Navigating the intricacies of Mergers & Acquisitions: A sector-wide alert

Written By

Aravind Radhakrishnan Nair, CTPRP | Risk Manager at Supply Wisdom


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Navigating the intricacies of Mergers & Acquisitions: A sector-wide alert


With the rapidly changing business world, mergers and acquisitions have become a common phenomenon. They offer a chance for growth, diversification, and market expansion. However, these ventures also pose several challenges, particularly in the realm of cybersecurity. The integration of technologies, networks, and data through mergers and acquisitions (M&A) has introduced a complex web of cybersecurity challenges.

A recent analysis of a cyber incident involving a major player in the healthcare sector (added below) has highlighted the transitional risks associated with these deals. While the company names and specifics remain anonymous, the lessons learned are universally applicable and underscore the critical importance of being watchful in today's interconnected business landscape.

The analysis highlights the need for businesses to continuously monitor third-party suppliers to detect and prevent potential threats during M&As in the supplier ecosystem.


Transitional Security: A Double-Edged Sword


During Mergers and Acquisitions, the drive for operational continuity sometimes undermines the critical aspect of cybersecurity, leaving transitional vulnerabilities open to exploitation by cybercriminals. The integration process, which entails merging diverse IT systems and corporate cultures, reveals a host of vulnerabilities, expanding the attack surface and rendering both entities a prime target for cyber adversaries. One of the most daunting challenges in this scenario is aligning security policies and practices between the merged entities. This divergence often results in oversights and security control gaps, especially concerning data consolidation. The aggregation of vast amounts of sensitive data, particularly in the healthcare sector, presents an irresistible target for attackers, increasing the likelihood of data breaches. This delicate equilibrium between operational demands and cybersecurity imperatives underscores the importance of strategic planning and risk management.


Transitional Cyber Vulnerabilities During M&As: A Closer Look

A comprehensive analysis reveals that several critical transitional vulnerabilities may arise during mergers and acquisitions (M&As). These vulnerabilities include:


  • Application Security Flaws: Predominantly attributed to inadequate secure coding practices and the utilization of outdated software components, exposing the system to various web application attacks.


  • Patch Management Inefficiencies: The discovery of unpatched vulnerabilities points to inefficiencies in the patch management process, including delays in applying critical patches and a lack of systematic vulnerability prioritization.


  • Credential Management Flaws: The significant issues surrounding credential management indicate a heightened risk of attacks through credential stuffing, phishing, or brute force methods. This risk is often exacerbated by inadequate password policies and the lack of robust authentication measures.


  • Risks of Information Disclosure: Misconfigurations that lead to unintended information disclosure can provide cybercriminals with critical insights into an organization's internal systems and sensitive data, stemming from poor access controls and encryption practices.


Early Detection: The First Line of Defence


Potential indicators of a cyberattack include abnormal network traffic, anomalies in system behaviour, and security solution alerts. Such signs, especially in the context of recent corporate mergers or acquisitions, necessitate heightened vigilance and prompt investigative action to mitigate potential threats.


Strategies for Mitigation and Prevention


  1. Prioritize Cybersecurity in M&A Strategies: Cybersecurity must be an indispensable part of the M&A process, which involves thorough due diligence, establishing robust security postures, ensuring compliance, and active monitoring.

  2. Implement Continuous Monitoring and Incident Response: The implementation of continuous surveillance and effective incident response mechanisms is critical for the early detection and management of cyber threats. Real-time monitoring, regular security assessments, and proactive risk management measures are essential for maintaining a strong defensive posture.

  3. Foster a Security-Conscious Culture: A unified approach to cybersecurity, consisting of regular training and awareness initiatives for all staff, is crucial for early threat identification and effective management of cybersecurity responsibilities.


In conclusion, the insights gained from the analysis of transitional vulnerabilities during M&A activities underscore the critical need for vigilance, strategic planning, and the adoption of robust cybersecurity measures. To mitigate these risks, organizations must prioritize cybersecurity at every stage of the M&A process, from due diligence to the post-merger integration phase.


As businesses strive to expand through these strategic ventures, it can also be a risky and challenging process. To mitigate potential threats and ensure a smooth transition, businesses need to adopt a proactive approach. Fortunately, Supply Wisdom offers a solution. Supply Wisdom's ability to offer actionable intelligence on a wide array of risks—including cyber, compliance, financial, and operational—makes it an invaluable asset for businesses navigating the complex landscape of M&As. This helps businesses to avoid any potential liabilities related to the integration process, ensuring long-term success. In conclusion, Supply Wisdom is an essential tool for businesses that are looking to navigate the M&A process effectively. By utilizing Supply Wisdom's risk monitoring and intelligence capabilities, businesses can ensure a seamless integration process, safeguard their investments and reputations, and avoid any potential risks that could impact their operations.

Case in point - 'A recent analysis of a cyber incident involving a major player in the healthcare sector'

Below is a high-level case-study analysis of “Change Healthcare”, focusing on its cybersecurity landscape following a targeted cyberattack that was shared with one of our clients.



The cybersecurity landscape surrounding “Change Healthcare”, (a service provider of revenue and payment cycle management that connects payers, providers, and patients within the U.S. healthcare system), especially considering its mergers and acquisitions (M&A) culminating in the 2022 acquisition by UnitedHealth Group's Optum, (an American healthcare services provider which has been a subsidiary of UnitedHealth Group since 2011), illustrates a nuanced web of vulnerabilities and potential risks that might have paved the way for the cyberattack it suffered. This analysis draws upon insights from three years of alerts on "Change Healthcare" and its Cyber risk profile, to offer a comprehensive view of the cybersecurity challenges introduced by these M&As.


The merger and acquisition activities involving Change Healthcare and its subsequent integration into Optum have significantly complicated its cybersecurity environment. This complexity is characterized by heightened vulnerabilities and a broadened attack surface due to the amalgamation of varied IT infrastructures, network systems, and corporate cultures. These integrations exacerbated existing security vulnerabilities and ushered in new ones, while the emphasis on operational continuity over cybersecurity heightened the organization's risk of cyberattacks. Identifying and addressing these vulnerabilities is crucial for fortifying Change Healthcare against future cyber threats.


Cybersecurity Challenge Analysis

  • Integration Complexities and Attack Surface Expansion: M&A activities necessitated merging diverse IT systems and networks, substantially enlarging the attackable digital footprint. This expansion not only unveiled new vulnerabilities but also spotlighted existing ones, especially where legacy systems and outdated software were involved. The integration's complexity often led to overlooked security gaps, particularly when merging entities with differing security policies and practices.

  • Security Policy Divergence and Data Consolidation Hazards: The challenge of aligning varied security policies, standards, and compliance practices posed significant risks, potentially leading to oversight in security controls. The aggregation of extensive amounts of sensitive data, notably patient health information, presented attractive targets for cyber adversaries, escalating the risk of sophisticated data breaches.

  • Transitional Security Weaknesses and Compliance Intricacies: Occasionally, the need to maintain operational continuity overshadowed cybersecurity, introducing transitional vulnerabilities. Furthermore, navigating the healthcare sector's stringent regulatory and compliance landscape added layers of cyber risk, including potential data breaches.


Change Healthcare Inc. - SW Cyber Risk Profile Change Alert - Shifts from Low to Moderate

A thorough examination of the "Change Healthcare” cyber risk profile has unveiled several critical vulnerabilities and misconfigurations, shedding light on potential contributory factors to the cyberattack:


  • Application Security Weaknesses: The significant number of vulnerabilities in web applications could be attributed to inadequate secure coding practices, insufficient security testing, or the use of outdated software components. Attackers often exploit such vulnerabilities to conduct SQL injection, cross-site scripting (XSS), and other types of web application attacks.


  • Ineffective Patch Management: The presence of unpatched vulnerabilities suggests challenges in the organization's patch management process. This could result from delays in applying critical patches, lack of automation in the patch management process, or insufficient prioritization of vulnerabilities based on risk.


  • Poor Credential Management: The large number of issues related to credential management highlights the risk of credential stuffing attacks, phishing, or brute force attacks. This could be due to inadequate password policies, failure to implement multi-factor authentication (MFA), or the reuse of passwords across multiple services.


  • Information Disclosure: Misconfigurations in services or public assets that lead to information disclosure can provide attackers with valuable information about the organization's internal networks, systems, and potentially sensitive data. This could be a result of insufficient access controls, lack of encryption for sensitive data in transit or at rest, or failure to properly secure APIs.


Early Indicators and Areas of Risk

  • Unusual Network Traffic and Suspicious System Behaviors: An increase in unusual network traffic and anomalies in system behavior, such as unexpected data flows or unexplained configuration changes, could have served as early indicators of a potential cyberattack. These signs might include increased scanning activities targeting known vulnerabilities within Change Healthcare's network.


  • Alerts from Security Solutions and Third-Party Vendor Risks: Security solutions flagging vulnerabilities, such as SSL/TLS issues or application weaknesses, and incidents within third-party services could indicate imminent threats. The integration process post-M&A might have obscured the distinction between legitimate activities and malicious actions, complicating early detection efforts.


The cyberattack on Change Healthcare underscores the heightened vulnerabilities and risks associated with M&A activities in the cybersecurity domain. Therefore, it's crucial to closely monitor M&A activities within your vendor ecosystem and proactively conduct thorough assessments and due diligence to mitigate potential risks.

By understanding the complexities introduced by these corporate changes and recognizing early indicators of potential threats, businesses can better prepare and protect themselves against any kind of collateral damage.

If you're interested in continuously monitoring your third parties and their locations, you can book a time with one of our specialists here.

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