In today’s M&A environment, private equity firms are under intense pressure to move quickly, close efficiently, and capture value. But with digital systems underpinning nearly every aspect of business, one area is too often underweighted in diligence: cybersecurity.
A cyber incident discovered post-deal can erode valuations, trigger regulatory scrutiny, and create costly operational disruption. For deal teams, LPs, and boards, cyber due diligence is no longer optional – it is a fundamental safeguard for value creation.
The Growing Cyber Risk in M&A
- Cyber Risk = Business Risk: Acquiring a company means inheriting its data exposures, systems, vendor relationships, and vulnerabilities.
- Threats Are Evolving Fast: Attackers now combine ransomware with data theft, exploit vendor software, and leverage AI for social engineering.
- Regulators Are Watching: From Europe’s NIS2 directive to the SEC’s 2023 disclosure rules, fines and reporting obligations are rising.
- Impact on Deal Value: Though comprehensive data are, as yet, unavailable, R&W experience suggests that cyber gaps can reduce valuations and, in some cases, force renegotiations or deal terminations.
Recent Lessons from the Market
- Blue Yonder Supply Chain Disruption (2024)
A ransomware attack on Blue Yonder disrupted operations at clients including Starbucks and UK grocery chains. The event illustrates how one compromised supplier can ripple across multiple businesses – a risk PE firms must assess in diligence. - Jaguar Land Rover Production Outage (2025)
A cyberattack halted production at multiple UK facilities, leading to supply chain interruptions and confirmed data loss. This shows the scale of operational and reputational damage that can hit a global brand—and the hidden liabilities investors can inherit. - MOVEit and MFT Exploits (2023–25)
Zero-day vulnerabilities in managed file transfer software (MOVEit, GoAnywhere, Cleo) led to widespread breaches, exposing sensitive HR and finance data across industries. These attacks prove how common business tools can become systemic liabilities.
Best Practices for Deal Teams
- Engage Cyber Experts Early
Cyber assessments should run alongside financial, legal, and commercial diligence—not after. - Conduct Multi-Layered Reviews
Go beyond questionnaires: run vulnerability scans, review policies and logs, and assess security leadership capability. - Map Third-Party Risk
Understand the target’s critical vendors and SaaS dependencies—often the weakest links. - Check Incident Readiness
Look for tested incident response plans, secure backups, and recent tabletop exercises. - Protect Through Deal Terms
Use representations, warranties, indemnities, and post-close covenants to allocate residual risk. - Plan the First 100 Days
Whether integrating or segregating IT environments, ensure remediation steps are resourced and sequenced.
Communicating with Non-Technical Stakeholders
Translate technical findings into business terms:
- Value at Risk: Potential financial and reputational loss if issues aren’t fixed.
- Remediation Cost & Timeline: What it will take to close gaps post-deal.
- Deal Delay Risk: How undisclosed issues could stall or reshape closing.
- Insurance Impact: Whether gaps affect insurability or premiums
- Exit Readiness: How sub-optimal cyber posture may reduce buyer confidence later
Simple scoring models, heatmaps, and cost-to-fix estimates help bridge the technical and business perspectives.
Conclusion
Cybersecurity is an inseparable part of deal value and subsequent value creation. By embedding cyber diligence into M&A processes and bridging that activity into post-acquisition readiness and resilience assessments and ongoing security posture management, private equity firms can protect downside risk, preserve reputational capital, and strengthen exit multiples.
The lesson from recent breaches is clear: cyber due diligence isn’t just about avoiding losses – it’s about making smarter deals and safeguarding long-term returns.
References
“Jaguar Land Rover to Shut Plants after Cyber Attack.” Reuters, 10 Sept. 2025, www.reuters.com/world/uk/britains-jlr-says-some-data-affected-by-cybersecurity-incident-2025-09-10.
“Jaguar Land Rover Cyberattack.” Wikipedia, 30 Sept. 2025, en.wikipedia.org/wiki/Jaguar_Land_Rover_cyberattack.
“MOVEit Data Breach.” Wikipedia, 29 Sept. 2025, en.wikipedia.org/wiki/2023_MOVEit_data_breach.
“Supply Chain Software Provider Hit by Cyber Attack, Affecting Starbucks and Major Retailers.” AP News, 21 Nov. 2024, apnews.com/article/4281388e1b2d196a5fc10fa0c996c7ed.
“Undisclosed Liability Claims Have Doubled Since 2022.” Goodwin Law Insights: Private Equity, 19 Sept. 2025, www.goodwinlaw.com/en/insights/publications/2025/09/insights-privateequity-undisclosed-liability-claims-have-doubled.
