Cybersecurity Due Diligence in M&A: What PE Firms Miss Before Close

Cybersecurity due diligence in M&A transactions has matured significantly over the past decade. Most PE deal teams now include some form of cyber assessment in their process. The problem isn't whether it gets done — it's how.

The questionnaire trap

The default approach relies on target-completed questionnaires and a limited number of stakeholder interviews. This has a structural flaw: the information is entirely self-reported. A target company under acquisition pressure has every incentive to present its security posture in the best possible light.

Questionnaires also can't surface what isn't disclosed. Legacy systems with known vulnerabilities. Undocumented integrations. Credentials still active from former employees. These don't appear in a well-formatted response to a 200-question spreadsheet.

What external intelligence reveals

A properly structured external assessment — conducted without any target access — can identify:

• Exposed infrastructure: Open ports, misconfigured cloud storage, unpatched externally-facing systems discoverable through passive scanning
• Credential exposure: Email and password combinations from prior breaches circulating on dark web forums, often tied to corporate domains
• Third-party dependencies: Vendors and integrations that introduce risk the target may not fully track internally
• Historical incident signals: Public breach disclosures, regulatory filings, and litigation records that don't appear in questionnaire responses
• Technology stack: Accurate, independently verified view of what systems are actually in production — not what the target believes or claims

This isn't theoretical. In transaction after transaction, external intelligence surfaces material issues that traditional access-based reviews miss until post-close — when remediation costs have already been absorbed by the acquirer.

The access problem

Traditional due diligence requires the target to grant meaningful system access. In competitive processes, this is often unavailable or restricted. In add-on acquisitions, the access request itself signals sensitivity that deal teams prefer to avoid.

An external-first approach removes this constraint entirely. Assessment begins the moment a target is identified — without notifying the company, without requesting access, and without consuming management bandwidth.

What to look for in a cyber DD provider

The right provider should be able to:

1. Deliver an initial risk profile before you've had a single conversation with the target
2. Independently verify the technology stack and infrastructure against what the target reports
3. Provide findings with full audit trail — source, methodology, and timestamp — defensible to co-investors and LPs
4. Translate technical findings into quantified financial exposure that deal teams and investment committees can act on

The checklist below covers the key assessment domains we apply across every transaction — from initial screening through binding offer.