Security gaps during M&A (mergers and acquisitions) can undermine the success of a deal before integration even begins. These gaps, ranging from misconfigurations to weak credentials, present significant risks that can derail the process. Unfortunately, cybersecurity is often overlooked in M&A activities, with leaders focusing more on financial concerns, business goals, and employee transitions. However, ignoring these vulnerabilities can lead to substantial damage, potentially halting the entire process.

As M&A activity continues to rise globally, it’s crucial for organizations to address security gaps throughout the process. According to recent research, 81% of executives who have made an acquisition in the past three years plan to pursue more acquisitions in the next three. While business leaders are excited about the growth potential, malicious actors see new opportunities to exploit these transitions.

The Importance of Identifying Security Gaps During M&A

Organizations are especially vulnerable to cyber threats during times of change. M&A deals involve significant shifts in business operations, with new staff, protocols, and systems being introduced. This disruption can create knowledge gaps, allowing hackers to exploit employees through tactics like phishing or social engineering. Additionally, the influx of sensitive data, such as new employee information, gives attackers more opportunities to target the business.

The integration process of an M&A deal can take up to three years, which is a long time for security risks to develop. Identifying security gaps early, particularly during the due diligence phase, is critical to addressing vulnerabilities before they escalate.

Real-World Example of Security Gaps During M&A

At Horizon3.ai, we conducted an audit for a major U.S.-based manufacturer during an M&A transaction. We discovered nearly 2,000 security vulnerabilities within the target company’s network infrastructure. If these weaknesses had been exploited, it could have led to 139 critical issues, including data exposure and host compromises — threats that could have jeopardized the entire deal.

This highlights the importance of including cybersecurity risk assessments as an essential part of any M&A process.

How to Conduct a Comprehensive Cybersecurity Audit

A thorough cybersecurity audit is key to uncovering security gaps during M&A. This audit benefits both the acquiring company and the target organization by providing valuable insights and allowing for improved security measures. Here’s a four-step approach to conducting an effective cybersecurity audit:

Identify All Reachable Assets:
Start by identifying all assets in the target organization, including network credentials, sensitive data, and critical systems.

Conduct a Penetration Test:
Perform a baseline penetration test to identify vulnerabilities and potential attack paths that hackers could use to compromise critical systems.

Verify Results:
Ensure the accuracy of the test results. False positives can be costly, while false negatives can lead to devastating outcomes. Retesting is essential to confirm findings and ensure effective remediation.

Remediate Critical Weaknesses First:
Prioritize the most dangerous vulnerabilities. By addressing the most significant risks first, you ensure that essential assets are protected without wasting resources on less critical issues.

Lessons Learned from Addressing Security Gaps During M&A

In an M&A deal, addressing security gaps is just as important as evaluating financials or market value. Leaders need full visibility into the risks associated with potential vulnerabilities. Fortunately, modern technology makes it easier to conduct these risk assessments promptly, often without relying on external consultants.

Cybersecurity risk management must be proactive, not reactive. By focusing on real-time monitoring and addressing vulnerabilities during the due diligence phase, organizations can lay the foundation for strong cybersecurity practices throughout the integration process.

By addressing security gaps during M&A, companies can ensure a smoother, safer transition and protect themselves from significant cyber risks.