RISK MANAGEMENT

Simplifying and automating cybersecurity due diligence in M&A transactions

Mergers and acquisitions (M&A) can provide a wide range of benefits for businesses
January 3, 2023
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6
min read

Mergers and acquisitions (M&A) can provide a wide range of benefits for businesses, including access to new markets, technologies, and talent. However, these transactions also carry their own set of risks, including the potential for cyber-attacks and data breaches. As businesses become increasingly reliant on digital technologies, conducting thorough cyber security due diligence during the M&A process has become progressively important.

By considering the cybersecurity risks at each stage of the acquisition or merger, we can mitigate the risk of cyber-attacks and maximize the ROI. In fact, a poor cyber-security infrastructure could be a deal-breaker. As per the PwC report, Cybersecurity can have a significant impact on business value across the lifecycle of an investment.  

Current challenges in M&A cybersecurity due diligence

The current process of conducting cyber security due diligence during M&A is usually cumbersome, manual, and lacks standardization. It often requires the use of highly skilled and costly resources to assess the cyber security of a potential acquisition target. Even with these efforts, many teams still lack visibility into the financial risks posed by cyber security issues.

Opportunities for automation

There is a significant opportunity for companies like Alfahive to automate the process of cyber security due diligence during M&A. Alfahive has developed a unique approach to simplify, standardize, and automate the cyber security assessment and quantify the cyber risk. This approach allows for easy access to financial information on cyber security risks, providing a more comprehensive and trustworthy report for M&A due diligence.

The three parts of Alfahive's process

Executives who can think about Cyber in capital terms will be ready for the next stage of the journey and that is where Alfahive can play a significant role.

Automating the cyber security assessment:

The first part of the process involves asking a limited number of critical cyber security questions to gain an understanding of the strengths and weaknesses of the digital security of a potential acquisition target.

Understanding the business:

The second part of the process involves identifying the profile of the business, including revenue, number of customer records, and regulatory compliance requirements, to accurately assess the business risk posed by cyber security issues.

Quantifying the cyber risk in financial terms:

The final part of the process involves quantifying the cyber risk in financial terms and sharing this information as part of the M&A due diligence. This includes both the dollar value risk and the likelihood of a loss event.

Conclusion

M&A transactions bring with them a range of potential benefits and risks, including those related to cyber security. As per Deloitte, from a recent example, a pending merger had 5% of its total purchase price set aside to cover the potential fallout from a ransomware attack. Conducting thorough cyber security due diligence is critical to ensuring the success of the transaction and protecting the business from future attacks and data breaches. By automating the process, companies like Alfahive are able to provide a more comprehensive and trustworthy report on cyber security risks, helping businesses make informed decisions during the M&A process.

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January 3, 2023
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Simplifying and automating cybersecurity due diligence in M&A transactions
Mergers and acquisitions (M&A) can provide a wide range of benefits for businesses
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Simplifying and automating cybersecurity due diligence in M&A transactions
Mergers and acquisitions (M&A) can provide a wide range of benefits for businesses
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Simplifying and automating cybersecurity due diligence in M&A transactions
Mergers and acquisitions (M&A) can provide a wide range of benefits for businesses