Are cybersecurity risks impacting your M&A deals?
In 2025, the link between mergers and acquisitions and cybersecurity has never been stronger. With threats like AI-powered intrusions and supply chain attacks on the rise, cybersecurity due diligence is no longer optional—it’s a foundational part of deal valuation.
In this month’s V-Techtips, learn about a proactive approach to due diligence that protects your data and guarantees a secure, seamless post-merger integration.
Table of Contents
1. Why Cybersecurity Is Crucial For M&A in 2025
In 2025, the business world is moving faster than ever, and digital technology is at the heart of it all. This has a huge impact on how companies are bought and sold in mergers and acquisitions (M&A).
Digital Growth Means More Cyber Risk
As more companies become digital-first, the risk of cyberattacks in M&A deals gets bigger. When you’re buying a company today, you’re not just buying their products; you’re also buying their digital systems and all the risks that come with them.
A great example of this trend is Singapore. Its digital economy has grown to make up over 17% of its GDP. The country has very high internet and smartphone usage, and its e-commerce market is expected to reach $11 billion USD by 2025.
This deep digital integration means companies have a larger “attack surface,” or more ways they can be targeted by hackers. When you acquire a digital company, you’re also acquiring its cybersecurity vulnerabilities. This is why checking for these risks before a deal is so important.
Why Cybersecurity Due Diligence is a Must-Have
Cybersecurity due diligence is the process of investigating a company’s cyber risks before an M&A deal is finalized. It’s no longer an optional step; it’s a fundamental part of the process for any company, in any industry.
Here’s why it’s so critical:
- Find Hidden Problems: The process helps you find security weaknesses and, most importantly, any past data breaches that the company might not have told you about.
- Protect Your Investment: Cyber issues have a real financial impact. A famous example is when Verizon bought Yahoo. During the due diligence process, Verizon found out about massive, undisclosed data breaches at Yahoo. As a result, they were able to cut the purchase price by $350 million.
- Avoid Future Trouble: A thorough check helps you avoid regulatory fines, lawsuits, and the loss of customer trust after the deal is done.
When you buy a company, you also inherit its risks. Cybersecurity due diligence is the best way to find those hidden risks before they become your problem.
The Strategic Value of Managing Cyber Risk
Good cyber risk management is more than just avoiding problems; it’s a smart business strategy.
Being proactive about cybersecurity in an M&A deal protects the long-term value of the company you’re buying. It also builds trust with your investors, partners, and customers by showing that you take security seriously.
For companies that acquire other businesses often, having a strong cyber due diligence process creates a repeatable framework for checking the cyber health of any new investment.
This turns cybersecurity from a simple cost into a strategic advantage. It helps you make smarter deals, negotiate better terms, and protect your company’s growth and reputation. In a world where cyber threats are getting faster and more sophisticated, this proactive approach is a must.
2. How Cyber Threats Are Changing and Affecting M&A in 2025
The cybersecurity world in 2025 is a mix of different threats, from organized cybercriminals to well-funded nation-state hackers. When one company acquires another, these threats can create major problems.
Dominant Cyber Threats Impacting M&A Targets
Ransomware and Extortion Tactics
Ransomware is still a major threat that can disrupt a business and lead to data exposure. In 2024, 86% of the incidents that security firms responded to involved some kind of business disruption.
Hackers are also changing their methods. They are moving from just encrypting files to data extortion. This means they steal a company’s sensitive data and threaten to leak it online if they don’t get paid. This is a huge problem even if a company has good backups. A data leak can still cause massive damage to a company’s reputation and lead to regulatory fines.
During an M&A, the buying company must check not only the target’s data backups but also their plan for responding to a data breach.
Supply Chain and Cloud-Based Attacks
Attacks on the software supply chain and the cloud are getting more common and more sophisticated. Hackers often hide in misconfigured cloud environments and scan for valuable data.
As more companies move to the cloud, the “attack surface” grows. A place like Singapore, with its massive investment in data centers, shows just how big this target has become. Hackers are also targeting third-party suppliers. A breach at a small vendor can be used to get into a much larger company.
This means that during M&A due diligence, you have to do a deep check of the target company’s cloud security settings and the security of all their key partners.
Sophisticated Phishing and Social Engineering
Phishing—tricking people into giving up their credentials—was the most common way for hackers to get into a network in 2024. It accounted for about a quarter of all security incidents.
Hackers are using advanced phishing emails, fake job scams, and MFA “push-bombing” (spamming a user with login approval requests) to steal passwords and bypass security.
The human element is a critical vulnerability. When buying a company, you must check the quality of their employee security training programs and phishing simulations.
Insider Threats and Data Exfiltration
Insider threats, from both careless and malicious employees, are a growing risk. During the uncertainty of a merger, employees can feel anxious or disconnected. This can lead them to accidentally leak data or even deliberately sabotage the company.
The acquiring company must have strict data access controls and monitor employee activity carefully throughout the M&A process to reduce this risk.
Emerging AI-Assisted Attacks
Hackers are beginning to use Artificial Intelligence (AI) to make their attacks more powerful.
AI is being used to create sophisticated disinformation campaigns and deploy disruptive malware. Some of the top concerns for 2025 include:
- Synthetic identity fraud (creating fake, believable online identities).
- Voice cloning for impersonation.
- AI model poisoning (corrupting a company’s internal AI systems).
This is a new and growing threat that M&A due diligence teams must start looking for, especially if the company being acquired works heavily with AI.
Advanced Persistent Threats (APTs) and Their M&A Relevance
Advanced Persistent Threats (APTs)
An Advanced Persistent Threat (APT) is a highly skilled, well-funded, and often state-sponsored hacking group. These groups pose a serious, long-term threat, especially to companies in strategic sectors like government, defense, and telecommunications. Their main goals are often cyber espionage, credential theft, and causing disruption.
Evolving Techniques to Stay Hidden
APTs are experts at staying on a network for a long time without being detected. One of their favorite stealthy techniques is COM hijacking.
As we’ve discussed, this attack involves changing the Windows Registry to trick a legitimate program into running the attacker’s malicious code. It’s used by many malware families and APT groups like APT28 because it’s a great way to gain persistence (staying on a system after a reboot) and get administrator rights without triggering a UAC pop-up.
Because this attack is often “fileless” and hides behind normal Windows processes, a standard antivirus scan won’t find it. During an M&A due diligence process, the security team must use advanced techniques like memory forensics (analyzing a computer’s live RAM) and deep registry monitoring to find this kind of hidden threat.
Using Zero-Day Exploits
APTs also use “zero-day” exploits. A zero-day is a security flaw in a piece of software that the software maker doesn’t know about yet. Because it’s unknown, there is no patch or fix available, which makes it an extremely powerful tool for hackers.
Attacks are also getting faster. In nearly one in five security incidents, data is stolen in less than an hour after the initial breach.
This speed creates a huge problem for M&A deals. By the time a company is being evaluated for an acquisition, it could already be deeply compromised without anyone knowing. This makes it critical for the due diligence process to include a “compromise assessment” to actively hunt for ongoing security breaches.
Key Cybersecurity Risks in M&A Deals (2025)
| Risk Category | Description / Key Characteristics | Impact on M&A |
| Ransomware / Extortion | Hackers are shifting to stealing data and threatening to leak it, not just encrypting it. | Financial loss, deal delay, reputational damage, and operational disruption. |
| Supply Chain / Cloud Attacks | Hackers are exploiting misconfigured cloud settings and attacking third-party vendors. | Financial loss, deal delay, reputational damage, and operational disruption. |
| Phishing / Social Engineering | This is still the most common way hackers get in, using credential theft and MFA bypass techniques. | Financial loss, deal delay, reputational damage, and operational disruption. |
| Insider Threats | Disconnected or malicious employees can leak data or sabotage systems during a merger. | Financial loss, deal delay, reputational damage, and operational disruption. |
| AI-Assisted Attacks | AI is being used to make attacks faster and more convincing, using things like deepfakes. | Financial loss, deal delay, reputational damage, and operational disruption. |
| Advanced Persistent Threats (APTs) | State-sponsored groups are using zero-day exploits and stealthy techniques like COM hijacking. | Financial loss, deal delay, reputational damage, and operational disruption. |
3. A Step-By-Step Approach To Cybersecurity Due Diligence
Checking a company’s cybersecurity during a merger or acquisition (M&A) is a complex job. It requires a structured, multi-phase approach to find technical weaknesses, review data practices, and understand the human and technological risks involved.
Phase 1: Pre-Deal Assessment and Risk Profiling
The first phase of due diligence is about getting a clear picture of the target company’s cyber risk before the deal is made. This requires a team of experts from legal, finance, and technology to do a full review. A modern assessment looks at everything from the company’s tech and data to its people and new technologies like AI.
Here are the key areas to investigate:
1. Technical Security Check
This is a deep dive into the company’s IT systems. You’ll need to assess the size and complexity of their IT infrastructure, applications, and cloud environments. Check how data flows between these systems and review the security of their cloud setups, including who has access and whether data is encrypted. It’s also important to check if their servers and computers are up-to-date and have a plan to replace any old equipment.
2. Data Protection and Privacy Review
You need to understand how the company collects, stores, and protects sensitive data. This involves reviewing their privacy policies to make sure they follow all relevant laws, such as GDPR, HIPAA, and CCPA. You also need to figure out if you’ll have to get new consent from customers to use their data after the acquisition is complete.
3. Check for Past Incidents
Investigate the company’s history of security breaches. Find out what happened, how they handled it, and if the underlying problems were truly fixed. A major goal of this step is to uncover any undisclosed breaches or find hackers who might still be hiding in their systems. You should also review their plans for responding to future incidents and disasters.
4. Third-Party and Supply Chain Risk
A company’s security is only as strong as its weakest partner. Because businesses rely on a complex network of outside suppliers and service providers, you must also check the cybersecurity of these third-party vendors. A breach at one of their suppliers could easily become a breach at the company you’re acquiring.
5. Employee Awareness and Insider Threats
The human element is often the biggest risk. You need to evaluate the company’s employee security training programs and their phishing simulations. It’s also critical to check their process for offboarding employees. When someone leaves the company, their access to all sensitive systems and data must be cut off immediately to prevent insider threats.
6. AI-Related Risks
As more businesses use Artificial Intelligence (AI), due diligence must now check for AI-specific risks. This includes seeing if their AI systems are secure from attack, reviewing their AI governance policies to make sure automated decisions aren’t creating security blind spots, and confirming that their use of AI follows all data protection rules.
Phase 2: Protecting Sensitive Data During Due Diligence
The due diligence process involves sharing highly sensitive and confidential information. It’s critical to have strong security measures in place to protect this data while the deal is being reviewed.
Use Secure Virtual Data Rooms (VDRs)
A Virtual Data Room (VDR) is the industry standard for securely sharing documents during an M&A transaction. It’s a secure online space that is much safer than using email attachments or physical copies.
Key security features of VDRs include:
- End-to-End Encryption: All data is encrypted, meaning it’s scrambled so that only authorized people can read it.
- Strict Access Control: You can control exactly who is allowed to see, print, or copy specific documents.
- Two-Factor Authentication (2FA): This adds an extra layer of security to the login process.
- Audit Trails: A VDR keeps a detailed log of every action, such as who viewed a document and when.
- Document Expiry: You can set access permissions to automatically expire after a certain amount of time.
Using a VDR is a proactive security measure that greatly reduces the risk of a data breach during the sensitive due diligence phase.
Follow Strict Data Handling Rules
Even when you’re using a VDR, you need to have strict internal rules for handling data.
- Practice Data Minimization: Only collect and share the absolute minimum amount of data that is necessary for the review.
- Encrypt Everything: All sensitive data should be encrypted, both when it’s being sent and when it’s being stored.
- Follow the Principle of Least Privilege: This means that people should only have access to the specific information they need to do their job, and nothing more.
These simple rules further reduce the “attack surface” and protect your most sensitive data.
A Full Cybersecurity Due Diligence Checklist
| Assessment Area | Key Questions / Items to Review | Why it Matters |
| Technical Security | How are the network, servers, apps, and cloud environments set up and secured? Is any equipment outdated? | To find technical weaknesses across the entire IT landscape. |
| Data Protection & Privacy | How is sensitive data stored and protected? Do they follow laws like GDPR, HIPAA, and CCPA? | To ensure legal compliance and protect sensitive information. |
| Incident History | Have they had any past breaches (including any they haven’t disclosed)? How good are their incident response plans? | To uncover hidden problems and see how well they handle a crisis. |
| Third-Party & Supply Chain | How secure are their key vendors and partners? What do their data-sharing agreements look like? | To find external security risks that could affect your business. |
| Employee Awareness | How good is their employee security training? What is their process for when employees leave the company? | To reduce the risk of human error and insider threats. |
| AI-Related Risks | Are they using AI securely? Are their AI systems protected from attack? Do they have an AI governance policy? | To assess the unique security risks that come with using AI. |
| Data Room Security | Are they using a VDR? Do they have strict access controls and data minimization practices in place? | To protect the highly sensitive data being shared during the due diligence process itself. |
4. Consequences of Inadequate Due Diligence In Cybersecurity
When a company gets cybersecurity wrong during a merger or acquisition (M&A), the consequences can be huge. Poor due diligence can destroy the value of a deal and cause long-term damage to the business.
Major Financial Losses
Failing to find and fix cyber risks before a deal can lead to massive financial losses. This goes way beyond the initial cost of a data breach.
- Heavy Fines: Breaking rules like HIPAA can lead to fines of up to $1.5 million per violation.
- High Breach Costs: The average healthcare cyberattack costs around $10 million.
- Huge Ransom Payments: Ransom demands are getting bigger. One undisclosed ransom payment in 2<strong></strong>024 reportedly hit $75 million.
- Expensive Lawsuits: Class-action lawsuits can end in settlements as high as $115 million.
A powerful example is the Change Healthcare breach in February 2024. The attack cost its parent company, UnitedHealth Group, a massive $3.1 billion in 2024 alone. This included the cost of fixing the problem and paying providers who were affected. The company paid a $22 million ransom, but the hackers didn’t secure the stolen data anyway. This shows that the ransom is often just a small part of the total cost.
Damaged Reputation and Lost Trust
A data breach can destroy a company’s reputation. This is often the most damaging cost of a cybersecurity failure.
A recent survey showed that 66% of consumers would not trust a brand after it had been hit by a cyberattack. This loss of trust can lead to customers leaving, and it can take years and a lot of money to rebuild the brand’s reputation.
Business and Operational Disruption
A major cyberattack, especially ransomware, can shut down a company’s entire operation.
The Change Healthcare breach is a perfect example. The outage lasted for weeks and crippled the financial operations of hospitals, pharmacies, and medical groups across the United States. 🏥 It caused huge delays in patient care and payments, and it pushed many smaller healthcare providers to the brink of closing. This shows how an attack on one company can cause a massive ripple effect across an entire industry.
Real-World Examples of M&A Cyber Disasters
1. Verizon’s Acquisition of Yahoo
In 2017, Verizon was in the process of buying Yahoo. During due diligence, they discovered two massive, previously undisclosed data breaches that affected all Yahoo user accounts. As a result, the deal price was cut by $350 million, and Verizon inherited the legal problems from the breaches. This shows why you must find hidden problems before you buy a company.
2. The Change Healthcare Breach
This 2024 ransomware attack was one of the most impactful in US history. It affected up to 192.7 million people and cost the parent company $3.1 billion in a single year. It also caused a major disruption to the entire US healthcare system.
3. Marriott’s Acquisition of Starwood
In 2018, years after Marriott bought Starwood, a data breach affecting 9.4 million guests was discovered. The breach was traced back to a vulnerability in Starwood’s old, legacy IT systems. This case shows that problems with old systems can show up years after a merger is complete, and it highlights the danger of combining IT systems without a strong security plan.
The Impact of Cybersecurity Failures in M&A
| Impact Category | Specific Examples |
| Financial Penalties | HIPAA fines up to $1.5 million; Yahoo was fined $35 million by the SEC. |
| Litigation & Settlements | Class-action lawsuits can settle for over $100 million. |
| Operational Downtime | The Change Healthcare outage lasted for weeks, causing billions in delayed payments for hospitals. |
| Reputational Damage | 66% of consumers say they wouldn’t trust a brand after a cyberattack. |
| Devaluation of Target | The price of the Yahoo deal was cut by $350 million because of undisclosed breaches. |
5. How To Integrate Cybersecurity Effectively After A Merger For Lasting Success
Once an M&A deal is done, the hard work of combining the two companies begins. This is called post-merger integration (PMI), and it’s a critical time for cybersecurity. The focus shifts from just assessing risk to actively combining the two companies’ security systems to make them stronger together.
1. Start with a Strategic Plan
Good integration starts with good planning. This planning should begin during the due diligence phase, before the deal is even finalized.
You need to set clear goals for the integration and create a roadmap with major milestones, timelines, and responsibilities. It’s also important to put together a dedicated team, often called an Integration Management Office (IMO), with leaders from different departments to guide the process.
2. Combine Security Policies and Controls
When two companies merge, they bring their own different security policies. This can create confusion and leave dangerous gaps in your security.
The first step is to create a single, unified set of security rules for the new, combined company. This should cover things like who has access to what data and how the networks are secured.
You should also:
- Do a full risk assessment of the combined IT systems to find any new weaknesses.
- Securely migrate all data using strong encryption.
- Have a clear plan to either upgrade or safely shut down any old, legacy systems so they don’t become a security risk.
3. Use Continuous Monitoring and Threat Intelligence
Once the systems are combined, you need to watch the new network closely for any threats.
Use advanced security tools like network intrusion detection systems (NIDS) and endpoint detection and response (EDR) to spot and respond to threats in real time. You should also run regular security audits and drills to make sure your team is prepared.
Using threat intelligence feeds will keep your security team up-to-date on the latest tactics being used by hackers, so you can strengthen your defenses before an attack happens.
4. Don’t Forget the Human Factor
A merger can be a stressful and uncertain time for employees. Managing the human side of the change is critical for a successful integration.
- Communicate clearly and often. Keeping employees in the loop is key to reducing anxiety and keeping the business running smoothly.
- Focus on culture. Work to combine the two company cultures and build trust among the teams.
- Provide training. All employees need to be trained on the new, unified security policies. Running phishing simulations and other awareness programs will help build a strong security culture.
5. Use Technology to Make Integration Smoother
The right technology can make the entire integration process much easier.
- Use integration software to manage the project. This gives you a single place for all communication, data, and analytics.
- Use a “network digital twin.” This is a virtual model of your newly combined network. It lets you see how everything is connected and test your security policies in a safe environment before you apply them to your live network.
- Use new tech like AI to improve your security, but be sure to check the security of these new tools as well.
A Post-Merger Cybersecurity Integration Roadmap
| Phase | Key Activities | Objective |
| Pre-Integration (During Due Diligence) | Assess the target’s technical security, data privacy, incident history, third-party risk, and employee awareness. Use a secure Virtual Data Room (VDR). | To find hidden risks, ensure compliance, and get the best deal terms. |
| Integration Planning | Form an integration team (IMO), set clear goals and KPIs, and create a high-level roadmap. | To create a clear plan and structure for the integration process. |
| Technical Integration | Combine security controls, securely migrate data, and manage or shut down old legacy systems. | To safely and securely merge the two companies’ IT systems. |
| Policy & Cultural Alignment | Create a single set of security policies, train all employees, and work to combine the two company cultures. | To build a single, strong security framework and a security-aware culture. |
| Post-Integration Monitoring | Set up continuous threat monitoring (NIDS, EDR), update incident response plans, and run regular security audits and drills. | To make sure the new company stays secure and can adapt to new threats. |
6. Conclusion:
Buying or selling a company today requires a close look at cybersecurity. This is no longer an optional step. It is a necessary part of any deal. The risks from cyber threats are too high to ignore. Skipping these security checks can lead to serious financial losses and harm a company’s reputation.
After a deal, the work continues. The new, combined company must merge its security plans and keep watching for threats. This protects the investment for the long term.
Is your M&A process ready for today’s cyber threats? Review your company’s acquisition strategy to make sure security checks are included from start to finish.