How to Negotiate a Cybersecurity and Privacy Data Safety Warranty in a Technology M&A Deal

Mai 13, 2024

With data loss affecting businesses every second and estimated to cost businesses $265 billion by 2031 so it’s no wonder distributors are offering consumers a brand new type of guarantee that’s called the cybersecurity guarantee. Designed to mitigate the monetary risks associated with cyberattacks and breaches They are typically an addition to cybersecurity insurance. They can help to fill in the gaps when insurance doesn’t provide protection.

These warranties are not all the same. Certain warranties have strict terms which can cost companies a significant amount of money in order to retrieve information in the event a cyber attack occurs. The stipulations can include:

Incorporating such a warranty into an M&A deal can be an excellent way to make sure that the buyer has adequate protections against security threats and that the vendor takes steps to prevent such attacks from happening in the near future. In addition to the usual representations and warranties in an asset purchase or stock purchase agreement, these warranties can be negotiated to address privacy, data security, and other pertinent issues that relate to the deal being discussed.

A typical warranty will cover the cost of repair and replace hardware, the cost for IT labor, forensics, and compensation for those affected by the breach. They also cover the costs of legal expenses resulting from lawsuits. A more comprehensive version might include lost business revenue and the cost of reprogramming software and the cost to repair reputational damage from an incident of security.

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