Mergers and acquisitions involve extensive financial, legal, and operational due diligence. Security due diligence is rarely given equivalent attention, despite the fact that acquiring an organisation means inheriting its entire security posture: its vulnerabilities, its technical debt, its compliance gaps, and potentially any ongoing compromise that the acquired organisation is not aware of.
The consequences of inadequate security due diligence in M&A range from inheriting a significant remediation cost to acquiring an organisation that is already breached. Both scenarios have played out repeatedly in high-profile transactions. The cost of discovering security issues after completion is substantially higher than discovering them during due diligence.
Expert Commentary
William Fieldhouse, Director of Aardwolf Security Ltd
“Security due diligence in M&A is one of the areas where we see the most avoidable risk. Acquirers inherit the acquired organisation’s security posture at the point of completion. Without adequate technical due diligence, you are buying unknown liabilities. We have seen integrations delayed by months because significant security issues were only discovered after completion.”
What Security Due Diligence Should Cover
Technical assessment of the target’s external attack surface identifies immediate exposure. A quick external scan reveals internet-facing systems with critical vulnerabilities, exposed administrative services, and deprecated or forgotten infrastructure that the target’s IT team may not be managing actively.
Internal network assessment of the target’s environment, where access can be negotiated as part of the due diligence process, gives a more complete picture. Active Directory configuration, patch levels, and internal security controls are all relevant to estimating the remediation cost required to bring the target up to the acquirer’s security standard.
Data and Compliance Risk
The acquired organisation’s data assets and their associated regulatory obligations transfer with the acquisition. If the target processes personal data under UK GDPR, the acquirer inherits those obligations. If the target has had a breach that has not been discovered or reported, the acquirer may inherit the reporting obligation and the regulatory exposure.
Internal network penetration testing of the target’s environment as part of due diligence is negotiated as a condition of the transaction. It requires cooperation from the target and careful scoping to avoid disrupting operations, but it provides the technical evidence base that financial due diligence alone cannot supply.
Integration Security Planning
Network integration between the acquirer and target creates new attack paths in both directions. A compromised target environment that is connected to the acquirer’s network gives an attacker access to the acquirer’s systems. Integration architecture should be designed to limit connectivity to what is operationally necessary, with monitoring on all integrated paths.
Identity integration is a particular challenge. Merging Active Directory environments, or federating authentication between them, requires careful management of trust relationships and access controls. The integration period is when the risk is highest and when security review is most valuable.
Planning the Assessment
Getting a penetration test quote that specifically addresses M&A due diligence allows you to plan the assessment timeline alongside the transaction process. The assessment needs to complete before the period when findings can still influence the transaction terms, valuation, or decision to proceed.
