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Cyber Security Problems in M&A – Real, Not Imagined, and Hitting Hard

Posted Friday, October 6th, 2017

Member Submitted

Submitted By: Jack Warnock, CEO, JW Strategic Advisors

Cyber security problems in M&A deals are no longer for the other guy to worry about. If you think that it is only software, communications and related information technology companies that are impacted by cyber security issues before, during and after their sale, then you are flirting with potential disaster and real hard money losses should you be (or are about to be) in the midst of selling your own company. This really was highlighted very well in an article I read recently in SC Magazine titled, “Majority of surveyed execs have inherited cyber security problems after acquiring a software company“. This article cited a bevy of dramatic statistics from a survey on Software M&A done by the investment bankers at West Monroe Partners.  Among those most notable was that more than half of respondents (52%) reported discovering a cyber security problem after a deal closed. Far more said they were displeased with past experiences conducting due diligence in cyber security (16%) than into either a target’s technology (1%) or operations (1%). Cyber security was the No. 2 reason (35%) software M&A deals were abandoned — as well as the second most common reason buyers regretted a deal.  And these stats were about software companies where they eat, breathe and sleep technology for a living!  
So my advice to you is this:

  1. You use computers to operate your business – right?  Then shore up your cyber security, get experts on it now, and make sure that cyber problems do not drive your company off the rails into the ditch.
  2. Anticipate problems, but make them go away (or even become opportunities) by engaging tech-savvy Board, business, and risk management pros so you do not have to lawyer up later.
  3. For the deal itself, get an M&A pro to quarterback the deal team — the lawyers, accountants, bankers, et al, and lead you through the exit minefield — due diligence to agreements to closing.

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