Reframing Cybersecurity in Private Equity Transactions

Discussion with Robert Flores

Robert Flores brings over 30 years of experience in IT and cybersecurity, including two decades serving as CIO and CISO for leading private equity-backed firms. Today, as founder of CyberSweep, he specializes in cybersecurity diligence for both buyers and sellers in M&A deals. His mission is clear: make cybersecurity financially relevant to private equity stakeholders. This article unpacks Flores' actionable insights on reframing cybersecurity from a technical concern to a strategic value lever, offering a new lens for C-suites and investment committees alike. Through compelling analogies, lived experience, and industry-first practices, Flores makes one thing clear: cybersecurity is not just about technology, it’s about protecting your investment.

Focus on Posture, Not Just Threats

In a world where new vulnerabilities emerge daily, private equity investors need to reframe their approach. “Vulnerabilities change every day. What matters more is the company’s overall cybersecurity posture,” Flores explains. He advocates for a defense-in-depth strategy, a philosophy that assumes breaches can and will happen, and therefore focuses on resilience, not just prevention.

Defense-in-depth isn’t about one silver bullet. It's about layering multiple controls, technical, administrative, and physical, to slow down attackers and minimize damage. This includes endpoint protection, firewalls, access control policies, incident response plans, employee training, vendor risk management, and real-time monitoring. Each layer reinforces the other, creating a system that is harder to penetrate and faster to recover.

“It’s like going to the gym,” Flores analogizes. “If you go every day and eat right, you're in a better place than someone just taking a pill when something hurts.” In other words, strong cyber hygiene is a lifestyle, not a quick fix.

The Hidden Risks That Blow Up Deals

While diligence often covers compliance checklists and IT inventories, it rarely accounts for the most pressing threats facing companies today: ransomware and data exfiltration. These risks don’t just pose technical challenges, they introduce serious financial and reputational exposure.

“Hackers know exactly when deals are happening. They monitor sites like Pitchbook and Crunchbase, then target companies pre-acquisition,” Flores warns. These threat actors are patient. They gain footholds in a system and wait until the ink is dry on an investment,  then executing their attack. The goal? Maximize leverage and profitability. Hold critical systems hostage. Expose sensitive customer or employee data. Disrupt operations until the ransom is paid.

What makes these risks so insidious is their timing. M&A periods are marked by change, IT migrations, integrations, team turnover. These shifts create blind spots and distractions. “They wait for you to finalize the deal, then strike with ransomware,” Flores says. To mitigate this, he advises investors to move beyond surface-level diligence. Engage cybersecurity professionals, not just IT generalists. Ask about breach history, privileged access management, and how recent tech changes have been governed. “You need specialists who go beyond IT checks. Cybersecurity diligence must be surgical, not check-the-box.”

Turn Risk Into a Financial Conversation

For C-level leaders, risk only becomes real when it has a number. That’s why Flores emphasizes the need to translate cyber threats into business language: cost, liability, delay. “When Home Depot got hacked, people stopped trusting them. That’s lost revenue, not just tech recovery,” he points out.

Breaches are rarely just about system downtime. The ripple effects can last months or years: reputational damage, customer churn, regulatory fines, legal settlements. In healthcare, a HIPAA violation can mean millions in penalties. In finance, GDPR non-compliance can shut down operations in Europe. And lawsuits, from class actions to partner disputes, can snowball quickly.

“Preventative maintenance always costs less than emergency surgery,” Flores notes. That’s the language investors understand. Even if precise numbers are elusive, scenario planning works: What happens if we lose customer data? How long to recover operations? What PR costs will we incur? This approach shifts cybersecurity from a sunk cost to a smart investment, and makes the board listen.

Cybersecurity as a Value Driver

Too often, cybersecurity is treated as insurance, a necessary cost with no upside. Flores challenges this view. “Let’s say you’re Coca-Cola, protecting your secret recipe. That data is your prize possession and the gold in your mine. If cybersecurity safeguards that IP, it’s part of your valuation.”

He encourages both buyers and sellers to flip the script. Cybersecurity isn’t just about avoiding loss, it’s about protecting competitive advantages. Intellectual property, proprietary algorithms, customer insights, operational systems, these are crown jewels that drive valuation. If they’re well protected, they should command a premium.

On the sell-side, proactive security enhancements can pay off. Fixing known vulnerabilities, improving documentation, implementing third-party audits, these signal operational maturity. “You wouldn’t sell a house without fixing the leaky plumbing first. Same thing here. Patch your digital infrastructure, then price it into your valuation, because it’s worth something!.” The message is clear: if you're investing in risk mitigation before a sale, you're not just shoring up defenses, you’re raising your asking price.

AI, Ally and Adversary

AI is transforming cybersecurity at a breathtaking pace. For defenders, it's a force multiplier, analyzing logs, spotting anomalies, and reducing response time. But for attackers, it offers automation, scale, and sophistication. “Both good guys and bad guys are using AI,” Flores notes. And they’re getting better at it.

Threat actors use generative AI to craft more convincing phishing emails, discover misconfigurations, and automate exploitation. Meanwhile, security vendors tout AI-powered tools as cure-alls. But Flores issues a caution: “AI is a one-trick pony. It knows what it’s trained on, but it doesn’t predict well.”

The real safeguard? A robust cybersecurity architecture where AI is just one of many tools. Smart firms ask: How are AI insights validated? What are the false positive rates? Are humans in the loop? Ultimately, AI should augment, not replace, strategic oversight. PE firms must ensure that any AI implementation is context-aware, transparently governed, and embedded in a broader risk framework.

Read the Digital Curb Appeal

Even before a term sheet is signed, there are early signs that a company may be cyber-risky. Flores refers to this as the "drive-by test."

“We can assess a company's web posture just from the outside: outdated technologies, unpatched web apps, leaked credentials, all of it signals a lack of maturity.” These signs may seem minor, but they often reflect deeper cultural or operational gaps. Are teams under-resourced? Is leadership disengaged? Is risk being swept under the rug?

These signals offer valuable decision-making intelligence. They can inform deal prioritization, negotiation leverage, and even post-close integration strategy. “If the front yard is a mess, expect the kitchen to be worse.” For savvy investors, pre-engagement scans offer a low-effort, high-reward window into potential digital liabilities, and help ensure no one inherits someone else’s cyber mess.

Cyber Is Not IT

Perhaps Flores’ strongest point is his insistence that cybersecurity is not IT. “IT is about uptime and availability. Cybersecurity is about risk. They’re related but, not the same.”

Where IT looks forward, planning infrastructure growth and scalability, cybersecurity looks inward, hunting for threats and minimizing exposure. This distinction matters for investors. A company can have best-in-class IT systems and still be dangerously exposed to breaches.

“If a breach happens, your growth plan gets derailed. The valuation multiple you were aiming for may shrink dramatically, or disappear entirely.” In other words, even the best strategic plan can collapse if the foundational risk isn’t managed. For PE-backed companies on tight investment horizons, the cost of ignoring cybersecurity can be existential. “You’re not just buying an asset. You’re buying its vulnerabilities. Know what they are before you sign.”

Key Takeaways

To wrap up, here are the essential insights from Flores that every investor, executive, and deal team should internalize.

• Don’t chase individual vulnerabilities, focus on the company’s overall cybersecurity posture. A layered defense strategy, combining tools, training, and governance, offers lasting protection compared to constantly patching one-off issues.
• Ransomware and data exfiltration are often overlooked during M&A, yet they can cause the most damage. KNOW WHAT YOU ARE BUYING!
• When explaining cyber risk to boards and deal teams, tie it to financial impact. Reputational harm, regulatory fines, and legal liabilities resonate more clearly than technical jargon.
• Cybersecurity upgrades should be viewed as capital improvements. Proactively fixing issues boosts a company’s valuation.
• IT supports operations, while cybersecurity protects value. You need both, IT for scalability, cybersecurity for stability. Don’t assume one automatically covers the other.

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