Cybersecurity Due Diligence

Cyberattacks, supply-chain exploits and tightening regulation – including NIS2 and GDPR – substantially raise the level of risk and liability for buyers. At the same time, artificial intelligence is accelerating both attack and defence capabilities: AI-supported phishing campaigns, automated exploits and data exfiltration are matched on the defence side by AI-based anomaly detection, threat hunting and automated response. For investors, cybersecurity is therefore transaction-critical – it affects operations, valuation, covenants and the post-transaction agenda.

Context and relevance

The density of regulatory requirements is rising: NIS2 obliges companies to meet demonstrable security standards, while GDPR conformity and structured incident management are increasingly used as assessment criteria in transaction processes. At the same time, AI-supported attack methods are broadening the potential attack surface. A missing cybersecurity posture, undetected vulnerabilities or incomplete compliance fitness can burden the investment case directly and create post-deal risks that were not priced in beforehand. On the basis of a structured framework (Figure 1: Analytical framework for examining cybersecurity structures), FOSTEC & Company systematically assesses the effectiveness of controls, the maturity of the security architecture and the overall risk exposure along clearly defined domains.

Our approach

Our framework (see Figure 1: Analytical framework for examining cybersecurity structures) systematically assesses the effectiveness of controls, the maturity of the security architecture and the overall risk exposure along clearly defined domains:

1. Cyber security risk score

• Assessment of the cybersecurity posture through analysis of central controls, attack surfaces and vulnerabilities
• Risk profiling with classification by criticality, maturity and exposure
• Positioning against industry-standard best practices and standards

2. Compliance gap reporting

• Assessment of conformity with central legal requirements (including NIS2, GDPR)
• Examination and assessment of governance, evidence capability and policy and process maturity
• Development of a gap profile to analyse deviations from best practices and standards

3. Incident history analysis

• Analysis of the causes, impacts and recurrence risks of past security incidents
• Downtime analysis, including incident response, monitoring, escalation paths and cost impact
• Assessment of operational stability, including recovery capability, communication processes and stakeholder management

4. Remediation roadmap

• Assessment of quick wins versus structural initiatives by feasibility, dependencies and change impact
• Analysis of resource and budget requirements, and examination of the governance logic (milestones, ownership)
• Assessment of integration into business and IT roadmaps by compatibility, sequencing and time-based risk windows

Figure 1: Analytical framework for examining cybersecurity structures

Results and impact

Clients receive a fact-based, risk-focused assessment of the target’s cybersecurity situation: attack surfaces are quantified, compliance gaps are set out in a structured way, and security incidents are assessed for their impact on the investment case. The analysis provides a robust judgement of whether the company has a robust cybersecurity posture, meets legal requirements and can efficiently detect, contain and remediate security incidents. The results are operationally relevant, influence valuation and covenants, and form the basis for a structured handoff to legal partners on legal questions.

For PE investors, the cybersecurity due diligence thereby becomes a transaction-critical assessment module – not as a downstream compliance exercise, but as an integral part of risk assessment and purchase-price determination.

Position within the service portfolio

The portfolio of due diligence services comprises offerings of varying scope and focus. FOSTEC & Company provides 360-degree due diligence services for the analysis of all business aspects:

• Commercial Due Diligence
• Digital & E-Business Model Due Diligence
• Technology, Data & AI Due Diligence
• Organization & Talent Due Diligence
• Merger & Acquisition (M&A) Advisory
• Value Creation & Exit Readiness
• Carve-out & Post-Merger Integration

Find out in a personal introductory conversation how FOSTEC & Company systematically assesses a target’s cybersecurity posture and identifies transaction risks early – get in touch with us.