When one company acquires another, the due diligence process scrutinises financials, legal obligations, customer contracts, and intellectual property. Cybersecurity due diligence, when it happens at all, tends to receive a fraction of the attention given to these other areas.
That imbalance has proven costly. Several high-profile acquisitions have resulted in the buyer inheriting undisclosed breaches, regulatory liabilities, and technical debt that materially affected the value of the deal.
What Cyber Due Diligence Should Cover
A thorough cybersecurity assessment during M&A goes beyond checking whether the target company has a firewall. It should evaluate their security programme maturity, review their incident history, assess their regulatory compliance posture, and identify technical vulnerabilities in their infrastructure.
William Fieldhouse, Director of Aardwolf Security Ltd, comments: “We’ve been engaged to conduct security assessments during the due diligence phase of acquisitions, and the findings regularly influence the deal terms. Discovering unpatched infrastructure, undisclosed breaches, and non-existent security policies after the deal closes is far more expensive than discovering them before.”
The goal isn’t to find a perfect security posture. No organisation has one. The goal is to understand the risk you’re inheriting and factor that into the deal terms, the integration plan, and the post-acquisition remediation budget.
Integration Creates New Risks
Connecting two previously separate networks creates attack paths that didn’t exist before. The acquiring company’s mature security controls mean nothing if the target’s compromised network gets connected without adequate segmentation.
Trust relationships between Active Directory forests, shared authentication platforms, and network interconnections all need careful planning and testing before they go live. Rushing integration to meet business timelines frequently creates security gaps that persist for years.
Pre-Acquisition Assessment
Conduct vulnerability scanning services against the target company’s external and internal infrastructure as part of the due diligence process. This reveals the actual state of their security, not just what their documentation claims.
The findings inform your negotiation position. Significant security deficiencies can justify price adjustments, escrow arrangements for remediation costs, or specific warranties and indemnities in the purchase agreement.
Post-Acquisition Priorities
After the deal closes, prioritise security integration alongside business integration. Conduct a fresh assessment of the combined environment. Align security policies, standardise tools and processes, and close the gaps identified during due diligence.
If you’re planning an acquisition and haven’t considered cybersecurity due diligence, getting a penetration test quote for a pre-acquisition assessment could save you from inheriting problems that cost far more than the assessment itself.