{"id":10043,"date":"2020-04-15T14:19:23","date_gmt":"2020-04-15T08:49:23","guid":{"rendered":"https:\/\/swaritadvisors.com\/learning\/?p=10043"},"modified":"2020-04-15T14:20:05","modified_gmt":"2020-04-15T08:50:05","slug":"how-cyber-security-is-significant-for-merger-and-acquisitions","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/learning\/how-cyber-security-is-significant-for-merger-and-acquisitions\/","title":{"rendered":"Cyber Security: How is it Significant for Merger and Acquisitions"},"content":{"rendered":"\n<p class=\"has-drop-cap\">In the process of due diligence that precedes a merger or an acquisition, it is essential to take account of the target company\u2019s strengths and assets, along with their weaknesses and liabilities. Among the several liabilities that the acquiring companies need to review and analysis, the most significant are the amount of financial debt, poor revenue streams, and any complex legal activities. One of the biggest liabilities that the acquiring companies need to ponder on is how well the target company copes its cybersecurity. Hence, the concept of cybersecurity has evolved as a key risk factor all through the <strong><a href=\"https:\/\/swaritadvisors.com\/due-diligence\"><em>process of due diligence<\/em><\/a><\/strong> of any merger and acquisition.<\/p>\n\n\n\n<p>Nowadays, modern businesses rely profoundly on computer network systems and digital data. Hence, the quality of these systems often equates to the quality of operations. Further, all the companies must have plans to detect and identify cyber risks and also have a strong risk management plan in place. Furthermore, these plans offer a greater level of assurance to the acquiring company that the concerned target company has done its best in order to prevent a cyberattack.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a5500a321fb5\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a5500a321fb5\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/learning\/how-cyber-security-is-significant-for-merger-and-acquisitions\/#Concept_of_Cyber_Due_Diligence\" title=\"Concept of Cyber Due Diligence\">Concept of Cyber Due Diligence<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/learning\/how-cyber-security-is-significant-for-merger-and-acquisitions\/#How_significant_is_Cybersecurity_in_a_Merger_or_Acquisition\" title=\"How significant is Cybersecurity in a Merger or Acquisition?&nbsp;\">How significant is Cybersecurity in a Merger or Acquisition?&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/learning\/how-cyber-security-is-significant-for-merger-and-acquisitions\/#Cyber_Risks_on_Merger_and_Acquisitions\" title=\"Cyber Risks on Merger and Acquisitions\">Cyber Risks on Merger and Acquisitions<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/learning\/how-cyber-security-is-significant-for-merger-and-acquisitions\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Concept_of_Cyber_Due_Diligence\"><\/span>Concept of Cyber Due Diligence<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Cyber Due Diligence is a process that discloses a variety of cyber-related strategic deal issues, operational risks and hidden costs before investing in a business. Further, the process of cyber due diligence affords new insights to detect bad debts, reducing risk to the investor\u2019s capital, while offering deal teams a competitive advantage to enhance returns.<\/p>\n\n\n\n<p>Further, executing deals without going through the process of Cyber Due Diligence puts unnecessary risk on the investment capital and future returns. However, still there many investors and fund managers who are unaware of the specific CyberRisks on <strong><a href=\"https:\/\/swaritadvisors.com\/mergers-and-acquisitions\">Merger and Acquisitions<\/a><\/strong> and how they impact a broad range of business operating models, and not just the high-tech and data-heavy.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_significant_is_Cybersecurity_in_a_Merger_or_Acquisition\"><\/span>How significant is Cybersecurity in a Merger or Acquisition?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The process of mergers and acquisitions ostensibly\ninvolves a deep breakdown of a company\u2019s balance sheet, market share, and all other\nimportant organizational factors that can either make or break a deal. Together\nwith the important organizational and financial metrics involved in these\ndeals, there is one more metric that is now just as significant as financial\nmetrics. The name of the said metrics is cybersecurity.<\/p>\n\n\n\n<p>As we know that, when acquiring a company, the purchasing corporation is also acquiring the <strong><a href=\"https:\/\/en.wikipedia.org\/wiki\/Computer_security\"><em>cybersecurity<\/em><\/a><\/strong> program and the cyber risks associated with that said company. Any unexpected cybersecurity issues appearing in the M&amp;A process is not good for executives and all personnel involved in that said process.&nbsp;<\/p>\n\n\n\n<p>Further, as per the recent study conducted by the Forescout Technologies over 2,500business decision-makers and information\ntechnology, 53 per cent of personnel stated that critical cybersecurity issues\nor incidents easily jeopardized M&amp;A deals.<\/p>\n\n\n\n<p>Furthermore,\naccording to a study conducted by&nbsp;ISC2 on 250 merger and acquisition\nexperts, cybersecurity is a tangible asset of a company as the cybersecurity\nposition of an acquisition target is one of the main concerns that are nowadays\nacquiring companies take into consideration when seeking to make an acquisition\ndeal. Around 96 per cent of them said they consider a robust cybersecurity\nprogram to be a key factor in assessing the value of a concerned company. Also,\nless than half of those who answered the survey said that they had seen a\nmerger or acquisition deal fall through due to cybersecurity issues. Moreover,\naccording to a survey conducted in&nbsp;2016&nbsp;by the NYSE Governance\nservices, companies that revealed a major vulnerability considered passing on\nthe deal.<\/p>\n\n\n\n<p>Nowadays, companies do have good reasons to be worried about cybersecurity protection. As around 52 per cent of those surveyed stated that the share price of a publicly-traded company dropped after it was acquired and later on experienced a data breach. For example- After the acquisition of Yahoo, two massive data breaches were discovered in the previous years, the acquiring company, Verizon,&nbsp;decreased the value of the acquisition&nbsp;by $350 million.<\/p>\n\n\n\n<p>Further,\nall of the survey takers decided that during acquisition cybersecurity audits must\nbe considered as a standard part of the due diligence process as the findings\nfrom the audit have a great pact of impact on the outcome of an acquisition.<\/p>\n\n\n\n<p>Also,\nabout 77 per cent of the experts stated that they would suggest one target\nacquisition over another only on the basis of the strength of their\ncybersecurity program. Also, a little over half of the experts said that they recognize\na weak cybersecurity program to be a liability or obligation that would directly\ndecrease the value of a company they saw for acquisition.<\/p>\n\n\n\n<p>Experts\nof Merger and acquisition agrees that the presence of a cybersecurity program\ncounts and the quality of the said program count even more as the companies\nthat are eager to make a financial investment in human resources and technology\nwould be more likely to be regarded as not being much of a liability. <\/p>\n\n\n\n<p>Further,\ncompanies can take specific steps in order to maintain or increase their worth.\nThese specific positive steps from which companies can substantiate their value\nmay include security awareness training programs, good risk management policies\nand promoting a culture of cybersecurity. Hence, mature cybersecurity programs\nbring value to an acquisition deal.<\/p>\n\n\n\n<p>Furthermore, during the course of an acquisition, the concerned acquiring company must be looking at how companies store and preserve their electronic information and also how they protect it. Moreover, the analysis of cybersecurity should include electronic records, cyber issues, and the infrastructure of the network. The reason behind this is that that the data serves as a pointer of the viability of the said company and it provides the buyers\u2019 transparency and clarity into existing vulnerabilities and also signals them around the potential security problems. The findings from the said cybersecurity analysis can also be used to assess the company and its structure in a fair lucrative deal.<\/p>\n\n\n\n<p>Hence,\na proactive approach to cybersecurity is the way\nforward for companies looking to take benefit of future Merger and Acquisition\nactivities.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Cyber_Risks_on_Merger_and_Acquisitions\"><\/span>Cyber Risks on Merger and Acquisitions<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Every\nmerger or acquisition comes with a great degree of risk. Hence, the\nprofessionals or the executives who work on mergers and acquisitions need to be\nas diligent as possible and must try to detect as many red flags as they can. <\/p>\n\n\n\n<p>Further,\nthere is always a chance that a deal of acquisition will uncover noteworthy\ncybersecurity weaknesses. Furthermore, one of the major concerns is that the\ntarget company may lead to vulnerabilities in the acquiring company and also set\nthe stage to take the entire entity down.<\/p>\n\n\n\n<p>Moreover,\ndetecting issues is not yet an exact science, as there are many&nbsp;hidden\ndangers. Also, the individuals who work on merger and acquisition deals need to\nbe aware of what hidden dangers or perils look like and how to spot them. <\/p>\n\n\n\n<p>Approaching\ncyber risks can be invisible for long periods. Thus, spotting cybersecurity\nissues is less about problem-solving after a said incident has happened and\nmore about being vigilant, watchful and proactive. There are possibilities that\nneither side could spot malware or some other security issue that would devalue\na company before the ink dries on the final forms. By the time any problems get\ndiscovered, it could be entirely too late.<\/p>\n\n\n\n<p>Further,\nmistakes in cybersecurity can cost both sides, and the cost might be quite\nhigh. For example, &#8211; A Target Companyfaced a&nbsp;data breach&nbsp;of the\nfinancial information of over 90 million of its customers. But by the end of\nthe deal, the company had lost over $192 million. So, by taking over another\nenterprise where there has been significant cyber trouble, customers will\ndistrust and disbelief the company, and it could considerably damage the\ncompany\u2019s reputation. Therefore, when a company\u2019s reputation has been damaged\nenough, it can create a situation in which there is a loss of revenue for\neveryone.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Whether your company is just a notion, or you are in the mid of conversations concerning acquisition right now. The concept of cybersecurity is and will always remain an integral facet of one company. Moreover, establishing and maintaining a cybersecurity program empowers a company to reduce cyber risks throughout its life together with when it matters most, during an acquisition. Hence, it is clear that the process of Merger and Acquisition process will include cybersecurity due diligence.<\/p>\n\n\n\n<div class=\"read\"><p><b>Also, Read:<\/b> <mark><a href=\"https:\/\/swaritadvisors.com\/learning\/analysis-of-merger-and-acquisition\/\" target=\"_blank\" rel=\"noopener noreferrer\">Analysis of Merger and Acquisition<\/a><\/mark>.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>In the process of due diligence that precedes a merger or an acquisition, it is essential to take account of the target company\u2019s strengths and assets, along with their weaknesses and liabilities. Among the several liabilities that the acquiring companies need to review and analysis, the most significant are the amount of financial debt, poor [&hellip;]<\/p>\n","protected":false},"author":17,"featured_media":10052,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[546],"tags":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/10043"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/users\/17"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/comments?post=10043"}],"version-history":[{"count":7,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/10043\/revisions"}],"predecessor-version":[{"id":10051,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/10043\/revisions\/10051"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media\/10052"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media?parent=10043"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/categories?post=10043"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/tags?post=10043"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}