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 that more distributors offer customers a new kind of warranty, the cybersecurity warranty. It is designed to reduce the financial risk of cyberattacks and breaches They are typically an additional benefit to cybersecurity insurance, and can fill the gaps where insurance doesn’t offer protection.

However these warranties aren’t created equal. Some have strict stipulations that can result in companies having to pay the highest price for information retrieval in the case of cyber-attacks. These can include:

This kind of warranty can be included in the technology M&A agreement to ensure that the buyer is protected from potential security threats and that the vendor takes steps to prevent future attacks. These new warranties in addition to the usual representations and warranty clauses in an asset purchase agreement or stock purchase agreement, can be negotiated so that they deal with privacy, data security and other issues specific to the transaction.

A typical warranty will include the cost of repairing and replacing equipment and equipment, the cost of forensics and IT labor to retrieve data, and the costs of compensating those affected by breaches. Some also cover the cost of legal fees resulting from potential lawsuits. A more comprehensive policy could also cover lost business revenue as well as the cost of reprogramming software and the cost of repairing reputational damage caused by an incident of security.

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