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IT & Cyber Deal Trends: 2024 in Review

Learn about cyber incident trends observed in M&A transactions in 2024 to help prepare for 2025.

While most companies strive for a year free of cybersecurity issues and challenges, for some businesses in 2024 that wasn’t the case. Reflecting on the past is one way to prepare for the future. This article recaps some of the trends we saw throughout transactions in 2024 in preparation for 2025. Specifically, we offer the security incident trends from the previous year, the value of cybersecurity insurance, and how IT budgets impact applications and enterprise resource planning (ERP).

Security Incident Trends 2024

According to an annual study by IBM and Ponemon Institute, the global average data breach cost in 2024 was $4.88 million, a 10% increase from 2023.1 Among several IT security incidents Forvis Mazars observed in mergers and acquisitions (M&A) transactions in 2024, the common causes can be attributed to three primary factors: people, processes, and technology.

Human error was a major contributor, often due to insufficient (or lack thereof) security awareness training, leaving employees vulnerable to cyberthreats. A Harvard Business Review noted in 2023 that 80% of cyberattacks are due to human error.2 This highlights the importance of educating staff about cyber risks and attack strategies, through security awareness training or similar, to foster a culture of vigilance.

On the process side, many companies lacked robust incident response policies (or did not have one altogether), leading to disorganized and delayed reactions to breaches, which increased the damage and financial losses. Effective incident response plans are crucial for swift and coordinated action during a time of crisis.

Technological gaps also played a significant role, with common issues like inadequate patching, lack of endpoint detection response solutions, and the absence of multi-factor authentication (MFA) leaving systems exposed to attacks.

These vulnerabilities emphasize the need for continual investment in and updating of security infrastructure to protect against evolving threats.

Cybersecurity Insurance

Cybersecurity insurance provides financial protection against the costs associated with cyber incidents, including data breaches, ransomware attacks, and other cyberthreats. The importance of cybersecurity insurance lies not only in its ability to mitigate financial losses but also in its role in encouraging companies to adopt stronger security practices. Despite its role, companies continue to lack or not have adequate cybersecurity insurance in place. One reason may be the perceived cost versus the “it won’t happen to us” mentality. However, the premiums for cybersecurity insurance often reflect the maturity of an organization’s IT environment. Lower premiums typically indicate more robust security measures and a well-managed environment due to meeting the necessary requirements for underwriting to achieve a lower premium. This correlation suggests that companies with lower premiums (assuming policy coverages and limits are comparable) have a reduced risk of being cyberattack victims, as they have demonstrated a higher level of preparedness and resilience against cyberthreats. Therefore, visibility into a company’s cybersecurity insurance premium can provide a baseline indicator of where a company stands with its IT environment.

IT Budgeting for Applications & ERP Systems

Many middle-market companies continue to struggle with effective IT budgeting and strategy, leading to many challenges during post-close implementations and other growth-driven initiatives. For example, during implementations of ERP systems or other critical operational applications after purchase, it is common for costs to be understated and not properly accounted for, leading to unexpected expenses. As NetSuite notes, it can be tempting to reduce next year’s IT budget to a slimmed-down version of this year’s to save some money. However, costly, unpredictable issues, “such as misaligned technology investments, resource shortages, or overspending on low-budget technologies,” may arise later.3

To avoid these pitfalls, analyzing these costs during diligence is crucial to identifying red flags pre-close. In addition, aligning an IT budget with a strategic IT plan on day one of the transaction is essential before undergoing large projects and initiatives to help ensure business goals are being met. Engaging reputable implementation providers can help mitigate these risks, aiming for better outcomes and avoiding costly mistakes. These providers bring knowledge, proven methodologies, and a history of successful deployments, and they can help align IT initiatives with strategic objectives.

Conclusion

2024 left an impression on us, and we expect many of these trends to carry into 2025. During the diligence phase, private equity firms should continue to emphasize evaluating a company’s IT security posture, cybersecurity insurance, and IT budget and strategy. Understanding a company’s current information technology and cybersecurity environments can help educate firms on the decision-making process throughout the M&A lifecycle. If you have any questions about IT and cyber topics, please reach out to the IT and cyber diligence team at Forvis Mazars.

Want to explore 2025 IT and cybersecurity trends that may impact future M&A transactions? Stay tuned for our upcoming webinar to learn more.

  • 1“Cost of a Data Breach Report 2024,” ibm.com.
  • 2“Human Error Drives Most Cyber Incidents. Could AI Help?,” hbr.org, May 3, 2023.
  • 3“IT Services Budgeting: How-To & What to Include,” netsuite.com, May 29, 2024.

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