Building a Cyber-Resilient M&A Strategy: Key Steps for Executives
Considering or performing an acquisition can be one of the most complex and stressful activities for organizations to undertake. To make something that’s already complex and stressful even more so, the acquiring organization needs to take steps to build a proper cyber-resilient outcome. To achieve this outcome, a cyber-resilient M&A plan needs to be created, and leaders need to plan strategically relative to the plan. A well-coordinated integration plan can decrease security risk while maximizing efficiency.
Cybersecurity Risk Stats
Adding yet another layer to the complexity of M&A activities, your vulnerability to cyberattacks may be heightened at each stage.
3 days to discovery a cyber incident in 2023
33 days to complete the investigation
$4.88 million average cost of a data breach in 2024
Here are 11 key steps for executives to implement a Cyber-Resilient M&A Strategy
Pre-Integration Security Steps
1. Conduct Comprehensive Cybersecurity Due Diligence
Before finalizing any M&A deal, it's essential to conduct thorough cybersecurity due diligence. This involves assessing the target company's cybersecurity posture, identifying potential vulnerabilities, and understanding any past security incidents. By doing so, you can avoid costly surprises post-acquisition and ensure that the integration process is smooth and secure.
2. Prepare for the Unexpected Through Risk Assessment and Threat Modeling
Take the time to solve problems before they happen. A risk assessment will identify potential vulnerabilities in the acquired company’s infrastructure, such as outdated systems, weak encryption, or poor patch management. Then threat modeling can identify the types of cyber threats most likely to affect the merged entity, whether external attacks or insider threats. Understanding these risks allows the acquirer to prioritize resources toward mitigating high-impact vulnerabilities.
3. Vet your Vendors with Third-Party Vendor Risk Management
Many companies rely on third-party vendors for critical services, but these vendors can introduce security vulnerabilities. It is important to evaluate the security practices of all vendors connected to the target company. Ensure contracts include security requirements, and check if vendors have undergone thorough security audits.
4. Keep Sensitive Data Safe with Data Encryption and Backup Strategy
Sensitive data also needs to be securely encrypted both in transit and at rest during the merger process to prevent breaches. While preparing to integrate, develop a strong backup strategy to ensure that data is recoverable in case of a cyber-related incident, such as ransomware attacks. Specific to the pre-acquisition phase of an effort, a highly secure “clean room” environment should be used (with appropriate security, backup, and compliance in-mind.)
5. Engage Integration Experts to Accelerate Outcomes
Partnering with integration experts, like Burwood Group, can provide valuable insights and support during M&A transactions. Experts can help identify potential risks, develop robust security strategies, and implement best practices. Collaboration can also lead to shared resources and reduced costs, making it a cost-effective approach to enhancing cybersecurity.
6. Align IT with Business Goals
Aligning IT with business goals ensures that cybersecurity measures are scalable, reliable, secure, and cost-effective. This alignment helps in achieving operational and financial efficiencies, decreasing security risks, and reducing time to value. Engaging in organizational change management and training can further enhance team member satisfaction and reduce support issues throughout the M&A process, especially if there are team member-impacting changes that will occur during or after the acquisition
Security Steps During Integration
7. Implement Strong Access Controls and Data Migration Plan
During M&A transactions, it's crucial to manage access to sensitive information carefully. Implementing strong access controls ensures that only authorized personnel have access to critical data. This reduces the risk of insider threats and minimizes the potential for data breaches. A secure data migration plan involves using encryption, secure transfer protocols, and validating that data integrity is maintained thorough the process. (The “clean room” concept as stated above operates with these practices.)
8. Develop a Robust Incident Response Plan
Having a robust incident response plan in place is essential for quickly addressing any security breaches that may occur during M&A transactions. This plan should outline clear steps for identifying, containing, and mitigating threats, and procedures for communicating with stakeholders. A well-prepared incident response plan can minimize the impact of security incidents and reduce associated costs.
9. Compliance and Regulatory Alignment
Regulatory compliance is a key aspect of cybersecurity, especially in highly regulated industries like healthcare or finance. During the M&A process, both companies must ensure their operations comply with relevant legal frameworks, such as GDPR, HIPAA, or PCI-DSS. This may require revisiting data handling, privacy policies, and security protocols to meet regulatory standards. Bear in mind that the acquiree might face elevated compliance expectations. Both entities should account for these standards to effectively facilitate discussions and planning.
10. Leverage Cloud Solutions for Cost-Effective Security
Cloud technology offers a cost-effective way to enhance cybersecurity during M&A transactions. Cloud-based systems can provide real-time monitoring, predictive analysis, and automated responses to threats, all while reducing the need for extensive on-premises infrastructure. By leveraging cloud solutions, organizations can achieve robust security without significant capital expenditure.
Post-Merger Security Steps
11. Monitoring and Continuous Improvement
Cybersecurity threats evolve rapidly, which makes continuous monitoring essential post-merger. It is important to conduct regular vulnerability scans and periodic security audits to adapt to new risks and continuously improve the overall cybersecurity posture.
By following these key steps, executives can build a cyber-resilient M&A strategy that ensures the security of sensitive data while achieving cost savings. Embracing cloud technology, optimizing resource allocation, and collaborating with experts are all effective ways to enhance cybersecurity without breaking the bank. Stay proactive and informed to navigate the complex landscape of M&A with confidence.