Cybersecurity due diligence for private equity: one process for every deal
- Cybersecurity
Most deal teams already know that a target's IT and security can move the price. What they often lack is a way of looking at it that holds steady from one deal to the next. When every review is scoped differently, every memo reads differently, and findings that should be easy to compare end up being argued over. This article walks through the pre-close process ProSource runs, why it is the same on every deal, and what the deal team gets back.
What cybersecurity due diligence is for
Cybersecurity due diligence is the part of transaction diligence that asks three practical questions: what the target’s IT and security really look like, what it will cost to fix what is weak, and what needs attention first once the deal closes. It is not an audit, and it is not trying to be. It happens with partial access and a short window, so the aim is a picture that is good enough to price the work and plan the first months of ownership, along with a clear list of what still has to be confirmed.
That limited access is exactly why the process matters. With only so many documents and so many interviews to work from, a deal team gets the most out of a review that knows in advance what it is looking for.
Why the same process on every deal
The cost of getting this wrong is not abstract. Kroll surveyed 325 private equity executives for a global report published in February 2026 and found that firms suffered, on average, $2.1 million in financial impact per cyber incident.
The same report shows how uneven the discipline is. Among larger firms, with more than $25 billion under management, 81% said cybersecurity due diligence is a standard part of the transaction diligence process. Among smaller firms, only 29% said the same.
Cyber due diligence as a standard part of transaction diligence. Kroll, February 2026.
Making it standard does not mean making it large. It means asking for the same documents, reviewing the same areas and receiving the same kind of memo on every deal. Findings become easier to price because they are described the same way each time, and easier to compare because the second target is measured exactly like the first. Nothing has to be rebuilt from scratch when the next deal arrives. KPMG UK makes a similar point for managers focused on bolt-ons and roll-ups: “having a clear standard approach to things like cyber security and finance is key to rapidly integrating new assets into existing platforms”.
The process, step by step
Here is how a ProSource pre-close review runs, from the first call to the handoff after close. Use the steps below to move through it.
Step 1 of 5
Start with a conversation, not a contract
Every engagement begins with a brief introductory call about the deal: your needs, your timeline and the regulatory requirements that may apply to the target. That call sets the depth of the work. Some deal teams want a high-level view to inform the offer. Others want a full pre-close deep dive.
We can be as involved as you want, from a review of the documents in the data room to a full internal and external review of the target's systems. It also helps a great deal to speak with the target's IT manager or team, because they know where the weak spots are long before anyone else does.
Step 2 of 5
The inputs that make the review possible
A pre-close review runs on a small set of inputs, and most of them are things the deal team is already gathering:
- An engagement letter and a non-disclosure agreement.
- The list of documents available in the data room.
- Interviews with the people who know the company's technology and its costs, usually the IT lead, the CFO and an operations leader.
- Explicit permission from all parties before anyone reviews the target's systems, preferably under a mutual NDA.
- The deal dates, so the work fits the window rather than the other way round.
Step 3 of 5
Six areas, the same way every time
The review looks at the same six areas on every deal: network and infrastructure, endpoint security, identity and access, email security, backup and recovery, and compliance gaps. Running the same areas in the same order is what makes one target comparable with the next.
Alongside those six areas, we screen which regulations are likely to apply to the company, look at staffing, key-person risk and dependence on outside providers, and flag technology contract terms, such as renewals, termination rights and change-of-control clauses, for deal counsel to review.
Step 4 of 5
Findings the deal team can price
The output is built for a deal team, not an IT department:
- A red-flag memo with each finding rated high, medium or low and backed by the evidence we saw.
- A findings register that tracks every item in one place.
- Estimate ranges for the fixes, split into one-time and recurring costs.
- A list of items to confirm after close, where access before close was not enough.
- A readout call to walk through the findings and answer questions.
Step 5 of 5
Confirm what diligence could only describe
Diligence works from documents and interviews. Once the deal closes, the Post-Close Technology Baseline confirms the picture with hands-on access, including a backup restore test, a review of IT vendors and contracts, and a check of systems past their vendor's end of support. Urgent exposures are flagged as they are found rather than held for the final report.
What the review does not do
A clear scope protects the deal team as much as it protects us, so it is worth being plain about the edges. The pre-close review is not a legal opinion; questions about what a contract or regulation means for the deal belong with deal counsel. It is not an audit or a certification, and it is not an opinion on insurance coverage, which stays with the carrier and the broker. Penetration testing is a separate engagement that the target must authorize.
None of that makes the review less useful. It keeps the memo focused on what the deal team needs: what is there, what it will cost, and what to confirm later.
Turning findings into deal numbers
Timing changes how useful the findings are. A review that starts before the offer or valuation is set gives the deal team room to account for what it finds. The same findings surfacing in the last weeks before close tend to complicate everything around them.
"Cyber security due diligence teams are balancing two distinct time horizons that could impact deal numbers: immediate remediation costs required to bring the target company up to acceptable industry security standards and longer-term red flags that could undermine future value creation."
Tyler Leach, Director, Forvis Mazars US
That is why every estimate we give is split into one-time and recurring costs. A one-time cost, such as replacing a system past its end of support, belongs in the price. A recurring cost, such as monitoring or licensing the company never paid for, belongs in the operating plan. Mixing the two makes both harder to defend.
Scrutiny from the other side of the table is rising, too. In a Mergermarket and SRS Acquiom survey of 150 senior US investment banking executives, published in February 2026, 84% said they expect increased scrutiny of cybersecurity due diligence in the next 12 to 24 months, and 43% expect significantly greater scrutiny. A company that has been through a disciplined review is easier to sell later.
One method from diligence to ownership
The pre-close review is the first stage of the same four-part method ProSource uses with every client. The stages simply carry on after close.
- AssessWe evaluate the environment, challenges and goals: before close through the pre-close review, after close through the hands-on baseline.
- PlanWe design a customized roadmap to reach the company's objectives, with estimate ranges and owners.
- ImplementWe deploy solutions with coordination to minimize friction for the company's people.
- SupportOngoing management, monitoring and support throughout the hold period.
How ProSource helps
ProSource is a managed IT, cybersecurity, cloud and compliance provider founded in 2006 by CEO Leon Hart, who still leads the company, with offices in Oviedo, Orlando and Melbourne and clients supported nationwide. We offer Private Equity and Venture Capital firms one repeatable process: the same pre-close review on every deal, a baseline after close, and the same standard and reporting at each portfolio company.
If a deal is coming up, book an introductory call or call 888-948-7767.
Frequently Asked Questions
What does it cost?
It depends on the company: the number of sites, users and systems, the deal timeline and what you need to know. It starts with a brief introductory call about your needs, timeline and regulatory requirements. From there, you choose a high-level view or a full pre-close or post-close deep dive, which can include a migration plan and managed services.
How long does a pre-close review take?
It depends on access and size. We discuss your timeline on the introductory call.
Do you replace a company's IT team or current provider?
We offer both fully-managed and co-managed IT services. This means you can use ProSource as an extension of your team (co-managed services) or we can be your entire IT department (fully-managed services). Co-managed support keeps the IT lead in place and adds coverage where the team is thin. Fully-managed IT has ProSource completing virtually all of your IT needs with services like vCISO and compliance-as-a-service available as needed.
Can you test a target company's systems before you invest or acquire?
We review a target's systems, inside or out, only with explicit permission from all parties, preferably under a mutual NDA. Penetration testing is a separate engagement the target must authorize.
But isn't a SOC 2 report enough?
Not on its own. A SOC 2 report is useful evidence if the target has one, but it reports on a system, not necessarily on the whole company or all of its products and services. Management defines the boundaries of that system, and anything outside those boundaries is outside the auditor's opinion. An ISO 27001 certificate works the same way: it covers the scope the company chose for its security management system. When you acquire a company, you acquire all of it, including the products, systems and hidden liabilities the report never looked at. Diligence still asks about the accounts, contracts, incidents and end-of-support systems that matter to the deal.
Will the assessment make the company compliant or insurable?
No assessment can promise that. We show where the company stands against the standards that apply, help close the gaps and document the evidence. Auditors, regulators and insurers make their own decisions.
Can we use the same process on every deal?
Yes. That is the point of it: the same pre-close scope, the same six areas and the same memo format each time.
Related articles
IT due diligence checklist for private equity firms
A one-page IT and cybersecurity checklist Private Equity and Venture Capital deal teams can use on every target, from the request list to red flags and multi-site checks.
Read more →
What Happens After a Business Data Breach? A Step-by-Step Guide
Learn what happens after a business data breach, including response steps, notification, recovery, and ways to prevent future security incidents.
Read more →
CMMC Phase 2 Suspension: What Florida Contractors Should Do
CMMC Phase 2 was suspended July 13, 2026, but DFARS and NIST 800-171 still apply. What Florida defense contractors should do during the pause.
Read more →Book an introductory call
ProSource Technology Solutions | Oviedo, Orlando and Melbourne, Florida | 888-948-7767 | sales@getprosource.com | getprosource.com