Cybersecurity has become a defining factor in private equity value creation. Regulators, insurers, limited partners (LPs), and strategic buyers now expect cyber resilience to be addressed at every stage of the investment lifecycle. A single breach can erode valuations, delay exits, or trigger costly indemnities. Conversely, a strong cyber posture accelerates diligence, supports higher multiples, and protects long-term portfolio value. 

This paper outlines how private equity firms can embed cybersecurity into investment strategies to protect assets, meet regulatory expectations, and enhance portfolio performance. 

The Cyber Imperative in PE 

• Rising Threats: Ransomware, AI-driven fraud, and software supply chain attacks now target mid-market firms – the heart of PE deal flow. 

• Regulatory Pressure: GDPR, CPRA, NIS2, DORA, the SEC’s disclosure rules, and the FTC Safeguards Rule all raise compliance stakes. 

• Investor Expectations: LPs increasingly demand quarterly reporting on portfolio cyber health. 

• Value at Stake: Deals with unresolved cyber issues face reduced valuations, indemnities in SPAs, and protracted exit timelines. 

Cyber Due Diligence Best Practices 

PE firms must treat cyber diligence as core to underwriting. Leading practices include: 

• Comprehensive Assessments: Evaluate policies, cloud security (M365/Google Workspace), backups, and cyber insurance readiness. 

• Framework Alignment: Benchmark against NIST CSF 2.0, CIS Controls v8.1, and ISO 27001:2022; check CMMC/DORA readiness where relevant. 

• Incident Readiness: Validate tested incident response and recovery plans. 

• Third-Party Risk: Review vendor contracts and monitoring for supply chain resilience. 

• Culture & Training: Confirm that executives and employees are cyber-aware, not just IT staff. 

Embedding Cybersecurity into Portfolio Management 

• Investment Criteria: Apply a baseline cyber checklist to all deals. 

• Capital Allocation: Reserve post-close investment for security uplift (MFA, EDR, identity governance). 

• Governance: Establish CISO councils or steering committees; track performance via dashboards and KPIs. 

• Collaboration: Encourage portfolio companies to share intelligence and jointly negotiate vendor contracts. 

• Value Creation Lens: Position cyber not just as risk mitigation but as an enabler of faster exits, cleaner diligence, and higher valuations. 

The 2025 Cyber Landscape for PE 

• Ransomware 2.0: Data theft + extortion + disruption. 

• AI Threats: Deepfake-enabled social engineering and automated exploit discovery. 

• Supply Chain Risks: Attacks on SaaS and service providers undermine multiple portfolio companies simultaneously. 

• OT/ICS Vulnerabilities: For manufacturing and critical infrastructure suppliers, regulators now expect OT risk management. 

Conclusion 

Cybersecurity is no longer optional in PE – it is a strategic necessity. Firms that embed cyber into diligence, governance, and portfolio operations will better protect downside risk and unlock upside value. In 2025, deal success is increasingly defined by cyber maturity. 

About PIP 

PIP executes hundreds of buy-side cyber diligence projects annually and delivers portfolio-wide assessments aligned to leading frameworks. We provide vCISO services and advisors who work directly with portfolio companies to reduce risk and prepare for exit. 

• Buy-Side Cyber Due Diligence – fast, actionable assessments 

• Cyber Readiness & Resilience Assessment – due diligence follow-on, bridging the gap to vCISO & Advisory 

• Complete Portfolio Assessments – baseline + sector overlays 

• vCISO & Advisory – tactical uplift, regulatory readiness, exit preparation 

• Cyber Insurance Alignment – optimize controls and policies for coverage 

Our Client Services team is ready to help you strengthen your portfolio today.