The year 2016 saw a lot of news headlines related to data breaches and hacks and Yahoo topped the most among those. At first, the web services giant became the victim of a largest cyber attack in history which saw over 1 billion accounts being compromised. Then it experienced the worst as Verizon which was about to acquire Yahoo, asked for a heavy discount after the hack.
Consequently, the hack resulted in Verizon paying $350 million less to Yahoo. Additionally, the former also made an agreement with Yahoo’s board that any future legal costs or reparations resulting from the consequences of the cyber attack will be jointly shared.
So, we can come to a smart conclusion that cyber attacks which escalate in both volume and size could spell trouble for acquirers if they try to forgo the implications related to cyber security. Therefore, companies which are planning to buy others will first have to go for a background check to see if the acquiring company was a victim of a cyber attack.
Otherwise, overlooking checks can prove detrimental later on, when all the legal procedures of the deal are signed and completed.
Remember, once a data breach is found, even if it took place some years back, the purchasing company can be held responsible then after. If things deteriorate, the newly acquiring company can face penalties, charges and the inevitable loss of reputation.
Then how to proceed under the said circumstances?
Let us suppose that A is purchasing a company B, and then it is the responsibility of A to carry out a risk audit of potential breaches and then calculate whether the eventual acquisition is cost effective. The risk audit should assess both the societal and financial factors that might increase the likelihood of the cyber attack in future.
Also, companies within certain industries are required to maintain a secure environment to mitigate risks associated with cyber-attacks to protect user data. This is essential to Merger and Acquisition deals as it ensures that potential purchases are compliant with these standards.
Since cyber security systems are complex and require a lot of in-depth knowledge, it is better to seek expert help while going for a merger and acquisition deal because failure to do so may cost more than you think.
