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

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With data loss affecting a business every two seconds and predicted to cost businesses $265 billion by 2031 It’s no wonder that more distributors are offering consumers the latest type of warranty: the cybersecurity warranty. These warranties are designed to help reduce the financial risks associated with cyberattacks, and are often used as a supplement to insurance. They fill in the gaps that insurance doesn’t cover.

However they’re not all made to be equal. Certain warranties come with strict terms that can cost companies significant amount of money in order to retrieve information in the event a cyber attack occurs. These may include:

Incorporating such a warranty into an M&A deal is an excellent way to make sure that the buyer is adequately protected against security threats and that the vendor takes steps to stop such attacks from occurring in the future. These new warranties are in addition to the usual representations and warranties clauses that are included in an asset purchase agreement or stock purchase contract can be negotiated so that they deal with privacy, data security and other pertinent issues specific to the deal.

A typical warranty covers the cost of repairing and replace equipment, as well as forensics, IT labor, and compensation for those affected by a breach. They also cover the costs of legal fees resulting from potential lawsuits. A more comprehensive version could also pay for lost revenue as well as the cost of reprogramming the software and the expense to restore reputational damage resulting from an incident of security.