As digital infrastructure becomes integral to business operations, cybersecurity is no longer just an IT concern—it’s a critical factor in enterprise value, operational continuity, and M&A transaction success.

Cybersecurity refers to the practice of protecting systems, networks, and data from threats like hacking, malware, and unauthorized access. For buyers and investors, understanding a target company’s cybersecurity posture can reveal hidden risks—or reassure them of long-term resilience.

Key Areas of Cybersecurity Assessment

Testing & Audits

Buyers now demand comprehensive documentation across several testing domains, including:

• Penetration Test Reports – Reveal exploitable system weaknesses
• Vulnerability Assessments – Identify known risks in applications and networks
• SOC 2 and ISO 27001 Reports – Demonstrate adherence to recognized security frameworks
• Regulatory Compliance Audits – GDPR, HIPAA, CCPA—failure here equals liability
• Firewall & IDS/IPS Logs – Show ongoing threat monitoring and mitigation

Buyers also look for:

• MFA Bypass Testing
• SIEM Reports (e.g., from Splunk or Azure Sentinel)
• Incident Response Documentation and Breach History
• Cloud Security Audit Reports for AWS, Azure, or GCP
• Cybersecurity Maturity Assessments

These materials help establish the company’s security baseline and identify gaps.

Policies & Documentation

Effective cybersecurity isn’t just about tools—it’s about governance. Expect scrutiny of:

• Network Security & Cloud Policies
• Incident Response Plans & Tabletop Exercises
• Multi-Factor Authentication (MFA) and Single Sign-On (SSO) Policies

Well-documented procedures signal to buyers that the company takes risk seriously—and that it can scale securely.

Protection of Personal Data (PII)

If your company processes personally identifiable information, especially in regulated sectors like healthcare, fintech, or SaaS, data protection compliance is crucial. M&A diligence should include:

• Data Loss Prevention (DLP) Logs
• PII Handling Procedures
• Regulatory Audits for GDPR, CCPA, HIPAA, etc.
• Data Protection Impact Assessments (DPIAs)

Failure to properly document data handling can delay or derail a transaction.

Firewalls & Infrastructure Defense

Firewall health is a key indicator of network security. Buyers often request:

• Firewall Configuration Documentation
• Performance Logs and Availability Reports
• Audit Logs & Change Histories
• Backup and Incident Response Playbooks
• Licensing and Vendor Support Agreements

A misconfigured firewall may leave sensitive systems exposed—and suggest broader operational weaknesses.

Why Cybersecurity Matters in M&A

• Deal Risk: Undetected vulnerabilities can lead to post-close breaches, regulatory fines, or customer trust erosion.
• Valuation Impact: A strong cybersecurity posture increases buyer confidence and supports a premium valuation.
• Scalability: Mature security systems allow buyers to scale operations without unexpected exposure.

At Colonnade Advisors, we work closely with clients to assess cybersecurity readiness and compliance as part of M&A preparation. Whether you’re on the buy-side or sell-side, identifying risks and remediating early ensures smoother diligence and a stronger outcome.

📩 Contact us to learn how we help middle-market companies navigate cybersecurity in M&A.