For Venture Capital and Private Equity, Q1 of 2024 were challenging times, considering the high interest rates and hesitant investors. A cyber breach on your PortCo’s shouldn’t become one of those challenges. Here’s the cybersecurity perspective on how to ensure a smooth exit.
What you should know – To safeguard deals, Private Equity and Venture Capital firms should prioritize cybersecurity before a PortCo’s sponsor-to-sponsor transaction.
Let’s discuss how a cyber breach negatively impacts Private Equity and Portfolio Company exits.
Cyber breaches disrupt exit performance for Private Equity or Venture Capital PortCo’s by diminishing trust among a range of stakeholders – clients, vendors, and, of course, shareholders. Per regulatory requirements, you will also have to report this event annually to investors. Without confidence in your firm, potential buyers may elongate due diligence processes to scrutinize your cybersecurity strategy more closely.
Depending on the level of cyber hygiene, a due diligence review will uncover hidden vulnerabilities in your PortCo’s system, undermining the value of your portfolio company deals.
The aftermath of a breach can ultimately lead to withdrawn offers, failed deals, and a sentiment of uncertainty across your portfolio.
Read: Verizon, Yahoo agree to lowered $4.48 billion deal following cyber attacks
Why this is important – Successful cyber attacks make selling your Portfolio Companies exponentially harder.
A 2023 Accenture private equity report highlights that many PortCo’s “lack the cyber maturity required” to safeguard their operations against cybersecurity threats. The report found:
- The lack of cyber maturity leads to compounding consequences, with an average $1M+ ransom paid in response to a cyber attack.
- One out of every two attacks target businesses that have not undergone cyber remediation.
By failing to prioritize cybersecurity, your Private Equity or Venture Capital firm amplifies its risk. Prospective buyers become wary, demanding more extensive audits and assurances. In turn, an already unoptimized cyber strategy can devolve into an even more complex mess, leading to exit strategy delays and failures.
Read: Private Equity and Rising Cost of Cyberattacks
Get smart – Prioritize cyber before selling your PortCo.
A robust cybersecurity program enhances the attractiveness of a PortCo to potential buyers. Proactive measures against cyber attacks demonstrate responsible governance and operational resilience, reinforcing overall trust.
Take action – Use data-driven cyber analysis for your portfolio.
At Drawbridge, our platform is designed with the needs of Private Equity, Venture Capital firms, and their PortCo’s in mind. We’ve developed a data-driven approach to evaluate your PortCo’s cyber risk and benchmark the strength of their cyber program against other companies in your portfolio.
To learn more, watch the recording of our March 7 webinar, Protecting Private Equity Portfolio Companies: Using Data-Driven Insight to Mitigate Cyber Risk. [Webinar recording] Protecting Private Equity Portfolio Companies: Using Data-Driven Insight to Mitigate Cyber Risk.
