Would you buy a company if you knew its data was exposed to hackers?
Cybersecurity isn’t just an IT concern—it’s a financial and strategic factor that can make or break a merger or acquisition deal. For small and mid-sized businesses, recovering from a cyberattack can be costly, but many don’t realize that their security posture can significantly impact how much their business is worth.
Today, buyers no longer limit due diligence to legal and financial documents. Cybersecurity due diligence has become a critical part of the process, helping buyers identify hidden risks that could affect deal terms—or derail the acquisition entirely.
🚨 Why Cybersecurity Impacts Company Value
In tech-driven or data-reliant industries, IT infrastructure is a core business asset. If it’s insecure, that’s a red flag for potential buyers.
Think of it like a home inspection: if foundational cracks are discovered, the buyer will either walk away or ask for a lower price. The same applies in business. If vulnerabilities or data risks are uncovered during an M&A assessment, buyers may:
- Renegotiate terms
- Demand remediation before closing
- Lower their valuation offer
- Or back out altogether
Case in point: When Verizon acquired Yahoo in 2017, revelations of massive data breaches caused the deal value to drop by $350 million—a reminder that cyber risks translate directly into financial consequences.
🧾 What’s Included in a Cybersecurity Due Diligence Assessment?
Buyers conducting cyber due diligence will typically explore the following areas to assess risk and gauge the business’s security maturity:
🔍 1. Data Inventory
- What types of data are collected and stored?
- Where is it stored and how is it transferred?
- Are current practices aligned with privacy laws and regulations?
Understanding these details helps buyers assess regulatory exposure, especially around standards like GDPR, HIPAA, or CCPA.
⚠️ 2. Cybersecurity Risk Assessment
- Are there known vulnerabilities or compliance gaps?
- Are current controls sufficient to protect sensitive data?
- What’s the maturity level of incident response and recovery plans?
This step helps the buyer estimate risk exposure and flag areas that require remediation.
🤝 3. Third-Party Risk Assessment
- How is data shared with vendors and service providers?
- Are third-party agreements and access controls robust?
Supply chain security is often a weak point, and buyers want assurance that your risk isn’t coming from someone else’s system.
🛡️ 4. Penetration Testing & Social Engineering
- Simulated attacks test for technical vulnerabilities
- Social engineering (e.g., phishing tests) gauge employee awareness
This is where theory meets practice—real-world testing helps buyers understand what attackers could exploit today.
⚙️ Thinking about selling your business or preparing for outside investment?
Now is the time to identify and remediate cybersecurity gaps. A strong posture can enhance your valuation and build buyer confidence. Luminary A.C.E. can help you assess where you stand.
✅ How Luminary A.C.E. Helps You Prepare
At Luminary A.C.E., we work with both buyers and sellers in the M&A process:
- For buyers: We conduct detailed cybersecurity assessments to identify and mitigate hidden risks before the deal closes.
- For sellers: We help you identify weaknesses, prioritize fixes, and present your company in the best light.
A proactive approach doesn’t just reduce risk—it can directly impact your sale price, shorten the deal cycle, and strengthen your negotiation position.
📞 Ready to Elevate Your Valuation?
Don’t let cybersecurity be the dealbreaker. Contact Luminary A.C.E. to schedule a consultation or learn more about our M&A cybersecurity readiness services.
Discover how cybersecurity influences your company’s valuation during mergers and acquisitions. Learn what buyers look for—and how Luminary A.C.E. can help you prepare.