Cyber Security in M&A: What CISO Must Know to Secure the Deal
As mergers and acquisitions (M&A) accelerate across sectors, Cyber Security has taken centre stage in deal negotiations. It is no longer a technical afterthought but a strategic imperative that can make or break a transaction. For Chief Information Officers (CIOs), the stakes have never been higher. From valuation assessments to post-integration governance, cyber risks must be identified, quantified, and managed across the entire deal lifecycle.
In the context of Australia and New Zealand, where data breach legislation and public expectations continue to intensify, the consequences of overlooking cyber threats during M&A can be severe. High-profile cases, such as the Latitude Financial breach and the Medibank data leak, have demonstrated that weak security integration can result in operational disruption, reputational damage, regulatory penalties, and shareholder backlash. For CIOs at mid-market enterprises, Cyber Security is now a board-level concern and a crucial factor in driving long-term deal success.
What Is Cyber Security in M&A?
Cyber Security in M&A refers to the proactive measures taken to identify, evaluate, and mitigate digital security risks before, during, and after a business acquisition. These activities are designed to:
- Assess the cyber hygiene and maturity of target companies
- Identify historical breaches or incidents and the associated liabilities
- Protect sensitive data throughout negotiations and integration
- Ensure legal compliance with evolving regulatory frameworks
- Safeguard infrastructure and user access during and after the merger
A strong Cyber Security approach helps prevent inherited vulnerabilities, ensures business continuity, and supports trust across stakeholders from employees to regulators and investors.
Why Cyber Security Can’t Be an Afterthought
Cyber Security is not just a technical issue, it is a financial, legal, and reputational concern. Research shows that nearly 60% of organisations report discovering serious cyber vulnerabilities in acquired companies, post-transaction. These can result in retroactive costs, stalled integrations, and even deal collapse.
Recent example: The Latitude Financial breach in 2023 occurred during corporate restructuring and compromised over 14 million records, highlighting the systemic risks posed by outdated systems and vendor vulnerabilities. Similarly, Medibank’s 2022 breach revealed lapses in authentication protocols and breach response preparedness.
These incidents are not anomalies they are warnings. CIOs must adopt a proactive posture to avoid absorbing hidden liabilities that can cost millions and erode customer trust.
Embedding Cyber Security Across the M&A Lifecycle
- Pre-Deal Cyber Due Diligence
Before signing the dotted line, CIOs must lead a comprehensive Cyber Security assessment of the target company. Key actions include:
- Reviewing the target’s security architecture, policies, and procedures
- Conducting audits of software, infrastructure, cloud assets, and endpoints
- Investigating breach history and incident response effectiveness
- Evaluating third-party vendor relationships and supply chain security
- Ensuring data protection measures align with Australia’s Privacy Act and other relevant laws
- Deal Structuring and Legal Protection
Findings from cyber due diligence should directly influence:
- Valuation models that account for remediation costs or tech debt
- Risk allocation via warranties and indemnities in purchase agreements
- Cyber insurance requirements and disclosure obligations
- Regulatory compliance, especially under Notifiable Data Breach (NDB) schemes
CIOs must work closely with legal counsel to ensure all cyber risks are legally addressed and responsibilities are clearly defined.
- Post-Merger Integration
Integration is a high-risk period. Security blind spots emerge as systems converge, staff transitions occur, and cultural changes unfold. To manage this:
- Develop a cyber integration playbook to guide the transition
- Inventory all digital assets, applications, and user accounts
- Consolidate identity and access management (IAM)
- Roll out MFA and endpoint detection across the new organisation
- Monitor for insider threats and enforce continuous training
Real World Lessons
Medibank (2022)
Though not directly linked to M&A, Medibank’s breach revealed how weak authentication controls and delayed detection mechanisms create openings for attackers. Any M&A deal that inherits similar systems risks replicating this vulnerability.
Westpac’s Acquisition of RAMS (2019)
While no breach occurred, the integration process highlighted the extensive work required to align legacy systems with modern cyber policies. Upfront investment in security alignment accelerated long-term value delivery.
Cross-Border M&A
As mid-market Australian firms expand into Southeast Asia, compliance with international data laws becomes critical. CIOs must audit data residency and cross-border transfer mechanisms to ensure full alignment with local regulations.
CIO vs. CISO: Breaking the Silos
In many M&A deals, the CIO leads IT integration while the CISO manages security controls. However, working in silos is no longer viable. CIOs must:
- Involve CISOs during due diligence and integration planning
- Create joint KPIs that measure both performance and security
- Use integrated dashboards to track progress and incidents
Security is not a department; it’s an organisational responsibility that requires aligned leadership.
The Human Layer: Insider Threats and Change Fatigue
M&A introduces human risks. Staff uncertainty, increased workload, and shifting roles create vulnerabilities. To address the human layer:
- Deploy awareness training tailored to M&A-specific threats
- Monitor behavioural anomalies during employee transitions
- Enforce strict access management, especially for departing staff
- Build a cohesive security culture across legacy and new teams
What’s Next: Future-Proofing Cyber Security in M&A
Looking ahead, CIOs should embrace modern frameworks and technologies that improve agility and security during M&A:
- Implement Zero Trust Architecture incrementally across systems
- Use AI-driven threat detection to monitor complex integrations
- Apply Cyber Security maturity models (NIST, ISO 27001) to benchmark targets
- Build digital resilience as a core pillar of M&A value creation
Cyber resilience will increasingly define which deals succeed in the market.
Conclusion: Secure the Deal Before You Sign It
Cyber Security is now a critical success factor in M&A. For CIOs, embedding cyber considerations into every phase of a transaction is the key to reducing risk, preserving value, and maintaining trust.
Whether acquiring a local competitor or entering a new regional market, secure leadership is essential. By planning early, collaborating with CISOs, and prioritising security integration, CIOs can transform cyber risk from a threat into a competitive advantage.
Ready to secure your next acquisition? Talk to our Cyber Security experts to assess your M&A risk exposure.
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