How to Negotiate a Cybersecurity and Privacy Data Safety Warranty in a Technology M&A Deal
Data loss is expected to cost businesses $265 Billion by 2031. It’s no surprise https://www.toptechno24.com/what-should-you-know-about-amazons-digital-currency that more distributors offer buyers a new type of warranty, the cybersecurity warranty. It is designed to reduce the financial risks associated with cyberattacks and breaches, these warranties are typically an additional benefit to cybersecurity insurance. They can help fill in the gaps where insurance does not provide security.
However, these warranties aren’t all created equally. Some have strict stipulations that could result in companies paying a substantial amount for information retrieval in the event of a cyber invasion. These can include:
This type of warranty could be included in an IT M&A agreement to ensure that the buyer is secured from security threats and that the vendor takes measures to prevent future attacks. In addition to the usual warranties and representations contained in an asset or stock purchase agreement, these new warranties can be bargained to address privacy issues concerns, data security, as well as other relevant issues that are specific to the deal at hand.
A typical warranty can include the cost of repairing and replacing hardware and equipment, the cost of forensics or IT labor to retrieve data, and the cost of compensating people impacted by a breach. Certain warranties also cover legal costs resulting from possible lawsuits. A more comprehensive version may also provide compensation for lost revenue as well as the cost of reprogramming the software, and the cost to repair reputational damage that was caused by an incident involving security.
