INSIGHT

Cybersecurity due diligence: Protecting your investment before you sign 

Josh Schmidt, Craig Hamm • July 21, 2025

Services: Cybersecurity Services, Due Diligence Services

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When you’re considering acquiring another business, you examine their financial records, assess their market position, and evaluate their operational capabilities. But how thoroughly do you investigate their cybersecurity posture? In today’s digital landscape, a target company’s cyber vulnerabilities can quickly become your organization’s biggest liability. 

Cybersecurity due diligence is a critical component of modern transaction evaluation that many acquirers overlook or treat as an afterthought. You need to understand not just what you’re buying, but what digital risks you’re inheriting.  

This article will explore how to conduct effective cybersecurity due diligence, what key areas you should investigate, and how to structure your approach for maximum protection. 

Understanding the cyber threat landscape in transactions 

You face unique risks when acquiring a company that extend beyond traditional business concerns. Cyber threats targeting organizations involved in M&A transactions have increased significantly, with attackers viewing these periods of transition as prime opportunities to exploit vulnerabilities. 

The threat landscape varies dramatically depending on industry and geographic region. If you’re acquiring a healthcare company, you’ll encounter different regulatory requirements and attack vectors than if you’re purchasing a manufacturing firm. Similarly, acquisitions in certain countries or regions may expose you to state-sponsored cyber threats or different compliance frameworks. 

You should approach cyber due diligence with a risk-based methodology that considers these contextual factors. Not every deal requires the same level of scrutiny, but every deal requires some level of cybersecurity evaluation.  

Building a flexible cyber due diligence framework 

Serial acquirers and private equity firms have learned that frequency brings flexibility in cyber due diligence. When you conduct multiple acquisitions, you develop standardized processes and established relationships with cybersecurity professionals who understand your requirements and risk tolerance. 

You should create a flexible cyber deals playbook that adapts to different deal stages, risk levels, and transaction types. This playbook allows you to engage cybersecurity stakeholders at key points throughout the deal lifecycle and manage risks more effectively across your portfolio. 

Regular acquirers often establish benchmarks for cyber readiness that they apply across their portfolio companies. Some conduct annual security assessments of their holdings, which prepares these companies for future transactions and maintains consistent security standards across their investments. 

Key areas to investigate during cyber due diligence 

Your investigation should focus on several critical areas that reveal the target company’s true cybersecurity posture. 

• Examine governance structure and determine who manages cybersecurity responsibilities within the organization. 
• Review incident response capabilities and historical security events. You need to know not just whether they’ve experienced breaches, but how they responded and what lessons they learned. This information helps you assess organizational maturity and resilience. 
• Evaluate third-party vendor relationships and supply chain security. Modern businesses rely heavily on external partners, and your target’s vendor ecosystem becomes part of your risk profile post-acquisition.  
• Assess compliance posture and regulatory adherence. Different industries face varying compliance requirements, and non-compliance can result in significant financial penalties and operational restrictions. 

Identifying deal-changers and quantifying risks 

Effective cyber due diligence rarely uncovers outright deal-breakers, but it frequently reveals issues that should influence your valuation and terms. You need the ability to identify and quantify these risks so you can make informed decisions about pricing and deal structure. 

Consider whether you want the seller to address critical vulnerabilities before closing or whether you prefer to renegotiate the purchase price to account for remediation costs. Some acquirers, particularly those making smaller deals, prefer to manage these risks themselves and use identified issues as leverage in price negotiations. 

Your due diligence should produce a clear roadmap of critical remediation items, including responsibility assignments, cost estimates, and realistic timelines for resolution. This roadmap becomes essential for your post-acquisition integration planning. 

Structuring your due diligence process 

Begin your cyber due diligence early in the transaction process, ideally during the preliminary due diligence phase. Early identification of significant cyber risks allows you more time to develop mitigation strategies and negotiate appropriate terms. 

Use a combination of questionnaires, document reviews, and technical assessments to gather comprehensive information. Don’t rely solely on management representations; verify claims through independent analysis where possible. 

Consider engaging third-party cybersecurity professionals who can provide objective assessments and technical depth that your internal team might lack. These professionals can conduct penetration testing, vulnerability assessments, and compliance reviews that reveal issues management might not fully understand or disclose. 

Planning for post-acquisition integration 

Your cyber due diligence doesn’t end at closing. You need a clear plan for integrating the target company’s systems securely and addressing any identified vulnerabilities. 

Develop integration timelines that prioritize critical security issues and maintain business continuity. Some security improvements can wait, but others require immediate attention to prevent exposure during the vulnerable integration period. 

Establish clear communication protocols between your cybersecurity teams and ensure that key personnel from both organizations understand their roles in maintaining security during integration.   

Working with BPM for comprehensive cybersecurity due diligence 

At BPM, we understand that cybersecurity due diligence requires both technical depth and business acumen. Our team combines extensive transaction experience with cutting-edge cybersecurity knowledge to help you make informed acquisition decisions. We work alongside your deal team to identify risks, quantify potential impacts, and develop practical remediation strategies that protect your investment. 

Don’t let cyber vulnerabilities become expensive surprises after closing. Our comprehensive approach to cybersecurity due diligence gives you the insights you need to negotiate better terms, plan effective integrations, and protect your organization’s future. To discuss how we can support your next acquisition with thorough, practical cybersecurity due diligence that delivers real value to your transaction, contact us.