Here’s a practical guide to ensuring your M&A process doesn’t just close a deal but does so securely.

M&A deals follow a familiar path: initial talks, early diligence, negotiating terms, deep dives, and integration. Let’s look at how cybersecurity fits into each phase.

1. Setting the Stage [Early Diligence]

This is where you set the tone. Bring cybersecurity experts into the conversation early.

Check the maturity of the target’s cybersecurity setup. You can start by gauging its maturity using your vendor security questionnaire.

If the law says information must be protected and that has never been a priority - there are five- to six-figure time and cost investments even to set a baseline. Some examples might include PCI compliance, HIPAA, SOX, or GDPR.

Use threat intelligence and open-source intelligence (e.g., a Google search, Censys, Shodan, Grayhat Warfare) to spot immediate red flags.

• Key Actions
  • Involve cybersecurity stakeholders from the start
  • Assess the target’s cybersecurity maturity using questionnaires
  • Perform external threat intelligence on the target

3. Negotiation of the Term Sheet [Negotiating Terms]

Make sure your term sheet covers the cybersecurity basics—due diligence, data protection, and compliance. Be clear about what the diligence period will involve, especially regarding cybersecurity assessments.

• Key Actions
  • Review cybersecurity terms with leadership
  • Include cybersecurity clauses in the term sheet: due diligence, data protection, and compliance requirements
  • Define the diligence period with specific cybersecurity tasks and assessments

2. Laying the Groundwork [Deep Dives]

At this point, there hopefully have been no red flags, more people are involved in the deal, and terms have been agreed to. Now you can start digging in. This is where detailed due diligence takes place.

• Key Actions
  • Identify targets’ tech and security stack
  • Risk assessments
  • Penetration Testing
  • Document risks and plan remediation

4. Deep Dive into Cybersecurity [Integration]

The deal is closed or is closing soon. All the terms have been met, and the integration work can begin soon. Conduct thorough assessments—endpoints, network, applications, and third-party risks.

Involve cross-functional teams and document any risks. Have a plan to fix them.

• Key Actions
  • Conduct detailed cybersecurity assessments
  • Engage cross-functional teams (Legal, IT, Finance, Product)
  • Document risks and plan remediation
  • Plan for post-closing cybersecurity actions, like onboarding the target’s IT infrastructure to the acquirer's cybersecurity systems before integration

6. Securing the Future [Post Acquisition]

The deal’s closed, but the work’s just starting.

Begin integrating IT systems and train the new employees on your cybersecurity standards.

Set up continuous monitoring and verification to catch any new threats.

• Key Actions
  • Conduct in-depth security assessments and penetration tests
  • Start IT systems integration and align security configurations and policies
  • New employees should complete your cybersecurity training
  • Establish continuous monitoring to catch issues during integration

Cybersecurity is a Critical Success Factor

Cybersecurity isn’t just another item on your M&A checklist—it’s crucial. But with a few simple steps, you can confidently navigate the process and protect your organization every step of the way.

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Checklist

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Initial Conversations: Setting the Stage

• Identify and involve key cybersecurity stakeholders early in the discussion.
• Assess the general cybersecurity maturity of the target company.
• Define high-level cybersecurity goals aligned with the business objectives of the acquisition.

Preliminary Diligence: Laying the Groundwork

• Execute a Non-Disclosure Agreement (NDA) that includes specific cybersecurity clauses.
• Conduct a high-level risk assessment, focusing on the target's cybersecurity posture.
• Leverage threat intelligence and open-source intelligence (OSINT) to identify any red flags.

Negotiation of the Term Sheet: Defining the Framework

• Review key cybersecurity terms with the executive leadership team before finalizing the term sheet.
• Ensure the term sheet includes clauses for cybersecurity due diligence, data protection, and compliance requirements.
• Set clear expectations for the diligence period, including specific cybersecurity assessments.

Detailed Due Diligence: Deep Dive into Cybersecurity

• Conduct detailed cybersecurity assessments, including network penetration testing, application testing, and third-party risk assessments.
• Engage cross-functional teams (Legal, IT, Finance) and third-party advisors to ensure a comprehensive review.
• Document any cybersecurity risks identified and develop a remediation plan.

Definitive Agreement and Closing: Locking in Security

• Ensure that all identified cybersecurity issues are addressed before the deal is signed.
• Include clauses in the definitive agreement for ongoing cybersecurity monitoring and post-closing remediation.
• Prepare for immediate post-closing actions, such as onboarding the target’s IT infrastructure to the acquirer's cybersecurity systems.

Post-Acquisition Integration: Securing the Future

• Conduct in-depth security assessments, including compromise assessments, network and application penetration tests.
• Begin integration of the target company’s IT systems, aligning them with your cybersecurity policies and procedures.
• Ensure all employees of the acquired company are trained on your cybersecurity standards and practices.
• Set up continuous monitoring to ensure that no new threats emerge during integration.

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