A practitioner’s brief on protecting deal value, separating signal from theatre, and structuring terms accordingly.

In alternative investments, we underwrite execution, integration, and customer concentration risk with rigor. Cybersecurity deserves the same level of discipline — not as a compliance checkbox, but as both a valuation factor and a lever for post-close value creation.

The past decade has shown how latent cyber exposure can directly affect deal outcomes - including price adjustments at signing, regulatory delays in the first year, and unplanned capital or operational expenditure that undermine the original investment thesis. A disciplined cyber review is therefore not about technology for its own sake; it’s about protecting EBITDA, preserving revenue durability, and maintaining covenant headroom.

Why cyber diligence is investment diligence

A target’s identity and third-party control posture directly affects how quickly you can stabilise operations on Day 1, execute separations or roll-ups, and convert pipeline. Weak access controls, untested recovery procedures, or unmanaged vendor sprawl all slow integration, increase hidden costs, and delay time-to-value.

Conversely, a well-governed identity model, tested backup and restore capabilities, and clearly defined vendor boundaries reduce friction, minimise unexpected spend, and sustain commercial momentum.

In short, cyber diligence is the difference between buying growth and buying a breach.

How insufficient diligence destroys value

When diligence is thin, the costs emerge precisely when the balance sheet is least able to absorb them. Incident response, forensics, legal remediation, and insurance renegotiations all hit the P&L. Sales cycles lengthen as certifications are re-earned, while operational interruptions magnify losses far beyond any ransom or remediation expense. 

In several public cases, acquirers have absorbed fines and retroactive obligations directly tied to cyber diligence gaps in the acquired environment. Even without a major incident, post-close clean-up - from deploying multi-factor authentication and privileged access controls to enforcing log retention and disaster recovery drills - becomes unplanned capital expenditure that delays integration and erodes value-creation timelines.

Translating findings into deal mechanics

Cyber findings should translate directly into deal economics and terms. Quantified risks can justify purchase-price adjustments, targeted holdbacks, and more precise representations and warranties.

Post-close, a 100-day plan anchored by clear, board-visible milestones ensures accountability and execution. Typical early priorities include:

• Enforcing phishing-resistant MFA for administrators and remote access
• Completing a timed restore of a crown-jewel workload
• Deploying EDR (endpoint detection and response) across all assetsHardening CI/CD (continuous integration and delivery) pipelines
• Running a cross-functional tabletop exercise that includes finance, operations and legal. 

Cyber insurance should be bound without exclusions that undermine recovery – such as clauses for ‘failure to maintain MFA’. This approach aligns incentives, caps downside exposure, and accelerates post-close integration.

What real maturity looks like—beyond the slideware

Mature cybersecurity programs lead with identity. They implement broad single sign-on (SSO), phishing-resistant multi-factor authentication (MFA), device trust policies, and automated joiner-mover-leaver processes. 

Privileged access is granted just-in-time and fully audited. 

Endpoint and email controls are consistent across the estate: legacy mail protocols are disabled, and DMARC enforcement protects domains from spoofing. 

Detection and response are measurable. Logs retained for meaningful periods, alerts are validated, and 24×7 incident response is tracked by MTTR (mean time to recover). Data governance is equally disciplined - data is classified, egress controlled, encryption keys managed in secure KMS/HSM environments, and backups are immutable, segmented and routinely tested through timed restores.

Finally, third-party access is tiered by potential impact (‘blast radius’), enforced through SSO/MFA, and reinforced by contracts that grant evidence rights and enable rapid offboarding. 

These are the hallmarks of operational maturity - signals of real resilience, not marketing artifacts.

One-page investor checklist

Use this quick-reference framework to verify whether a target’s cybersecurity posture supports valuation assumptions and post-close stability.

• Valuation drag check: Any price reductions or escrows tied to disclosed incidents? Benchmark against public re-cuts following breach disclosures.)
• Restore reality: Evidence of a successful, timed restore within the past 90 days for a crown-jewel workload. If missing, reserve for downtime using a high hourly interruption cost.
• Identity health: Named list of IdP (Identity Provider) admins; phishing-resistant MFA enforced; automated joiner-mover-leaver (JML) processes; SSO for contractors and vendors.
• EDR/MDM coverage: ≥95% of endpoints and servers protected; non-compliant devices isolated.
• Email and domain security: Modern filtering; DMARC policy set to ‘reject’; legacy protocols disabled.
• Logging and response: ≥12-month log retention; validated alerts; 24×7 monitoring with tracked mean time to recover (MTTR).
• AI risk posture: Inventory of AI tools and models; access controls for plugins/APIs; defined remediation plan and budget for shadow AI.
• Data and key management: Data classification in place; DLP (data loss prevention) on egress; encryption keys stored in KMS/HSM; backups immutable and segmented.
• Third party risk: Vendors tiered by blast radius; SSO/MFA for Tier-1; 15-minute kill-switch and offboarding runbook; contractual evidence rights in place.
• Regulatory exposure: Review open investigations, fines, or undertakings – including inherited liabilities from acquisitions.
• Deal terms: Cyber-specific holdbacks with milestone-based release; R&W insurance aligned to actual control maturity, not documentation alone.

From insight to action

Cyber diligence is not an IT exercise; it is a core component of underwriting. Treat control evidence with the same scrutiny as audited financials and ensure findings directly inform deal terms. Translate identified gaps into contractual protections, targeted milestones, and measurable post-close actions.

A disciplined 100-day plan should follow — one that turns diligence into a roadmap for execution, not just documentation. This level of preparedness preserves the investment thesis, accelerates value creation, and safeguards the growth narrative that underpins every deal.