How to Negotiate a Cybersecurity and Privacy Data Safety Warranty in a Technology M&A Deal
With data loss affecting businesses every two seconds and predicted to cost businesses $265 billion by 2031 So, it’s not surprising that more distributors are offering consumers an entirely new type of warranty that’s called the cybersecurity guarantee. The purpose of these warranties is to limit the financial threats posed by cyberattacks and breaches These warranties are usually used in conjunction with cybersecurity insurance, and can fill the gaps where insurance does not provide protection.
However these warranties aren’t made in the same way. Some warranties have rigid conditions that can cost companies a considerable amount of money to recover information in the event of a cyber attack. These may include:
Incorporating such a warranty into an M&A deal is an excellent way to ensure that the buyer is adequately protected against security threats that could be a threat, and that the vendor will take steps to prevent such attacks from happening in the near future. These new warranties, in addition to the usual representations and warranty clauses in an asset purchase agreement or stock purchase contract can be negotiated to ensure that they address privacy, data protection, and other relevant concerns specific to the deal.
A typical warranty covers the cost of repair and replace hardware, the cost for IT labor, forensics, and also compensation for people affected by a breach. Some warranties also cover legal costs caused by lawsuits. A more comprehensive version could also cover lost business revenues as well as the cost of reprogramming software and the cost to repair reputational damage from an incident of security.