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Security Risks In Mergers and Acquisitions


Malicious actors will seize any opportunity to gain remote server access to your business, especially when your cybersecurity efforts are at their lowest. Mergers and acquisitions happen to be one of such times because there’s a higher chance for system failure are at least twice as many targets (the acquirer and the acquired). This is why companies are particularly paranoid about M&A processes.

Talk to our experts in IT Due Diligence and IT Integrations for M&A

As you already know, trust is critical to the success of acquisitions. The knowledge of a potential loophole in the other party’s servers can increase the number of side-eyes in boardroom meetings preceding mergers. The parent company is worried about paying above the market valuation, and the acquired company wants more in the deal. After all, it is not uncommon to hear about business owners hiding and covering up cracks in their IT infrastructure so that their companies appear more valuable than they really are. 

For the seamless completion of acquisitions, you must have the M&A security sorted out by undertaking thorough due diligence. 

What Is Merger and Acquisition Security?

Merger and acquisition security are the measures taken by both the parent and the acquired company from the start to finish of their business dealings. The security of the acquired party may start long before meeting the buyer, as ensuring that your IT environment is clean is one of the many ways to appear and stay valuable. 

While M&A security may form the basis for verifying and authenticating the acquired company’s IT infrastructure and health, it entails more than just digital transparency. It provides a clear picture of the resources needed for service migration to the new IT environment, the efficiency of the systems post-merger, and the maintenance cost. Overall, it lets you know if the acquisition is worth it.

Optimum M&A security involves the IT team asking themselves three questions:

  • What is the security posture of both companies before M&A?
  • What are the most commonly exploited loopholes by bad actors?
  • Are the post-merger/acquisition expectations met?

Asking yourself the first question helps you paint a mental picture of the cyber security measures in place and what could be wrong. With the second question, chances are that you can accurately determine the path hackers may want to utilize, giving you the time and resources to guard against them.

The third question may seem needless after the completion of a merger; an impenetrable infrastructure relies on efficient systems working in a well-aligned cybersecurity roadmap. That question helps gauge your expectations and guides you to make the needed changes.

What Are the Top Security Risks?

Although this does not represent all the possible IT security risks you could encounter, here are some of the most troubling:

Data Breaches 

Spending too little time on security assessments can conceal data breaches and data privacy concerns that would have come up in the past, especially if it was never made public. This is worrying as hackers can leave behind a backdoor for re-entry and remain undetected for a long time. Additionally, as hacking becomes more sophisticated, there is no telling how frightening the cost of such actions can be — if Verizon and Yahoo’s story is anything to go by.

Information System Vulnerabilities

It can be challenging to analyze the target company’s security documentation because many security policies and permissions can be exploited by third parties. It can be easy to miss with timelines to adhere to and deadlines to beat. However, that does not take the costliness away from such a mistake. 

In such a scenario, you will lose many fronts; the trust of your clients, valuable company data, sensitive information and extra costs to clean up the mess. Because, apparently, it is costlier to be reactive. 

Frail Cybersecurity Architecture and Documentation

Documenting can save you a whole lot of trouble. It preserves consistency in the framework of your IT architecture and ensures strict configuration management and protocols. However, you can’t practice proper documentation if the foundational cybersecurity framework is poor, nor can you maintain IT security best practices with sufficient documentation.

Poorly Continuing Cybersecurity Strategy and Roadmap

What is contained in your organization’s cybersecurity documentation? Is it easy for new IT employees to understand, or does it require handholding to understand the documented concepts and strategies? Does the M&A security roadmap reflect the security goals of the merging companies? If your answer is no, your organization is at risk of practicing wrong configurations, operating inefficient systems, or worse, making your company an easy target for malicious actors. 

Weak IT and Financial Compliance and Regulation

There are peculiar IT compliance requirements within industries and regions, with the most important processes being prioritized. For example, under the Gramm-Leach-Billey Act, all financial institutions are charged with protecting their client's financial information and must publicly announce their breach status should there be one. There is an entirely separate act that governs healthcare institutions. Companies undergoing M&A have a hard time complying with the pronouncements of these acts.

How To Improve Your Security During Mergers and Acquisitions

Effectively managing and guarding against cyberattacks during M&A requires meticulous planning and ruthless execution at all stages of the acquisition process. Here are a few tips you can adopt:

Hire Experienced and Skilled Security Teams

Hiring a capable, experienced and reliable IT team is the first step to averting the security bottlenecks of the M&A process. Plus, you don’t have to worry about the quality of work and attention paid to improving your company’s IT architecture while working in full automation. If you do not have the resources to hire full-time employees, there are cybersecurity companies that offer these services on a pay-as-you-go basis. They can work under the supervision of the chief information security officer (CISO).

As the acquiring organization, we advise that you have a team on hand before you meet with representatives from the company’s prospective subsidiary. This gives your team enough time to be more familiar with the target company’s structure, carry out their cybersecurity due diligence, and access the data protection protocols. That way, even the most seemingly harmless endpoint and erased and the malware squashed.

Assess the Security Framework of the Both Companies

The security frameworks of the acquiring company and the entity to be bought must be assessed to:

  • Gauge how well both architectures can withstand hacking attempts
  • Compare and contrast the digital policies, and find how best to marry them
  • Understand the level of threat the systems may have been exposed to in the past
  • Devise strategies on how to ensure the success of the M&A process

Not all of this data can be obtained from testing and documentation reading. Interaction with the target company’s staff, and in some cases interviews, is the perfect risk assessment procedure that will expose a company’s culture that threatens the security integrity of the acquiring company.

Utilize Watertight Security Techniques and Strategies

Adopt agile security techniques and strategies and teach your team to follow suit. Most times, cyber security issues can be too robust to handle or eliminate in one go. Agile implementation — a continuous lifecycle of troubleshooting, design and implementation — is typically an ideal solution. That way, you can handle the short and long-term goals of the merger and, hopefully, set the new entity underway for a lasting positive IT culture. 

Iterate and Improve on Current Security Standards

Dismantling the security standards of the company to be acquired attracts costs and consequences that may be too costly to repair; teaching too many new habits to a workforce of considerable size can be daunting. Instead, improve on the current security standards. Gradually discontinue the non-beneficial parts and provide adequate training to improve their competency. This way, workers can better adapt to the new security policies, making your company hackproof.

Common Mergers & Acquisitions Security Frameworks and Strategy

Usually, the strategy employed during an M&A is the most important “how” of sustaining sustained security integrity. It is more efficient to track the goals of the M&A deal phase and the diagnostic tests this way.

During the Due Diligence phase, your goal is to uncover hidden information about the company of interest. You are keen on the compatibility of your systems and processes, hidden costs and news that will support your bargain. 

The On-Boarding and Integration phase is about ensuring a smooth transition from pre to post-acquisition and having a support team to provide round-the-clock security maintenance. For Risk Management and Value Creation, the goals are to preserve and make the existing processes efficient and close security breaches that may have arisen quickly.

The last stage, Divestment and Separation, is where unannounced cyber threats and breaches in the past are exposed (if any), and to ensure that the entity’s value is intact before purchase or if there are hidden liabilities.

Talk to our experts in IT Due Diligence and IT Integrations for M&A

Contact ne Digital for Your Cybersecurity Needs During Mergers and Acquisitions

M&A business meetings can be complex, tricky, and mentally exhausting to handle; you shouldn’t have to take on the cybersecurity risks yourself too. 

ne Digital is a team of dedicated IT experts and providers whose sole purpose is to ease the complexity of your existing IT infrastructures by employing lasting cost-effective solutions. Our practices comply with the different acts governing the healthcare, real estate, logistics, manufacturing, and hospitality sectors. 

Contact us today to learn how we can lessen your M&A security worries.

Topics: IT Due Diligence

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