards sensitive information but also enhances the overall value of your business.

This article is jointly authored by Clarkslegal and cyber security compliance experts, RightCue.

Clarkslegal’s corporate team advise on mergers and acquisition across a range of sectors with a particular focus on technology.

RightCue provide cybersecurity due diligence and assurance services before, during and after mergers and acquisition activities.

This article was jointly authored by Ashan Arif, Corporate Partner at Clarkslegal and Yogesh Agarwal, M.D of RightCue