In the fast-paced world of business, mergers and acquisitions (M&A) are frequently an integral part of the business growth strategy. However, when it comes to addressing cybersecurity within M&A, it requires thorough due diligence to assess the potential cyber risks associated with a target company.  

This blog serves as a checklist, providing a comprehensive list of considerations for organizations with pre-merger and acquisition activity. It will outline the major steps you should take during this period to ensure your decision-making is well informed and ultimately leads to successful integration post-M&A. 

The Importance of Cyber Due Diligence 

Prior to engaging in an M&A deal, organizations need a well-defined strategy formulated by the executive team at the board level, outlining objectives, criteria, and target companies for potential acquisitions. After selecting a target, a thorough assessment of its cybersecurity issues is crucial. Failing to do so can have significant ramifications for the acquiring organization in terms of value and reputation. 

For example, imagine an organization acquiring a target company is unaware of a recent cybersecurity breach. This breach granted unauthorized access to sensitive customer information in the target’s loyalty program. Discovering this breach post-acquisition can greatly impact the acquiring organization, causing a decline in stock value and numerous challenges. 

These situations emphasize the importance of comprehensive due diligence, particularly regarding cybersecurity, in M&A transactions. It underscores the need to evaluate risks like domain impersonation and data loss before acquiring a company. Assuring the brand’s integrity and assessing its cybersecurity history is vital. Thorough due diligence empowers organizations to make informed decisions and protect themselves from unexpected harm. 

4 Cybersecurity Due Diligence Considerations

When engaging in M&A deals, it is crucial to consider cybersecurity to protect the involved entities from potential risks. Below are four important considerations to mitigate cybersecurity risks during M&A deals.  

1. Brand Evaluation 

Brand evaluation plays a critical role in the M&A due diligence process. It helps organizations make informed acquisition decisions by identifying brand or executive impersonation. Thoroughly evaluating the brand enables a better understanding of potential risks and facilitates the implementation of necessary mitigation steps. Here are some of the risks to consider when evaluating the brand of a target company: 

  • Brand and domain impersonation: This is when malicious actors deceive customers and stakeholders by impersonating a company’s brand and registering similar domain names. It causes confusion, damages the organization’s reputation, and can result in financial losses if customers and partners unknowingly engage with the impersonator. 
  • Social media impersonation: This is where unauthorized individuals create fake social media accounts posing as the acquired company or its executives. This can be detrimental to the brand’s reputation, as the impersonator may disseminate false information, tarnish the public image, or engage in fraudulent activities. 
  • Phishing: Phishing attacks use deceptive emails, messages, or websites to trick individuals into revealing sensitive information like login credentials, financial details, or personal data. Falling for these attacks compromises the organization’s security, reputation, and exposes valuable information to malicious actors.
  • Business email compromise (BEC): BEC attacks involve attackers impersonating high-ranking individuals within the company and tricking employees into transferring funds, disclosing sensitive information, or performing unauthorized actions. These attacks lead to financial losses and damage the brand’s trustworthiness. 
  • Fraud: This encompasses fraudulent activities that can negatively impact the acquiring organization, such as counterfeit products, misrepresented financial statements, or undisclosed liabilities. By assessing these risks thoroughly, organizations can make informed decisions and prevent significant financial and reputational damage. 

 2. Analyze Potential Data Loss

When analyzing potential data loss, it’s important to evaluate any online data breaches or instances of data loss that may have occurred within the target company. This evaluation involves utilizing a comprehensive range of sources, including open, deep, and dark web platforms;, technical sources;, and closed sources. The purpose of this analysis is to identify any risks or vulnerabilities related to data security and privacy that may exist within the target company. Here are some specific risks that can be assessed during this process: 

  • Exposed passwords and PII (data pairs): Some examples of personally identifiable information (PII) include names, addresses, or social security numbers. The exposure of this information can happen as a result of data breaches or leaks, putting users at risk of identity theft, unauthorized access, and other malicious activities. 
  • Stolen technical credentials, API keys, and system passwords: Technical credentials, API keys, and system passwords are critical for accessing and securing various systems, applications, and data. If these credentials are stolen or compromised, it can lead to unauthorized access and potential damage to systems and sensitive information. 
  • Lost documentation detection: It’s possible that important documents related to commercial operations, legal matters, and employee information may be lost or misplaced. Detecting and preventing document loss is crucial to safeguard critical information, mitigating legal and operational problems. 
  • Sensitive documentation detection: This involves identifying and analyzing sensitive documentation, such as confidential business plans, proprietary algorithms, intellectual property documents, or other sensitive materials. This detection protects the organization’s intellectual assets and prevents unauthorized use or dissemination. 

3. Attack Surface Monitoring 

The concept of attack surface monitoring involves actively seeking out and identifying technical weaknesses or vulnerabilities within a target company. These weaknesses or vulnerabilities can be exploited by attackers to gain unauthorized access and cause harm to a network or online infrastructure. Common risks in terms of attack surfaces include: 

  • Hackers scanning for weaknesses: In the digital landscape, hackers regularly conduct scans to identify weaknesses in networks or online infrastructures. This puts organizations at risk of potential attacks and unauthorized access. 
  • Open and vulnerable ports: Open ports that are not adequately secured can serve as entry points for attackers. Organizations need to ensure that ports are properly monitored and protected to reduce the risk of exploitation. 
  • Outdated software: Organizations that do not have a systematic and well-defined patch management process are more prone to vulnerabilities. Timely application of patches is crucial in addressing known security issues and reducing the attack surface. 
  • Expiring or expired certificates: Certificates play a significant role in authentication and encryption within systems. When certificates expire or are not renewed on time, it can create security gaps that attackers can leverage to compromise the organization’s assets. 

4. Dark Web Monitoring 

Dark web monitoring involves monitoring and gathering intelligence from sources on the dark, deep, and open web where criminal activities are prevalent. This proactive approach helps organizations understand the potential risks associated with their target companies and allows them to take appropriate measures to mitigate those risks. There are several risks that organizations may encounter when it comes to the dark web: 

  • Selling of fraudulent or stolen goods: The dark web is a marketplace for criminals to sell fraudulent or stolen goods. Monitoring allows organizations to identify if their target company is involved and take necessary steps to address the risk.
  • Exposure of employee customer credentials: The dark web is a source of leaked or compromised employee and customer credentials, like usernames, passwords, and personal information. By monitoring it, organizations can identify data exposure, take proactive security measures, and notify affected parties. 
  • Breaches of trusted third parties: Dark web monitoring helps organizations stay informed about potential breaches or compromises of vendors or partners. By being aware of these breaches, organizations can assess their impact and take steps to mitigate risks. 
  • Toolkits targeting customers: Monitoring the dark web helps organizations defend against harmful toolkits and exploit kits. By identifying and addressing software vulnerabilities, organizations can protect their customers and target company.  

Post-Deal Cybersecurity Priorities 

After you’ve done your due diligence and assured yourself that the benefits of acquiring your target company outweigh the risks involved, you can close the deal and officially begin the process of integrating the acquired company into your existing operations. Often, the companies acquired have different security stacks, which can cause challenges in terms of integration and risk management.   

ReliaQuest GreyMatter for M&A 

ReliaQuest GreyMatter offers a range of capabilities to help organizations address these challenges associated with M&A activities. When integrating acquired entities or business units, GreyMatter offers the capability to quickly gain visibility into their security infrastructure and effectively manage the inherited risk that comes with the new acquisition. GreyMatter’s bi-directional API integrations enable seamless connectivity with various security tools, such as different EDRs, SIEMs, and clouds. 

It can be difficult to continuously monitor and analyze security events as M&A transpires. With GreyMatter, you can actively monitor security events and utilize advanced analytics techniques and threat intelligence to promptly identify and address potential security risks. By taking a proactive approach to managing these risks, GreyMatter creates a more secure business environment for the organizations involved in the M&A activities.  

The GreyMatter Security Model Index, a security metrics dashboard, allows you to measure performance for the overall organization as well as across different business units. This helps you assess the effectiveness of your security measures and make informed decisions based on real-time insights. 

Conclusion

Successful M&A transactions and subsequent business unit integrations require careful consideration of cybersecurity risks and thorough due diligence. By evaluating the brand, analyzing potential data loss, monitoring attack surfaces and the dark web, organizations can mitigate potential risks and make informed decisions during the pre-M&A stage.  

The post-deal integration phase, supported by solutions like ReliaQuest GreyMatter, plays a crucial role in enabling a smooth and secure transition. Ultimately, prioritizing cybersecurity throughout the M&A process safeguards organizations from unexpected harm and paves the way for long-term success.