So what's the bottom line?
M&A can bring many benefits: enhanced market share, expanded product portfolios, and operational synergies are all important reasons. But it also introduces a distinct set of challenges. Particularly in the realm of cyber security.
There are four main factors to consider with mergers and acquisitions and cyber security:
- Data breaches and unauthorised access
- Integration challenges
- Vendor and third-party risks
- Loss of focus on cybersecurity
How to handle each of these is vital to know. But first:
Why Cyber Security Matters in Mergers and Acquisitions
In an era defined by digitalisation, data is a valuable currency in the business world.
As companies consider combining forces, the
exchange of data and information becomes an integral part of the process. This data exchange includes sensitive financial records, customer information, intellectual property, proprietary software, and more.
Ensuring the security and integrity of this data is crucial. That is if you want to maintain trust, preserve competitive advantage. And of course, avoid potential legal and financial liabilities.
The Biggest Risks in Cyber Security During Mergers and Acquisitions
Here are the areas of cyber security that matter concerning M&A.
Data Breaches and Unauthorised Access
During M&A transactions, companies often share vast amounts of sensitive information. This information exchange creates an opportunity for cybercriminals. They can exploit vulnerabilities and gain unauthorised access to valuable data. If not protected, compromising customer data, trade secrets, and financial records could leak.
For example, in 2017,
Verizon's acquisition of Yahoo encountered two massive data breaches. Yahoo suffered a breach in 2013 but failed to disclose it until 2016. This delayed disclosure raised concerns about Yahoo's data security practices. Which had a direct impact on the deal's final price.
Integration Challenges
Merging two distinct IT infrastructures can be complex. It often involves integrating various hardware, software, and networks.
Misconfigured integrations can create security gaps that hackers can exploit. Furthermore, different cybersecurity cultures and practices in merging organisations can clash. Thus making it difficult to establish a unified and strong security posture.
Vendor and Third-Party Risks
M&A transactions often involve third-party vendors who provide services to the companies involved. These vendors might not adhere to the same level of security standards. This can introduce vulnerabilities into the consolidated business. Without a thorough assessment of these vendors' security practices, the risk of a breach increases.
For example, the
2013 data breach at Target is a cautionary tale of third-party risk. The breach occurred through a heating and cooling vendor's compromised credentials and gained access to Target's payment system. Which led to the exposure of credit card information for millions of customers.
Loss of Focus on CyberSecurity
Sometimes, the things that don't seem important are never actioned or forgotten about.
Here's the deal:
Amid the flurry of activities during a merger or acquisition, cybersecurity considerations can take a back seat. Resources and attention may go towards other challenges, leaving critical security measures neglected.
This distraction can be an easy thing for cybercriminals to exploit.
Cybersecurity in M&A: What’s Changed in 2026
Cybersecurity is no longer a “nice‑to‑have” appendix in M&A; it has become a core valuation and regulatory issue. Now, dealmakers are seeing tighter rules, deeper technical due diligence, and more explicit pricing of cyber risk in purchase agreements and warranty insurance.
Tighter cyber‑specific regulation: Regulators in the US, EU, and UK are increasingly treating cybersecurity as a national‑security and competition‑policy concern, not just a data‑protection issue. In the US, SEC‑style cybersecurity‑disclosure rules and sector‑specific frameworks now require acquirers to scrutinise incident history and materiality before closing. In Europe, directives such as NIS2 and the Cyber Resilience Act (CRA) mean that targets in critical‑infrastructure or high‑tech sectors face higher scrutiny and mandatory breach‑disclosure timelines that directly affect deal timelines and disclosure obligations.
Cyber due diligence has gone from a checklist to a deep dive: In 2024, many buyers treated cyber risk as a standard‑form question in data‑room questionnaires; by 2025–2026, leading firms routinely commission technical assessments, penetration‑test reviews, and architecture‑level reviews of cloud and identity controls. Law and consulting firms now talk about
“targeted DD” packages where cyber and data‑protection workstreams sit alongside financial and legal diligence, with over 30% of mid‑ to large‑ticket deals involving a material cyber or data‑protection component.
AI‑driven risk is now part of cyber‑M&A:
Generative AI and agentic tools have added a new layer to cyber‑M&A: buyers are now asking not just about perimeter controls, but about how AI is used, where training data comes from, and whether model‑governance frameworks exist. Some RWI underwriters are starting to request detailed AI‑risk inventories and may introduce AI‑specific exclusions, which in turn pushes sellers to document AI‑governance and data‑sourcing practices before entering a process.
Cyber risk is being priced into deals: Where once cyber issues were flagged as “post‑close integration items,” 2025–2026 deals increasingly see cyber remediation costs baked into purchase‑price adjustments, escrows, or specific indemnities. Sophisticated buyers are using cyber‑due‑diligence findings to negotiate tighter reps and warranties on incident history, third‑party‑risk exposure, and compliance with sector‑specific standards.
Integration planning, zero‑trust and identity: Post‑acquisition integration is being re‑designed around zero‑trust principles, particularly in identity and access management (IAM). With a surge in mega‑deals around identity and cloud‑security platforms, acquirers are treating IAM consolidation as a first‑day‑one priority, not a back‑office project, to reduce lateral‑movement risk and streamline compliance.
Best Practices for Mitigating Cyber Security Risks in Mergers and Acquisitions
Now that we know the major issues facing M&A from a digital point of view, it's time to take those steps to prevent it from happening.
Early Due Diligence
Conducting comprehensive cyber security due diligence is one way to prevent cybercrime. This means assessing the cyber security practices, vulnerabilities, and incident history of the target company. Identifying weaknesses early allows for the development of a risk mitigation strategy.
Establish Cyber Security Teams
Forming dedicated cyber security teams composed of experts from both merging entities can help. These teams should work together to check and address potential risks. They can develop integration plans and ensure that security practices are consistent across the new organisation.
Security-Focused Integration Planning
Integrating IT systems and networks that have a strong focus on security. This includes:
- Reviewing and enhancing the security architecture
- Ensuring consistent security policies
- Conducting thorough testing to identify and rectify vulnerabilities.
Third-Party Risk Assessment
Checking over the cyber security practices of third-party vendors involved in the M&A process is often an overlooked step. This assessment should extend beyond the immediate integration phase. This ensures that vendors align with the new security standards.
Continuous Monitoring and Training
Install continuous monitoring mechanisms to identify any irregularities or potential breaches.
But also provide cyber security training to all employees. This helps raise awareness about best practices and potential threats.
What Else Affects the M&A Process?
As businesses navigate the world of mergers and acquisitions, cybersecurity becomes a no-brainer. The digital age has redefined the value of information. Making it critical to protect sensitive data. Especially when two companies are coming together.
By recognising the risks, implementing best practices, and fostering a security-centric approach, organisations can safeguard their digital assets and protect their reputation. And most important of all, ensure a smooth and secure transition into their new business phase.
With data breaches and cyber attacks on the rise, cyber security in mergers and acquisitions is not an option—it's a necessity for sustained success.
For more in-depth strategy and knowledge on the topic, be sure to check out our
selection of mergers and acquisitions courses led by expert trainers.
FAQ
What are the Top 3 Targeted Industries for Cyber Security?
The top three industries that focus on cybersecurity are finance (banks and online transactions), healthcare (patient data protection), and technology (securing software and networks). These industries aim to prevent hacking, data breaches, and cyberattacks to keep sensitive information safe.
What are the 3 P's of Cyber Security?
The 3 p’s of cyber security are patches, phishing and passwords. All play an intricate role in the long-term security of a business.