During a deal, teams appropriately focus on price, structure, and tax, but those same pressures can leave less time to fully interrogate cyber risk. Meanwhile, attackers are quietly circling your transaction, looking for exactly what M&A creates: distraction, unclear roles, compressed timelines, and a lot of sensitive data moving around. Cyber risk is no longer just an IT problem; it is also a transaction risk. It can erode value, create hidden liabilities, and damage the buyer’s reputation long after closing.

This article looks at how cyber risk shows up in Canadian M&A, what proper cyber and privacy due diligence should cover, and how buyers can protect themselves before and after closing.

Why does M&A make you a prime cyber target?

M&A creates the perfect environment for cybercriminals and espionage actors:​

  • teams are managing multiple parallel workstreams, including negotiations, closing mechanics, and integration;
  • user accounts, access rights, and systems are in flux; and
  • there is pressure to keep timelines on track, which can compress the time available for deeper cyber review.

Threat actors know this. They use M&A windows to:​

  • steal trade secrets, pricing models, deal terms, and strategy;
  • launch ransomware when leadership is under maximum pressure to avoid disruption;
  • run business email compromise schemes using fake invoices and altered wiring instructions;
  • exploit insider risk when employees are anxious about their roles and more tempted to misuse access; and
  • target suppliers and other third parties in supply‑chain attacks as an indirect route into the deal.

For boards and deal committees, the bottom line is this: cyber diligence and cyber integration should be treated as integral to valuation, not just a compliance workstream addressed late in the process.​

What do breaches really cost — and when?

The 2025 IBM Cost of a Data Breach Report is a useful reminder that breach costs are driven by how quickly an incident is detected and contained, and how mature your security controls are. Faster identification, better monitoring, and thoughtful use of automation and AI can materially reduce the impact.​

For purchasers, the uncomfortable reality is that breach costs can arise post‑closing even if the underlying incident happened years earlier, through notifications, remediation, regulatory fines, and litigation. Companies that have done some preparation tend to fare much better when an incident hits; those that have not often pay for it in both dollars and distraction.​

What privacy and cyber “patchwork” do you inherit in Canada?

Our privacy framework in Canada is a mosaic of federal, provincial and sectoral laws. Depending on the target, you may be dealing with:​

  • federal private‑sector privacy law (PIPEDA);
  • provincial private‑sector laws in Alberta, British Columbia and Quebec;
  • sector‑specific regimes for health, financial services, and other regulated areas;
  • public‑sector and broader public‑sector laws for municipalities, hospitals, schools and other public bodies; and
  • international overlays, including the EU’s GDPR, a growing list of U.S. state privacy laws, and emerging AI‑specific regimes like the EU AI Act, as well as cybersecurity laws (NIS2, for example).

Across Canada, there can easily be three or four privacy laws that apply to a single province, depending on the actors involved. Most of these regimes share common expectations:​

  • “appropriate” security safeguards for personal information and key systems;
  • mandatory reporting of certain breaches to regulators and affected individuals; and
  • record‑keeping, accountability, and ongoing remediation of identified gaps.

An acquisition does not wipe that slate clean. If the target has weak safeguards, unresolved investigations, or past breaches that were not handled properly, those exposures can quickly become yours.​

What good cyber and privacy due diligence looks like

With that context, diligence is about understanding technology, data, and security so you can price risk, structure protections, and plan integration. Documentation alone rarely gives a complete picture. You need a balanced view of design, implementation and behaviour, and how systems and teams work in practice.​

Technology due diligence examines an organization’s products, architecture, and processes with a focus on security: Is the technology resilient and supportable? Are there concentrated risks, end‑of‑life components, or bespoke code no one really understands? How quickly can vulnerabilities be identified and patched?​

On the technology side, you should understand:​

  • how resilient and supportable the environment really is;
  • whether known vulnerabilities or technical debt pose material risk;
  • how identity, access, logging, and monitoring actually work day-to-day; and
  • the history of security testing, audits, penetration tests, and how findings were handled.

In privacy and cybersecurity diligence, you should at least cover:​

  • Data understanding:
    • what data is collected (customer, employee, health, financial, IP);
    • in what volumes, for what purposes, and under what legal basis; and
    • who is in the data (Canadians only, or also EU/US residents, etc.).

Safeguards and governance:

  • technical controls like encryption, access controls, and backup;
  • organizational controls like policies, training and clear ownership; and
  • storage locations, cross‑border transfers, and retention practices.

Controls, testing and incidents:

  • endpoint protection, detection, and response capabilities;
  • vulnerability management processes and timelines;
  • incident history: what has happened, how it was handled, whether notifications were made; and
  • existence and maturity of incident response plans and external breach support.

Third‑party and insurance:

  • how critical vendors are vetted and monitored;
  • contractual security and privacy clauses, including breach terms; and
  • cyber insurance coverage, exclusions and any known claims.

A crucial question: Have past breaches been reported properly? Because failing to disclose or notify can create ongoing regulatory exposure, and you can inherit liability arising from a pre‑closing breach.​

How can you use deal mechanics to allocate cyber risk?

Once risks are identified, there are three primary tools:

1. Representations and warranties:

Representations and warranties are statements of fact about the business that serve both a disclosure function and a basis for post‑closing indemnity if untrue. In M&A, cyber‑specific representations can flush out issues around past incidents, regulatory compliance, data mapping, security controls, and vendor management. Well‑drafted representations also support closing conditions: if a representation is inaccurate at closing (subject to negotiated materiality thresholds), the buyer may have termination rights or leverage to renegotiate terms. The objective is clarity and risk allocation: to elicit disclosure and allocate the consequences if the disclosed picture is incomplete or inaccurate.

2. Indemnification:

Indemnities provide a path to recover losses, but they are constrained by negotiated survival periods, baskets/deductibles, and caps. They should be treated as a backstop, not a strategy. For cyber risk, consider whether certain obligations, such as undisclosed past breaches, willful misconduct, or violations of privacy law should be carved out of caps, addressed through special indemnities, or subject to extended survival, depending on deal dynamics.

Also remember the practical side: indemnities are only as good as the seller’s ability to pay and the ease of enforcing the claim.

3. Insurance

Representations and warranties (“R&W”) insurance can respond to losses arising from breaches of representations and warranties, subject to underwriting exclusions, retention and policy terms. However, underwriters now scrutinize cyber posture and diligence quality closely. Weak diligence can lead to exclusions or narrower coverage, particularly for known vulnerabilities, weak access controls, or prior incidents. R&W insurance is a tool, but it should not be used as a substitute for good diligence, and insurers will typically underwrite on that basis.

These tools are not substitutes for real diligence; they are how you turn diligence findings into enforceable protections.​

What should your deal teams do now?

If you’re a buyer, investor, or advisor involved in Canadian deals, a few practical steps make a big difference:​

  • treat cyber and privacy as core deal risks from day one;
  • build integrated legal + technical diligence teams and give them meaningful access;
  • link cyber findings directly to valuation, conditions, and indemnities;
  • plan post‑closing assessments and remediation, especially where pre‑closing access is limited; and
  • make sure your board or investment committee sees cyber issues in plain language, not buried in an appendix.

Talk to Miller Thomson’s Cybersecurity and M&A teams

The most expensive time to discover a cyber problem is after closing, or in the middle of a live incident.​

If you’re planning a transaction or already in the middle of one, contact Miller Thomson’s Privacy and Cybersecurity lawyers, including David Krebs, or M&A lawyers, including Kirk Emery. A short conversation now can help protect deal value, reduce regulatory exposure and keep your next deal out of the headlines for the wrong reasons.ons.