Founders who’ve weathered acquisitions say due diligence feels like “handing over your medical records to a stranger—while running a marathon.”
Due-Diligence in 2024
Private equity holds $2.59tn in dry powder (Preqin 2024), and cybersecurity remains the hottest sector. But after Broadcom’s VMware layoffs, buyers scrutinise operational resilience harder than ARR. Your SOC 2 report won’t save you if pen-test results reveal unpatched CVEs.
Deals like Thoma Bravo’s $6.9bn Magnet purchase show buyers demand three things: clean IP ownership, verifiable threat detection rates (≤5% false positives), and evidence your IAM (Identity and Access Management) can scale without custom scripts.
The Due-Diligence Deep Dive
1. The Legal Foundation
Buyers will tear apart your cap table and contracts. Have these ready:
- IP assignment agreements for every engineer—even interns
- DPA (Data Processing Addendum) showing GDPR/CCPA compliance
- Cybersecurity insurance with at least $5m coverage (standard for Series B+)
2. Technical Proof Points
GTM claims need forensic backing. Prepare:
- EDR (Endpoint Detection & Response) logs showing mean time to detect (MTTD) <1 hour
- NDR (Network Detection & Response) evidence of lateral movement prevention
- DNS filtering reports proving you block callbacks to hostile TLDs
3. The Human Factor
Acquirers now audit staff retention plans. Be ready with:
- Key-person insurance for CTO/CISO
- Documented handover procedures for privileged access
- Proof your AI tools don’t expose customer data in training sets
Actionable Steps
Use this 90-day checklist:
- Week 1-4: Run a mock audit using the SANS Critical Security Controls framework
- Week 5-8: Fix any compliance gaps—especially in Zero Trust segmentation
- Week 9-12: Pressure-test your data room with a neutral third party
Metric to track: Can your team produce requested documents within 24 hours?
The Final Question
When a buyer asks “How do you know your detection rules work?”, can you point to more than anecdotal wins? If not, start documenting—before the term sheet arrives.
Leave a Reply