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Cybersecurity: The Hidden Pillar of M&A Due Diligence

In an era where enterprise value increasingly hinges on data, algorithms, and interconnected systems, every merger or acquisition is a cybersecurity risk. Skipping cyber due diligence can turn a strategic move into a costly liability, lowering valuation, attracting regulatory scrutiny, and eroding customer trust. Mergers and acquisitions (M&A) are no longer just about financials, market share, and operational synergies; they hinge on trust, which starts with security.

The lesson learned from these missteps is not theoretical; it is written in headlines and enforcement actions. Consider Marriott’s acquisition of Starwood: attackers had been resident in Starwood’s systems well before Marriott closed the deal and the breach wasn’t discovered until two years after the deal closed, ultimately yielding multi‑year litigation and government settlements. Verizon’s purchase of Yahoo likewise saw a $350 million price cut after massive breaches surfaced during the run‑up to closing.

In today’s hyper-connected business environment, cybersecurity must be embedded across the M&A lifecycle, including pre‑signing, pre‑close, and post‑close to provide peace of mind to executives who want to protect value while accelerating integration.

Why Cybersecurity Now Sits at the Center of M&A Value

Cyber is valuation‑relevant. In 2024, 53% of dealmakers discovered significant cyber issues after closing, triggering unexpected remediation spending and governance challenges. Cybersecurity problems delay 62% of M&A deals, and 73% of dealmakers would walk away if undisclosed cybersecurity issues or breaches were identified. In 2024, the average global cost of a data breach reached $4.88 million, the steepest jump since the pandemic, primarily driven by business disruption and longer recovery windows. These factors directly affect pro formas and synergy timelines.

The attacker’s window widens during integration. Cyber threats don’t pause for corporate restructuring. In fact, the transition period is a prime opportunity for attackers, as IT teams are distracted by integration tasks. A single overlooked vulnerability can compromise sensitive data, intellectual property, and customer trust—assets that often drive deal valuation.

Empirical and threat‑intel reporting shows adversaries actively target organizations during M&A—when staff are distracted, logging baselines shift, and systems converge—producing spikes in phishing and supply‑chain compromise attempts around deal announcements.

A Practical M&A Cyber Framework: From Pre‑Sign to Day 1 and Beyond

The fastest way to operationalize cyber diligence is to adopt recognized frameworks and make them bilingual across technical and business teams:

• NIST Cybersecurity Framework (CSF). Use the Govern, Identify, Protect, Detect, Respond, Recover functions to structure assessments and quantify remediation plans (time, cost, priority). CSF is a widely adopted set of guidelines for managing and reducing cybersecurity risk.
• ISO/IEC 27001:2022. Leverage the ISO Information Security Management System (ISMS) governance and Annex A controls (best-practice security measures organizations can implement to mitigate risks) as objective evidence of process maturity; ISO certification can accelerate diligence and integration by standardizing risk treatment and documentation.
• Supply‑chain risk (NIST SP 800‑161r1 / SP 1326 draft). This is especially relevant for targets with complex vendor ecosystems. These standards address risks from ICT (Information and Communications Technology) suppliers and foreign ownership or control, and should be part of due diligence assessments.

Pre‑Transaction Cyber Due Diligence

1) Governance & Disclosure Controls. Assess board oversight, CISO reporting lines, and incident disclosure procedures aligned to SEC rules. This will help determine whether the target can quickly assess materiality and file an accurate 8‑K , which is a required disclosure of significant events.

2) Control Maturity & Hygiene. Test core control domains such as identity & access, segmentation, patching, endpoint protection, backups, multi-factor authentication (MFA), and logging against NIST CSF/ISO 27001 baselines. Verify not just policy existence but also operational evidence (such as security alerts, support tickets, audit trails, and system metrics).

3) Incident History & Legal Exposure. Review detailed incident registers and forensic findings. Map ongoing claims, regulatory actions and cost to complete remediation. 

4) Third‑Party Dependencies. Catalog critical vendors, cloud providers, and data processors. Review contractual cyber obligations, breach notification SLAs (Service Level Agreements), and insurance coverage.

5) Quantify Remediation & Adjust Deal Terms. Convert gaps into a remediation plan (capex/opex, timeline, staffing). Incorporate these into valuation models, escrows, indemnities, and post‑close covenants. Determine how cyber findings translate directly into price and liability allocation.

Strategic Advantages: Cyber‑Mature Deals Close Faster and Perform Better

Companies that embed cybersecurity into their M&A playbook gain more than protection. They gain the confidence of investors, regulators, and customers. These stakeholders increasingly view cybersecurity as a marker of operational maturity. By prioritizing security, organizations not only mitigate risk but also enhance the long-term value of the deal.

Embedding cybersecurity yields more than risk reduction:

• Negotiation leverage. Evidence‑based findings support price adjustments and targeted indemnities.
• Integration velocity. Standardized frameworks (NIST/ISO) create a shared language across teams, cutting decision friction and accelerating Day‑1 stability.
• Regulatory resilience. Strong governance and disclosure controls reduce missteps under the SEC rules and build investor confidence.
• Quantifiable value. With breach costs rising sharply, proactive controls and automation demonstrably protect deal thesis and EBITDA.

Post-Transaction Integration

Cybersecurity doesn’t end at the closing of a deal. It only intensifies. Post-merger integration should include (but not be limited to):

• Harmonize policies, tools, and protocols across both entities.
• Revalidate user permissions and eliminate redundant accounts.
• Deploy advanced threat detection to safeguard against emerging risks during integration.
• Aligning both workforces on security best practices to reduce human error.

Conclusion

Cybersecurity is a cornerstone of modern dealmaking. What you don’t find before you buy can become your most expensive asset afterward. Systematic cyber due diligence before signing, disciplined stabilization before closing, and rigorous integration after Day‑1 will protect valuation, reduce disclosure risk, and preserve stakeholder trust. If you’re preparing for your next transaction, cybersecurity should be top of mind. Ignoring it can turn a strategic acquisition into a costly liability.

Cyber risk is not a footnote. It is a material driver of valuation, terms, and post‑close obligations.

How Centri Can Help

In today’s dealmaking environment, cybersecurity is a board-level concern that directly impacts valuation, regulatory exposure, and stakeholder confidence. Centri partners with executives and deal teams to embed cyber risk management into every stage of the M&A lifecycle—from pre-sign diligence to post-close integration. Our approach translates technical findings into actionable business insights, enabling informed decisions on pricing, indemnities, and governance. With Centri, you gain a trusted advisor who helps protect enterprise value and accelerate integration without compromising security. Connect with us to learn how we can strengthen your next transaction.

Karyn DiMassa

Managing Director | CPA, PMP, CISA, CFE

Karyn is a Managing Director in the IT Risk & Cybersecurity Practice at Centri Business Consulting. She has more than 15 years of combined experience in internal IT audit and external audit support (IT controls), third-party assurance (SOC 1 and SOC 2 reporting), internal controls consulting, project management, IT risk and cybersecurity, and system implementation support. View Karyn DiMassa's Full Bio

Rich Sowalsky

Partner | Risk Advisory Practice Leader | CISA

Rich is a Partner at Centri Business Consulting and the leader of the firm’s Risk Advisory Practice. He has more than 17 years of combined experience in risk & internal control consulting, internal audit, IT risk & cybersecurity advisory, Sarbanes-Oxley (SOX) 404 Compliance, Enterprise Risk Management, financial reporting & accounting. He joined Centri in February 2022 and has provided a variety of risk advisory and compliance services for clients across various industries, including insurance, digital assets & fintech, life sciences, financial services, healthcare, technology, and more.. View Rich Sowalsky's Full Bio