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

Data loss is estimated to cost businesses $265 billion by 2031. It’s not surprising that more distributors offer buyers an entirely new type of warranty called the cybersecurity warranty. Designed to mitigate the monetary threats posed by cyberattacks and breaches they are generally used in conjunction with cybersecurity insurance and to https://www.toptechno24.com/how-to-achieve-express-warranty-agreement-using-data-room-services fill in the gaps when insurance does not provide security.

However, these warranties aren’t all made in the same way. Certain warranties come with strict terms that can cost companies a significant amount of money in order to retrieve information in the event of a cyber attack. These stipulations can include:

This type of warranty can be included in the technology M&A agreement to ensure that the buyer is adequately secured from security threats and that the vendor is taking steps to prevent future attacks. In addition to the usual warranties and representations that are included in an asset or stock purchase agreement, these warranties can be negotiated to address privacy security, data security, and other relevant issues that are specific to the transaction at hand.

A typical warranty will include the cost of fixing and replacing hardware and equipment, the cost of forensics and IT labor to retrieve data, as well as the costs of compensating individuals impacted by a breach. Some warranties also cover legal costs that could arise from lawsuits. A more comprehensive version may also pay for lost revenue and the cost of programming the software and the cost to restore reputational damage caused by a security incident.