Why cyber security belongs at the centre of M&A due diligence

Mergers and acquisitions can create significant commercial value, yet they also combine networks, identities, cloud environments, software, data stores and third-party suppliers. A business that appears financially sound may carry hidden vulnerabilities, unresolved incidents or compliance gaps that become the buyer’s responsibility after settlement.

Cyber security due diligence gives decision-makers a clearer view of those risks before the transaction is finalised. For organisations operating in Australia, the review should account for the Privacy Act, the Notifiable Data Breaches scheme, sector obligations and the growing expectations of customers, regulators and insurers.

The security risks hidden behind the balance sheet

Financial, legal and operational reviews rarely reveal the full condition of an organisation’s technology environment. A target may have unsupported systems, excessive administrator privileges, weak remote access controls or sensitive information spread across unmanaged cloud services.

Past breaches can also remain undisclosed or poorly understood. Attackers may have maintained persistence in a network, stolen credentials or extracted data without triggering effective detection. The buyer could inherit these weaknesses immediately after completion, along with remediation costs and reputational damage.

What a proper cyber assessment should examine

A merger and acquisition security review should combine document analysis with technical testing. Policies and audit reports provide useful context, while vulnerability assessment and penetration testing can validate whether controls work under realistic conditions.

The assessment should cover corporate networks, endpoints, applications, APIs, mobile platforms, cloud accounts, identity systems and critical suppliers. It should also review backup resilience, security monitoring, incident response arrangements and the target’s history of security events.

The Australian regulatory and market context

Australian organisations must consider obligations under the Privacy Act and the Notifiable Data Breaches scheme when personal information may be exposed. Depending on the industry, additional requirements may apply through APRA, the Australian Securities and Investments Commission, the Australian Energy Sector Cyber Security Framework or government security expectations.

The market also has practical realities. A Melbourne fintech, a Sydney e-commerce company and a regional Queensland manufacturer may rely on very different technology stacks and suppliers. A deal involving a healthcare provider must account for sensitive health information, while a government contractor may face strict contractual controls over data handling and access.

Due diligence priorities for an Australian deal

A focused review helps transaction teams distinguish urgent risks from normal technology housekeeping. It should produce evidence that can support valuation, warranties, indemnities, integration planning and the decision to proceed.

Key areas to prioritise include:

• Known vulnerabilities, exposed services and unsupported operating systems
• Data locations, privacy obligations and cross-border information transfers
• Identity governance, privileged access and multi-factor authentication
• Cloud configuration, software supply chains and critical vendors
• Security monitoring, incident response and breach notification procedures

The review should also test whether the target can withstand disruption during integration. Useful evidence includes recent penetration testing results, remediation records, security awareness data and proof that backups have been restored successfully.

Additional questions for the transaction team include:

• Has the target experienced a suspected or confirmed cyber incident?
• Are security logs retained, monitored and accessible to the acquiring organisation?
• Can former employees and contractors still access business systems?
• Are customer, payment or health records protected by appropriate controls?
• Do insurance policies, contracts and licences impose cyber security conditions?

Why integration creates a fresh attack surface

Integration is often the point at which separate security boundaries begin to weaken. Teams may connect directories, create temporary accounts, share applications or transfer large data sets under intense time pressure. A single compromised account can then provide a route between the acquiring and acquired environments.

A staged integration plan reduces this exposure. It should define trust relationships, access approvals, network segmentation, data migration controls and monitoring requirements before systems are connected. Temporary privileges should have expiry dates, and high-risk legacy assets should remain isolated until they are assessed and remediated.

Turning findings into deal decisions

Cyber findings should be translated into commercial language. A critical internet-facing vulnerability may justify immediate remediation before completion, while outdated software in a segregated environment may be managed through a priced post-settlement programme.

Clear reporting can support several transaction outcomes: renegotiating the purchase price, adding contractual protections, requiring remediation conditions or delaying integration. A security risk register should identify each issue, its business impact, remediation owner, priority and estimated cost.

Independent expertise is valuable when internal teams lack the capacity or specialist skills to assess an unfamiliar environment. Services such as VAPT, infrastructure audits, cloud security reviews, SIEM monitoring and threat intelligence can provide a more objective view of the target’s exposure.

Preparing for the first days after settlement

The first phase after acquisition deserves its own security plan. The new owner should rapidly review privileged accounts, disable unnecessary access, enforce multi-factor authentication, confirm logging and establish clear escalation paths for suspicious activity.

A 24/7 monitoring capability can help identify abnormal behaviour while systems are being connected and processes are changing. It is particularly useful when the acquired organisation has limited in-house security coverage or operates across time zones and distributed sites.

Infoziant Security can support this work through tailored vulnerability assessments, penetration testing, cloud and mobile security reviews, compliance support, managed security services and continuous monitoring. A free VAPT report or trial-based engagement can help transaction teams identify priority exposure before committing to a broader programme.

Protect the value of the deal before the systems are joined. Contact Infoziant Security to arrange a focused cyber security due diligence assessment for your next acquisition or merger.