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Co-Authored by: Eric Fair
As businesses evolve through mergers and acquisitions (M&A), the ever-changing technology landscape continues to provide a challenge to companies and their acquirers. This highlights the ongoing need to perform cybersecurity (cyber) and information technology (IT) due diligence, since it’s critical to understand the nature and significance of the targeted business’s vulnerabilities, the impact of these vulnerabilities and the existing cyber program in place to mitigate potential threats.
Know Before You Acquire
Acquirers must take a risk-based approach to IT due diligence and have a process in place to evaluate the current threat landscape to identify any underlying threats to the business being acquired. The landscape may vary by industry or region, and higher risk transactions require a greater level of scrutiny, but the process can be applied to other businesses in the portfolio and used when assessing new M&A opportunities.
For highly active private equity firms, it’s critical to continuously inject IT due diligence into the transaction lifecycle. This allows such firms to engage cybersecurity or other experts at critical points to more effectively identify and mitigate risk to their potential and existing businesses.
When and What to Assess
Knowing when to inject the right experts is a critical component to any well-run M&A due diligence strategy. Here are a few key indicators to consider when making the decision to inject cyber or other IT experts:
Other Areas to Assess
In the ongoing effort to mitigate IT risks in M&A, other areas that acquirers may consider assessing include:
Potential Impacts
The failure to assess IT risks during M&A transactions can cripple a business’ reputation and future growth before it even starts, through unforeseen and costly technology integrations, unexpected liabilities, inherent data exposure/breach and overall increased enterprise risks. An effective IT due diligence program, then, could have a major impact on the value the acquirer places on the target company and the overall structure of the transaction.
If you have questions related to M&A or IT due diligence for an upcoming transaction, we welcome the opportunity to discuss your specific situation.
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