Why You Should Never Forget Cybersecurity in Your Due Diligence

Experts forecast the U.S. merger and acquisition (M&A) activity to bring in more than $1 trillion this year. This has then led to many businesses becoming interested in their own expansion. Including yours.

After all, M&A brings many benefits to both parties. From reduced costs to better market penetration to diversification. These are just some of such benefits of mergers and acquisitions.

But your company can only reap these benefits when you’ve merged with a secure organization. This means more than a physically- and financially-secure firm. It also means one that has low cybersecurity risks.

IT due diligence is the key to a safe and secure M&A process. Remember, there’s no leeway when it comes to your organization’s IT management and cybersecurity. More so when you’re about to undergo a merger and acquisition.

Let’s take a look at why cybersecurity has a significant bearing on the M&A process.

Cybercriminals Don’t Discriminate

Think back to last year’s news headlines. It was a year filled with massive cybersecurity breaches, such as the Equifax attack. This breach alone compromised nearly 50% of the country. And it attacked the population with credit card accounts.

But that’s not all. Every day, cybercriminals come up with various new strategies to wreak havoc on the IT world. And they don’t only attack private businesses. They’ve even targeted government organizations. And not just any government entity. These hackers compromised none other than the National Security Agency!

Think about it. If hackers can penetrate NSA’s seemingly-impenetrable defenses, they can do the same to everyone else. Especially to organizations less secure than NSA.

All these highlight the critical roles IT due diligence plays. It’s vital to every aspect of your company. Especially in the M&A process that can leave your back-end susceptible to attacks.

You Don’t Want to Invest in a Company that Has Compromised Security

You definitely don’t want to buy a company that’s already compromised. But how would you even know if it has already fallen victim to a cyberattack?

Through IT due diligence. It’s the only way to reduce the risks of cybercriminals taking advantage of your M&A.

The cybersecurity due diligence process is extensive and time-consuming. But it’s more than worth the resources you’ll spend. After all, a company already under cybercriminals’ radar (perhaps even control) puts your entire organization at a serious security risk.

There are many important aspects that due diligence should cover. Your process should address the following:

  • The target’s current policies on privacy and data security
  • The extent of cybersecurity the target enforces across all network platforms (mobile, web, and cloud)
  • Compliance records with all applicable regulations set by the industry and government
  • Previous IT breaches, including those not publicized
  • Third-party contract vulnerabilities
  • The physical security enforced on the target’s computing infrastructure
  • The target company’s cybersecurity protocols on all sensitive information, including the location of the data
  • Social media presence of the target company and its policies governing employee use

As you can see, due diligence can unearth the risks you’re putting your own company in during an M&A process. Ensure that you have complete knowledge of these potential cybersecurity-related problems. This way, you can protect both the front- and back-end of your organization.

A Compromised M&A Can Be the Downfall of Your Company

An M&A with a vulnerable or compromised target can be all it takes to see your own company fail. No matter how strict your IT due diligence policies are, you should apply the same to a target company.

Failure to do can lead to the M&A falling through. It can even result in the downfall of your own organization.

Remember, merging and acquiring technically means you’re buying a company. This translates to purchasing everything relating to the target, including data. And when you buy data, you’re potentially buying security problems too. And this includes recent, previous, and current problems.

Simply put, merging with a company that has a poor security system means sharing all the target’s vulnerabilities. IT due diligence prevents you from buying a company rife with flaws in their cybersecurity.

Compatibility of Cybersecurity Maturity Matters

You may not always discover IT risks while conducting due diligence. However, it’s the only way you can determine the target company’s cybersecurity maturity.

Yes, your own organization may have an exceptionally-mature cybersecurity. This doesn’t mean the target has the same standards. Pursuing the M&A, in this case, can prove difficult, due to the major incompatibility issues with the systems.

Of course, you have the option of raising the target’s cybersecurity up to your company’s standards. This can further complicate the already complex process of M&A though. It can also significantly increase the M&A costs.

A More In-Depth Look at the Target’s Credibility

A common issue that arises during merging and acquisition is lack of transparency. Target companies may hide problems with their IT infrastructure. They may choose not to divulge existing and present security risks.

You wouldn’t want to buy such a company, would you? Definitely not.

This is another reason behind the importance of IT due diligence. With it, you can establish whether the target has opted for transparency.

As such, you can avoid investing in a company that you can’t even trust in the first place.

Determining Potential Employee Risk

Cybersecurity threats aren’t limited to the outside world. The hazards can be within the organization itself. In fact, many security breaches have occurred through an ‘inside job.’ It’s when an employee contributed to the attack.

Due diligence, with its comprehensive approach, also factors in potential employee risks. Keep in mind that M&A can include integration of all your target’s employees. So, the employee risks on that side can just as quickly become yours.

Ready for Your IT Due Diligence Partner?

These days, a cyber attack can mean millions of dollars lost. It can also mean the compromised safety of both data and individuals.

This is why you should never underestimate the power of due diligence. Cover all aspects of a target company’s cybersecurity before absorbing it.

Learn more about the crucial roles cybersecurity due diligence plays in the M&A process.

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