Significance of Cybersecurity After an Acquisition

The thrill of mergers and acquisitions is undeniable—they signal growth and fresh opportunities. Yet my recent experience has taught me that beneath this excitement lies a complex web of often-overlooked risks. An eye-opening audit of our M&A practices revealed challenges we hadn't initially anticipated. The lesson was clear: when an acquisition ventures further from your core business, understanding the details becomes exponentially more critical. This experience highlighted three crucial insights that have changed some of our processes: First, expect the unexpected. Each acquired business brings its own technological DNA—complete with unique security challenges and potential vulnerabilities that could affect your entire organization. Second, invest in expertise, or third party subject matter experts. Surface-level risk assessments won't cut it. You need dedicated specialists who can dive deep into the nuances of each acquisition's security landscape. Third, resist the urge to rush. Hasty system integrations can create security blind spots. Taking time to thoroughly understand what you're inheriting is invaluable. In an era where cyber threats evolve daily, every M&A should enhance, not compromise, your security foundation. I'm curious: What's your approach to managing security during M&A? Which strategies have proven most effective in identifying hidden risks? Are there any third parties that stepped up to help your organization? Let's exchange experiences and grow stronger together. Some great partners I have enjoyed working with: Synopsys Inc, Cobalt, Renatio #MergersAndAcquisitions #CyberSecurity #RiskManagement #Leadership

Buying a company with weak cybersecurity is like buying a house with no locks—sure, it’s a great deal until someone walks right in and takes everything. 🏠🔓 Acquiring a company with low technology maturity can expose your investment to significant cyber risks. To rapidly enhance cyber maturity in such scenarios, consider the following strategies: 💠Engage Managed Security Service Providers (MSSPs): Leverage MSSPs to provide immediate, expert oversight of your cybersecurity infrastructure, ensuring continuous monitoring and threat response. You can never go wrong with eSentire or Arctic Wolf. 💠Adopt Cybersecurity-as-a-Service Solutions: Utilize providers like Cyvatar and Coro to implement scalable, turnkey security measures tailored to your organization's specific needs. 💠Implement Comprehensive Security Platforms: Deploy solutions from vendors with a platform offering such as Microsoft Security, Palo Alto Networks, Cisco, which offer integrated security solutions across multiple domains, including network and endpoint protection. 💠Enforce Zero Trust Architecture: Require strict identity verification for every user and device accessing the network using tools like Zscaler and Fortinet, reducing the risk of compromise for Internet-facing systems and off-network end user compute. 💠 Develop a Day-One Security Integration Plan: Establish robust workstreams to secure business-critical data. databases and on-premises systems immediately upon acquisition, preventing potential breaches during the transition period. For a comprehensive analysis of cybersecurity considerations in mergers and acquisitions, refer to this insightful article. https://shorturl.at/wNyws #CyberSecurity #PrivateEquity #MergersAndAcquisitions #TechIntegration

Cybersecurity is changing how financial markets work but not in the way people think: 1. Private equity companies have learned that cyber incidents can derail even the best-laid investment theses, and few cases illustrate it as well as the story of SolarWinds. That is why we are seeing more and more PE firms invest in captive MSSPs - having a single service provider (usually owned by the same PE) offer security and compliance to all the companies in their portfolio. The struggles of SolarWinds and the fact that the company has become known worldwide because of the breach highlighted that, while over the long term, the impact of cyber incidents tends to be negligible, given the PE playbook and timelines, it can be pretty disruptive. 2. During M&A, security is starting to play a more and more important role. One of the earliest wake-up calls came in 2017 when PayPal acquired TIO Networks. Some weeks after the acquisition closed, PayPal discovered that 1.6 million customers’ data had been compromised in a breach that predated the deal. The fallout was really bad: TIO was forced to suspend operations, PayPal got stuck in many lawsuits, and the company took a reputational hit even though it wasn’t responsible for the original breach. The story of TIO Networks became a textbook example of a cyber issue derailing an otherwise promising acquisition, sending over $200M down the drain. There have been plenty of other cases like Verizon’s acquisition of Yahoo and Marriott's acquisition of Starwood Hotels that made this an issue acquirers are paying attention to today. 3. VCs don't evaluate the security of their investments because there has not been a correlation between the security posture of a company and their success. Most startups fail due to well-known and well-documented reasons: lack of product-market fit, running out of money, poor execution, etc. A breach or cyber incident is not on the list of top 20-50 reasons. Let me be clear: I am not saying that VCs ignore cyber risk. It’s really the opposite - venture is fundamentally about managing risk and reward, but not all risks are treated equally. Legal and regulatory risks, for example, are taken seriously because there’s a well-established history of them tanking deals and killing companies. Legal due diligence is a standardized, critical part of the investment process, not because it’s exciting, but because stuff like intellectual property issues have burned investors before. The moment cybersecurity creates similar pain, like when a breach derails a billion-dollar IPO or acquisition, cyber due diligence will quickly become a part of the process, likely starting with later rounds.

😡 We hate to see it, but it’s surprisingly common for an acquisition to get held up by IT compliance and cybersecurity concerns. At Eden Data, we’ve now helped numerous companies prepare for IPO or acquisition, and have also been brought in by acquirers to put out dumpster fires and mitigate risks quickly. If your company is growing fast and an acquisition (or IPO) is on the horizon, keep in mind how much Due Diligence will be performed on your organization specifically related to your security program. If you’ve ever been through a due diligence cycle, you know that they scrutinize the heck out of what you have in place, and they don’t count things that are only in the heads of your team members! When they start digging into your security posture, here are the factors to prioritize: 1. Effective Risk Management: Your cybersecurity strategy should be proactive, not reactive. It should anticipate threats, mitigate risks, and protect your assets with precision and foresight. They’ll want to see that you have a DOCUMENTED risk register with clear ownership and plans of action. 2. Internal Monitoring: Continuous vigilance is paramount. You’ll want to ensure you can prove that you are actually monitoring your critical assets, have alerting established, and have a documented plan to outline what you’re supposed to do with those alerts! 3. Achieving Security Credentials: Trophies like SOC 2, ISO 27001, and adherence to NIST standards aren’t just shiny accolades for your corporate mantlepiece. They are a testament to your dedication to cybersecurity, a tangible proof point that reassures potential acquirers that you take the digital safety of your empire seriously, emphasis on the word ‘proof’! Showcasing a compliance accolade that has been validated by a third party gets you major brownie points with acquirers and overlaps heavily with IPO requirements. I know it’s easy to view investment into cybersecurity as a cost center, but in cases where your company is planning to be acquired or go public, it’s quite literally one of the best ROI initiatives you can put your money towards! #cybersecurity #compliance #duediligence #mergers #acquisition #business

Acquisition story time. We provide IT services to highly acquisitive mid-market companies. So we see a lot of 'outgoing' MSPs at small SMBs (20-200 employees) that are being acquired and we get to see what their network/service level looks like and we off board them. Spoiler: it's usually not good. We often find: -Outdated/unsupported servers -Unmanaged workstations -Exposed flat networks -Little to no domain control -Lots of ignored vulnerabilities -Inconsistent/No MFA, no central patching, no backup testing One MSP claimed to be an MSSP (a security focused expert)...but in reality the client they were serving had massive security gaps, unmanaged workstations, sloppy work. The MSP actually had a great website and you'd think these guys know what they are doing...but the work product tells a very different story. It's possible the client declined MSPs recommendations. Either way, not a good look for either party. If your company is acquiring others, this is one of the biggest blind spots to watch for. And acquisition announcements are the highest risk point and are targeted by threat actors. Just because the acquisition has an MSP, doesn't mean you have coverage. Validate and verify, ideally prior to close. Gives you flexibility to find a quality partner or even give you more negotiating leverage. Simple, cost effective solution is to do pre-acquisition IT diligence. It's extremely cheap, and you know what then needs to be done. Because once that acquisition announcement goes out, attackers see that as a signal because they know there will be material security gaps. Typical IT acquisition diligence services look like (each with tangible results and actionable value): ✅ Pre-acquisition IT & cybersecurity due diligence ✅ Infrastructure discovery and documentation ✅ Security posture audits ✅ Post-acquisition integration (getting them into YOUR environment) Did you do any IT diligence prior to acquiring your last company? Find any skeletons?