ANALYZING CYBER RISKS IN M&A TRANSACTIONS

By Joey Masters | Commercial Risk Advisor

Acquiring a new entity inherently translates to adopting a fresh set of digital operations and cybersecurity risks.  Data breaches and cyber vulnerabilities can certainly be a deal breaker in today’s M&A environment. It is essential for acquirers to gain a clear understanding of their target’s cyber risk profile. A holistic analysis of the target company’s cyber environment will help firms uncover cyber vulnerabilities, evaluate how cyber activity impacts value and mitigate risks to close the deal with peace of mind.

Assess Vulnerability

A cyber vulnerability assessment can help acquirers uncover risks they could inherit from an acquisition. It’s important to understand the threats your target is facing and the risk controls they currently have in place to determine areas of vulnerability.

Evaluate Value

Evaluating a target’s true value is an essential part of any M&A transaction.   As cyber events and integration issues come into focus, the costs associated with each can lead to drastic changes in a target’s true value. A cyber assessment may uncover an existing breach that requires significant costs to adequately recover.  In addition, you may realize deal value should be less because of the necessary investment in cybersecurity resources.

Mitigate Risks

Mitigating risks and gaining confidence in the target’s systems will allow you to close the deal with peace of mind.

The frequency and extent of high-profile cyberattacks reported by the media demonstrates the inherent cyber risks all organizations face. Implementing a cyber risk analysis in the due diligence phase of an acquisition is critical for understanding a target company’s cyber risk profile. Consult a BKS commercial risk advisor to help you identify, analyze and treat the risks associated with your next M&A transaction.

 

Related Articles