Cyber Due Diligence for M&A - How to make Cyber-Secure Takeovers a Success

Cyber criminals specifically exploit the complexity and dynamics of M&A transactions. The reason: security architectures are particularly vulnerable in the midst of integration processes, system changes and organizational restructuring. Such vulnerabilities can be avoided by planning ahead.

A structured cyber security assessment helps organizations in the sensitive phase of mergers and acquisitions to identify risks at an early stage, close security gaps and ensure seamless IT integration.

Cyberrisics in the shadow of the merger

The integration of cyber security measures in the M&A process is essential to minimize risks. Below are the most important threats.

1. Data leaks & covert cyber attacks
   - Compromised systems or stolen customer data are taken over unnoticed.
   - Advanced Persistent Threats (APTs) gain undetected access to company networks.
2. Non-compliant IT security & regulatory risks
   - Different security standards and compliance requirements (e.g. revDSG, GDPR, NIS2) lead to high penalties.
   - Insecure cloud services and missing audit trails make compliance more difficult.
3. Legacy systems & shadow IT
   - Outdated or undocumented systems increase the risk of security gaps.
   - Lack of transparency about IT assets makes risk assessment more difficult.
4. Weak access management & social engineering
   - Inadequate Identity & Access Management (IAM) policies enable insider threats or unauthorized access.
   - Hackers use targeted attacks such as CEO fraud and spear phishing during restructuring phases.
5. Third-party risks & supply chain security
   - Insecure external service providers and suppliers pose a risk of vulnerabilities.
   - Security audits of partners are essential.
6. Lack of responsiveness
   - Without cyber insurance, financial losses are insufficiently covered.
   - A lack of incident management delays responses to acute threats and increases the extent of damage.

"A thorough due diligence and zero trust strategy reduces risks in M&A transactions."

Cyber security checklist for secure takeovers

Three key phases of cyber security measures are important as part of an M&A process.

Before integration: cyber security due diligence (before integration)

IT systems and security processes of the target company are comprehensively examined. Vulnerabilities, compliance gaps and hidden security incidents are identified so that well-founded takeover steps can be taken.

1. Identify, test and assess critical digital assets for security measures for sensitive data and systems, e.g. based on NIST CSF 2.0, Active Directory (AD) Security Assessment, Cloud Security Assessment for misconfigurations, access risks and compliance violations.
2. Vulnerability analyses and penetration tests, simulated attacks on networks and cloud architectures identify risks.
3. Compliance checks and ensuring that the target company meets regulatory requirements (e.g. revDSG, GDPR, NIS2, etc.)
4. Compromise assessment investigation for existing security breaches or hidden attackers.
   

Post-merger cybersecurity integration

After the takeover, the IT systems of both companies are merged. Security standards are standardized, interfaces are secured and existing risks are specifically addressed to ensure a smooth transition.

1. Zero Trust and IAM check and introduction of multi-factor authentication and least privilege principle.
2. Security baseline alignment to standardize security guidelines according to best practices (e.g. NIST, ISO 27001).
3. Secure IT integration to avoid open interfaces and merge networks from a security perspective.
4. Incident management and implementation of monitoring mechanisms for early detection of threats.

Governance & continuous improvement

In the long term, clear responsibilities are defined and regular audits and training are carried out. This establishes a dynamic security management system that adapts to new threats and strengthens cyber resilience in the long term.

1. Clear responsibilities and definition of responsibilities for cybersecurity.
2. Integrate security requirements into contracts and anchor cybersecurity assurances and guarantees in M&A contracts.
3. Security awareness and training to sensitize employees to cyber risks such as phishing and social engineering.

M&A transactions involve significant cyber risks that must be minimized through thorough due diligence and a zero-trust strategy. Early identification of threats, robust governance and continuous monitoring of IT security are essential to ensure long-term business success.

We recommend: No deal without 360° cyber protection

Our standardized package provides comprehensive support for companies in the M&A process - from initial cybersecurity due diligence to post-merger cybersecurity integration and continuous improvement of governance. We analyze the IT security architecture and compliance processes through analyses, interviews and technical audits. Based on these results, we create a well-founded risk assessment and derive specific measures to optimize security standards.

In addition, we support companies in the post-merger phase with the secure consolidation of IT systems and the standardization of security guidelines. As part of governance and continuous improvement, we develop long-term strategies, define responsibilities and carry out regular audits and training - in order to meet the dynamic challenges of the cyber world in the long term.

Start now with a cyber security assessment as the first step towards cybersecurity due diligence - for a secure and successful M&A transaction. This will lay the foundation for sustainable security - before, during and after the deal.

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