Acquisition Ready Security Checklist

TL;DR

M&A due diligence scrutinizes everything. Before acquisition talks, ensure clean code ownership, no security skeletons, documented architecture, clear data practices, and all compliance in order. Security issues discovered during due diligence reduce valuations or kill deals.

Code and IP 5

Code ownership is clearAll code written by employees or properly licensed.

No secrets in repositoryFull history scanned for credentials.

Open source licenses documentedKnow all licenses in your dependency tree.

No GPL in proprietary codeLicense conflicts can be deal-breakers.

Architecture documentedClear diagrams and documentation.

Security Posture 6

No known vulnerabilitiesDependencies and code scanned and clean.

Security incident history documentedPast incidents and resolutions on record.

Penetration test completedRecent third-party security assessment.

Access controls documentedWho has access to what and why.

Encryption practices documentedHow data is protected at rest and in transit.

Backup and recovery testedProven ability to recover from disasters.

Compliance and Legal 5

Privacy compliance verifiedGDPR, CCPA, etc. as applicable.

Data processing agreements in placeDPAs with all vendors and customers.

Security certifications currentSOC 2, ISO 27001 if applicable.

Insurance coverage documentedCyber liability insurance details.

Vendor security assessedThird-party risk is your risk.

What security issues kill M&A deals?

Major breaches that weren't disclosed, pervasive security debt that's expensive to fix, unclear data practices that create liability, and license violations that threaten the IP. Being honest about issues is better than having them discovered.

Do I need SOC 2 for acquisition?

Not always, but it helps significantly. Enterprise acquirers often require it. Even without certification, having documented security controls that could pass SOC 2 scrutiny is valuable.

How do security issues affect valuation?

Directly. Acquirers will discount for remediation costs, potential liabilities, and integration complexity. Clean security can be a competitive advantage when multiple companies are being evaluated.