The Hidden Physical Security Risks in M&A Deals

When most companies perform due diligence before mergers and acquisitions, many of the risks that are examined during that audit are financial: contracts, finances, and brand reputation all taken into account during the due diligence process. But financial risk isn’t the only sort of risk a company can carry.

If your M&A due diligence isn’t taking security risks into account, you may have a big blind spot when it comes to your investment. Are all your acquisition’s sites secure? Has the company suffered a data breach? What about their policies? Are the past or ongoing liabilities that this location has been exposed to? Does your acquisition subscribe to a culture that puts security first? All of those elements will affect the value of your investment.

If you don’t know the answers to the above questions, it’s time to perform a risk analysis as part of your due diligence process. The data you’ll get from a security risk analysis platform may change your understanding of your prospective investment.

What is a risk analysis?

Often you will see the terms “assessment” and “analysis” used interchangeably when it comes to determining a company’s risk. They aren’t the same thing, however. A risk assessment is just that: gathering information to assess an organization’s (or a site’s) security and risk.

A risk analysis is a comprehensive examination of the data produced by one or more security assessments. When we do a risk analysis, we use the set of data we’ve gathered during an assessment to produce a set of recommendations that will help you make your organizations safer.

When it comes to M&A, a security analysis is a great tool that helps you understand the value of the company you’re purchasing, and also ensures you’re not overpaying for a site that will need a security overhaul, for example. Think of it as an audit of an asset’s security risk.

What to look for during a pre-M&A risk analysis

While every company has a different appetite for risk, there are some common items your analysis should include.

1. The location of sites: It’s important to understand where each site is, and if those sites are safe. Your assessment should take into account crime data for the area around each site, as well as information about weather patterns and geography. If one site is in a flood plain, that’s a risk you need to know about.

2. The infrastructure at each site: What does each of the company’s sites look like security-wise? Is there a guard presence? Are all the security cameras working? Have the fire extinguishers been inspected recently?

3. Policies and procedures: What is security like now in the company you want to purchase? Are the policies in place sound? Does management review the policies regularly?

4. Cybersecurity: Has the company suffered a data breach lately? What controls are in place to secure the company’s data ecosystem? What about its digital supply chain? Are third parties secure?

5. The security culture of the organization as whole: Does the entire company value security, from the top down? (If the security department is in the basement, or there’s no upper management devoted to security, chances are your new company does not currently embrace a culture of risk.) Is there a culture of risk with the organization you wish to purchase?

Why is risk analysis so important before a merger or acquisition?

Imagine you’re buying a house. You wouldn’t make the purchase without having the home inspected first, would you? If the foundation is crumbling, for example, you’d want to know, because a bad foundation is a major risk for a homeowner. It’s the sort of risk you might not want to take on in a new investment. Just as you wouldn’t buy a home without knowing all the associated risks, you shouldn’t buy a business without being aware of all of its risks.

A company’s financials tell only part of the story. Without a clear understanding of its physical, digital, and cultural security posture, you may be taking on costly, hidden risks that could erode the value of your deal.

Circadian Risk’s comprehensive security risk platform gives you that clarity. Our tools transform complex data from multiple sites and systems into visual, actionable insights, helping you identify vulnerabilities, quantify risk, and make confident, informed decisions before you buy. Whether you’re assessing physical security, cybersecurity, or organizational culture, Circadian Risk’s risk analysis platform helps ensure your new acquisition strengthens your portfolio, not your exposure.

Before you finalize your next deal, see how Circadian Risk can help you make smarter, safer M&A decisions.

Schedule your risk-free demo today.

About the Author

Daniel Young

Founder & Chief Innovation Officer

Daniel has been a security and risk advisor for more than 10 years, and is passionate about helping companies to better understand their risks to undesirable events on a daily basis. Dan previously served as the Regional Bioterrorism Coordinator for District 1 in Michigan, where he was instrumental in preparing communities for catastrophic incidents. He has also acted as the Private Security Liaison for the City of Lansing’s Critical Infrastructure Team, which identified and documented deficiencies in the city’s critical infrastructure.

He is a Co-Founder of the CSO Risk Council, a think tank of seasoned security professionals and thought leaders with extensive experience in managing the physical security and risks of large enterprises consisting of multiple sites and whose mission is to create a better process to develop and share innovative solutions and pertinent information with organizations to improve safety and security risk by providing a forum to discuss best practices and recommendations for specific risk scenarios and to network with other enterprise security professionals.