Mergers and acquisitions (M&A) can feel like tightrope walks for mid-market and enterprise companies. Thereās the thrill of growth and new opportunities, but also a lurking risk that can topple even the best deals: compliance. When two organizations become one, aligning their technology and processes isnāt just an IT choreāitās a compliance minefield. Overlooking how data is handled, secured, and regulated during an M&A can invite fines, breaches, or worse, derail the whole deal. In fact, regulators often scrutinize businesses more closely during periods of change like M&A, and failing to preserve compliance amid the chaos can lead to lawsuits or brand damage. Compliance is not something that pauses just because youāre integrating systems; all those rulesāHIPAA, SOC 2, GDPR, CMMC, and othersāstill apply and compound when companies merge. This post will explore the common compliance challenges businesses face during M&A and how to stay audit-ready through it all.
Why M&A Compliance Matters (and Where Companies Fall Short)
Itās easy to see why compliance sometimes slips through the cracks in a merger. Leadership is busy with valuations, legal papers, culture fit, and day-one business strategy. IT and compliance teams often get involved late, sometimes only after an issue pops up. Unfortunately, this reactive approach is exactly where companies fall short. Major IT changes during a merger make organizations more prone to security incidentsāIBMās 2023 Cost of a Data Breach Report found that companies undergoing big IT transitions (like those in M&A) are more likely to suffer costly breaches. Why? Because in the rush of integration, basic security practices can be overlooked: maybe a legacy system stays running without proper monitoring, or a user account from the acquired company doesnāt get deactivated. Bad actors know merging companies are vulnerable.
Equally important, compliance obligations do not take a holiday when two businesses combine. If one company was subject to strict regulations (say, HIPAA in healthcare or GDPR in Europe), the new merged entity inherits those obligationsāand any new ones the other company brings along. Businesses often underestimate this compounding effect. A common pitfall is failing to integrate compliance programs early. One team assumes the other has it covered; the other figures ābusiness as usualā will suffice. The result is often duplicated effort at best, and serious gaps at worst. Consider documentation: each company may have its own way of tracking policies, controls, and audits. If those arenāt centralized and reconciled, things will slip through. As one Meriplex M&A guide bluntly puts it, IT (and by extension, the compliance function) should act as the strategic safety net during a merger, ensuring documentation is accurate, data is handled properly, and standards are upheld even amid rapid change. Companies that ignore this advice often find out the hard way that compliance is a make-or-break factor in M&A success.
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Common Compliance Challenges in M&A
Every merger comes with a unique set of IT systems and protocols, but several compliance challenges tend to crop up repeatedly during M&A integrations. Below are some of the most common pain points mid-market and enterprise firms face:
- Aligning Disparate IT Systems: Merging companies often bring together a patchwork of networks, applications, and databases. These systems might be redundant or downright incompatible with each other. Overlapping IT without a clear integration strategy creates inefficiencies and unexpected security gaps. In practical terms, if Company Aās CRM isnāt securely talking to Company Bās customer database, data can fall through the cracks or get duplicated in unsecured ways. Alignment is not just about convenience; itās about ensuring all data flows and connections meet the combined entityās security and compliance standards.
- Protecting Sensitive Data During Transition: During M&A, huge volumes of data get transferred, consolidated, or archivedācustomer records, financial info, employee HR files, you name it. If this data isnāt handled carefully, the risk of exposure or loss skyrockets. In many mergers, data migrations are rushed or poorly planned, leading to scenarios where sensitive information is mishandled or even lost. One IT consulting firm notes that data inconsistencies and poor data quality post-merger can hurt decision-making and customer service. Worse, improper data handling can violate privacy laws. For example, merging two customer databases without checking consent records or encryption practices could run afoul of GDPR or other data protection regulations. Protecting data during a merger means encrypting it in transit, limiting access on a need-to-know basis, and monitoring closely for any irregularitiesābecause hackers are certainly watching for an opening when companies merge.
- Reconciling Security Policies and Controls: No two companies have identical security postures. Their password policies, access controls, vendor management practices, and incident response plans might differ significantly. When you merge, you canāt effectively have two sets of security rules; disparities must be reconciled quickly. If one company required multi-factor authentication (MFA) on every login and the other didnāt, the merged company needs to decide which way to go (hint: opt for MFA). Aligning policies isnāt just bureaucratic; itās crucial for compliance. After an integration, leadership should update and unify information security policies, then communicate those changes clearly to all employees. Without a unified policy, employees may follow old guidelines that no longer apply, potentially breaking compliance rules unwittingly. This challenge extends to technical controls as wellāfirewall rules, endpoint protection software, identity managementāall need to be evaluated and standardized so that the entire new organization is operating on the same secure page.
- Maintaining Adherence to Compliance Frameworks: If each company in the merger had to follow certain regulatory frameworks or industry standards, combining companies can double the compliance workload. M&A in regulated industries (healthcare, finance, government contracting, etc.) is especially tricky. For instance, a hospital chain acquiring another hospital must remain HIPAA-compliant throughout the transitionāthereās no grace period where patient data can be treated with anything less than full confidentiality. If a tech firm thatās SOC 2 compliant buys another company that isnāt, the onus is on the acquirer to extend its SOC 2 controls over the new acquisition. Similarly, a Department of Defense contractor acquiring another contractor needs to consider CMMC requirements during the deal. In fact, under the latest rules, a significant merger or IT change can trigger the need for a fresh CMMC assessment because the cybersecurity certification scope has changed. And letās not forget GDPRāif the deal involves EU personal data, any lapses can lead to hefty fines.
Bottom line: whichever laws and standards applied to each organization will apply to the combined entity, and regulators wonāt cut you slack because āwe were in the middle of a mergerā. Knowing all the applicable frameworks and ensuring continuous compliance is a major challenge that must be managed actively during M&A.
Real-World M&A Compliance Pitfalls: Cautionary Tales
To understand how critical it is to manage these challenges, letās look at a few real-world examples where M&A compliance issues made headlines:
- Healthcare Merger Breach ā Spectrum Health & Lakeland: In 2018, Spectrum Health merged with Lakeland Health, only to discover that Lakelandās third-party medical billing service had been breached prior to the merger. The initial breach exposed around 60,000 patient records, and to make matters worse, a second breach occurred after the merger, affecting another 1,100 patients. For a healthcare provider, these incidents arenāt just PR nightmaresātheyāre serious HIPAA compliance failures. Spectrum Health Lakeland ended up footing the bill for identity protection services for affected patients and had to scramble to notify and protect others. The lesson? A thorough cybersecurity and compliance due diligence might have flagged the vulnerable vendor system and prompted stronger protections from day one. In the world of HIPAA, you inherit not only the patient data of the company you acquire, but also its security weaknesses if youāre not careful.
- Hidden Breach Costs Marriott $123M ā The Marriott/Starwood Debacle: M&A compliance missteps arenāt limited to smaller firms; even global giants can stumble. Case in point: Marriottās acquisition of Starwood Hotels. After Marriott bought Starwood in 2016, it came to light that Starwood had a massive, ongoing data breach since 2014āa breach that continued through the acquisition and wasnāt discovered until 2018. Ultimately, information on roughly 500 million guests was compromised . Regulators came down hard. The UKās Information Commissionerās Office cited Marriott for failing to perform adequate data protection due diligence in the acquisition, which allowed the breach to go unnoticed for so long . The ICO initially proposed a Ā£99 million (ā$123 million) fine under GDPR for this oversight , and although the final fine was lower, it was still a wake-up call. This example underscores that cybersecurity and privacy compliance must be front-and-center during M&A. Skipping a comprehensive security audit of the target company is a recipe for disaster ā Marriott learned that the hard way.
- Yahooās $350 Million Lesson ā The Verizon Deal: Compliance issues can also directly impact the value of a deal. When Verizon was set to acquire Yahoo in 2017, a bombshell dropped: Yahoo disclosed that it had suffered a colossal data breach back in 2014, affecting hundreds of millions of accounts. Yahoo had delayed disclosing this breach for years. The revelation not only tarnished Yahooās reputation but also had an immediate financial consequence: Verizon slashed the purchase price by $350 million as a result . In addition, the U.S. SEC later fined Yahoo (by then renamed Altaba) $35 million for failing to report the breach promptly to investors . This case is a prime example of why transparency and compliance during due diligence are paramount. If a company hides or neglects a known compliance failure (like a data breach), it can literally take hundreds of millions off its valuation and invite regulatory penalties. No acquirer wants to be blindsided like Verizon was, and no seller wants to be the cause of a mergerās value dropping overnight.
These cases show that M&A compliance isnāt just a theoretical concern. It has real dollars (and reputations) on the line. Data breaches that were lurking in an acquired company can come back to haunt the buyer. Weak compliance practices can lead to post-deal fines or even lawsuits. And failure to plan for regulatory obligations can slow down integration or nix contracts (imagine losing a big government contract because your new acquisition isnāt CMMC compliant ā it happens). The good news is that with lessons learned from others and a proactive approach, you can steer clear of most of these pitfalls.
How an MSP Can Support Audit-Readiness During M&A
If reading those cautionary tales made you a bit anxious, thatās actually a healthy reaction. Compliance during M&A is complex, which is why many mid-market and even enterprise companies lean on specialists to guide them. This is where a Managed Services Provider (MSP) or Managed Security Services Provider (MSSP) comes into play. During a merger, a strong MSP is more than just an outsourced IT teamāthey act as an infrastructure-level advisor and risk manager to stabilize the transition. Rather than approaching IT integration as a mere tech support task, an experienced MSP treats it strategically: mapping out risks, shoring up defenses, and keeping the combined environment audit-ready from day one.
Here are several ways an MSP or MSSP can bolster compliance continuity and audit preparedness through an M&A:
- Thorough IT Compliance Due Diligence: Long before āDay 1ā of the merger, an MSP can perform a deep dive into both companiesā IT and security environments. Think of it as a comprehensive risk assessment on steroids. They inventory hardware and software, review data flows, evaluate user access rights, probe for vulnerabilities, and identify all the regulatory requirements that apply. Crucially, this due diligence will highlight gaps between the two firms. For example, an MSP might discover that the target company lacks the encryption standards the acquiring company uses, or that vendor contracts with compliance implications (like cloud storage providers or payment processors) are scattered across departments with no oversight. By getting this full picture, you walk into the deal informed ā knowing what systems or practices need to be retained, retired, replaced, or secured to stay compliant. This prevents the āexpensive surprisesā that come from ignoring IT and compliance until after the ink is dry on the deal.
- Bridging Gaps and Integrating Controls: Post-merger, an MSP helps actually implement the integrations and changes identified in due diligence. One major task is centralizing and updating documentationāeverything from security policies and standard operating procedures to network diagrams and asset inventories. This central documentation is gold for audit-readiness; it proves that the merged entity knows its environment and controls. MSP teams also assist in technically integrating systems in a secure manner. Theyāll ensure that logging and monitoring tools cover the combined infrastructure, not just pieces of it. This unified monitoring means you arenāt flying blind on security events or compliance deviations. (Many breaches happen during the messy integration phase because no oneās watching all the new connections closely ā unified oversight prevents that .) Additionally, MSPs can help reconcile those disparate security policies we mentioned earlier. Rather than Company Aās and Company Bās IT teams debating whose approach wins, the MSP brings an objective view of best practices and compliance mandates to formulate a new, merged security policy set. They can implement controls like MFA, updated access management, or enhanced encryption across both environments, ensuring that the strongest security posture becomes the standard. Essentially, the MSPās job is to knit the two IT environments into one compliant whole, without leaving seams for attackers (or auditors) to pick apart.
- Maintaining Continuous Compliance (Even During Chaos): One underrated value of an MSP during M&A is simply having extra hands ā and experienced hands at that ā to keep an eye on compliance when your internal team might be overwhelmed. They can manage routine audit preparations, update compliance checklists, and remind everyone about key tasks like updating business associate agreements (in a healthcare merger) or adjusting privacy notices (if customer data ownership changes). MSPs often provide Compliance-as-a-Service, essentially a program to maintain ongoing adherence to frameworks and readiness for any audits . This means while your leadership focuses on business strategy, someone is making sure that the HIPAA training is being rolled out to the newly acquired staff, or that the merged IT systems will pass a SOC 2 audit. Many providers also run 24/7 Security Operations Centers (SOCs) that monitor for security incidents ā a crucial safety net during a transition when new threats can emerge. By having experts continuously watching and fine-tuning the security and compliance posture, the organization can avoid lapses that typically occur in the fog of integration. In short, an MSP keeps the lights on and alarms armed in the compliance department, so you stay audit-ready at any moment.
- Strategic Guidance and Remediation: Even with the best preparation, issues will be found in any complex M&A. Maybe a penetration test finds an unpatched server, or an internal audit discovers missing records for a compliance control. An MSP doesnāt just identify these problems ā they help create and execute remediation plans to fix them promptly. Best practices suggest that once you identify compliance gaps, you should establish a remediation plan with clear steps, resources, and timelines to close those gaps . MSPs excel at this because theyāve seen similar issues across many clients. If the acquired companyās staff need training on the merged companyās security policies, an MSP can coordinate that. If legacy systems need segmentation or upgrades to meet standards, the MSP can design that solution. The goal is to proactively address vulnerabilities or compliance weaknesses before auditors (or attackers) come knocking. Additionally, a seasoned MSP will advise on prioritization: which compliance tasks are critical vs. nice-to-have, so you allocate your resources smartly in the first 100 days post-merger. Their strategic guidance helps turn compliance from a reactive fire-fighting exercise into a structured program.
Throughout all this, the underlying theme is audit readiness. By having centralized documentation, unified monitoring, proactive assessments, and solid remediation processes (often facilitated by an MSP), a business can confidently say it is always ready to demonstrate compliance ā even in the whirlwind of an M&A. Letās break those components down further, because theyāre so important to M&A success.
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Staying Audit-Ready: Best Practices and Benefits
Staying audit-ready during a merger isnāt magic; it comes down to disciplined practices and smart planning. Here are four key practices and their benefits for maintaining compliance continuity:
Centralized Documentation
Keep all compliance-related documentation in a unified repository that both merging parties can access and update. This includes policies, procedure manuals, network diagrams, data inventories, risk assessment reports, audit logs ā essentially, your paper trail for how you manage security and compliance. Centralizing these documents ensures nothing important gets lost in transition. It also makes it easier to prove to auditors (or regulators) that you didnāt drop any balls; for example, you can show updated policies and signed employee attestation forms for the new combined company. IT teams serve as the gatekeepers here, making sure documentation stays accurate and up-to-date even as systems and teams change. The benefit? You reduce confusion and duplication, and everyone has a single source of truth for compliance information. When an external auditor asks for evidence of, say, your latest access control review, you know exactly where to find it ā regardless of which company originally held that info.
Unified Monitoring & Logging
During a merger, itās critical to implement monitoring that covers the entire new environment. This means unifying security operations centers or logging systems so that one team can see all network traffic, user access events, and system alerts across both former companies. By having a birdās-eye view through unified monitoring, you can catch anomalies that might otherwise slip by. Many companies that merge without integrating their monitoring end up missing signs of a breach because each side was only watching its own systems. Donāt let that be you. A centralized SOC (whether in-house or via an MSSP) can detect and respond to threats across the merged network, ensuring you donāt accidentally leave a backdoor open. It also helps with compliance reporting ā many frameworks like SOC 2 or CMMC require demonstrating continuous security monitoring. By correlating logs from old Company A and Company B systems into a single dashboard, you maintain visibility and control. This unified approach directly counters the tendency for security gaps to appear during M&A; remember, breaches are more likely when IT changes are happening , so comprehensive monitoring is your early warning system.
Proactive Risk Assessments
A merger is the perfect time to conduct fresh risk assessments ā ideally before the deal is finalized and again during integration. Proactive risk assessment means youāre actively looking for where things could go wrong, rather than waiting for problems to find you. This could take the form of a formal compliance audit (e.g., a HIPAA due diligence audit of a healthcare target company ), vulnerability scans and penetration testing on the targetās networks, or reviewing all software and vendors in use for potential risks. By doing this early, you identify compliance gaps or security vulnerabilities in advance. For example, you might discover the company youāre acquiring hasnāt been performing required software updates or lacks an important certification. Knowing this before merger day allows you to plan remediation (or even negotiate the deal accordingly). Post-merger, ongoing risk assessments ā say, at 60 days and 180 days in ā will help ensure that any new combined processes are working as intended and meeting standards. The benefit of this proactivity is clear: you greatly reduce the chances of surprises like an undisclosed breach or an overlooked regulatory requirement. Instead, you can address issues methodically. Regulators and auditors appreciate (and often expect) this level of diligence. It shows that the organization is not complacent about compliance.
Structured Remediation Plans
Itās not enough to find issues ā you need a plan to fix them. Establish a structured remediation plan for any compliance deficiencies discovered during due diligence or post-merger integration. This plan should list each identified gap (e.g., missing encryption on a backup drive, or an outdated privacy notice), the steps needed to resolve it, the owner responsible, and a target date. Having such plans does two big things for you: First, it keeps your team accountable and focused, so important fixes donāt fall by the wayside amid other M&A chaos. Second, it serves as evidence to auditors that you take compliance seriously; you can show that upon finding a gap, you documented it and worked to close it. Industry experts advise companies to implement a remediation plan to address compliance deficiencies as part of the post-merger process . For example, if you discover that the acquired firm wasnāt performing annual penetration tests required for SOC 2, your remediation plan might include scheduling a test within 90 days and updating policies to ensure future tests. By following through on these plans, you maintain continuous improvement in your compliance posture. The real benefit here is risk reduction ā plugging small leaks before they become big leaks. It also builds a culture of compliance in the newly merged organization, showing employees that the company is committed to doing things right from the start of this ānew chapter.ā
Each of these practices works in concert. Centralized documentation feeds into better risk assessments (since you know what assets and policies exist), unified monitoring might reveal issues that go onto the remediation plan, and so on. The overarching goal is to remain audit-ready at any moment. If an external auditor or regulator showed up unannounced post-merger, ideally you could demonstrate that you know your environment, youāre monitoring it, youāre aware of the risks, and youāre fixing issues promptly. That level of readiness not only keeps you compliant, but it also builds trust with customers, partners, and investors that your newly merged company has its act together.
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Conclusion: Plan Ahead and Leverage Experts for Compliance Success
M&A is often a whirlwind, but compliance is one area where you canāt afford to just āwing itā and clean up later. The companies that handle mergers best are the ones that treat IT and compliance integration as a core part of the deal, not an afterthought. By understanding common challenges and learning from othersā mistakes, you can put compliance front-and-center and turn it into an advantage rather than a burden. Imagine being able to tell your board or stakeholders: āYes, weāre acquiring this company, and we already have a plan to keep all our data safe, our certifications intact, and our audits clean.ā Thatās a powerful position to be in.
Staying audit-ready through an M&A comes down to planning, consistency, and getting the right help. Many mid-market and enterprise firms find that partnering with a skilled MSP or compliance consultant during this process is a game-changer ā it provides peace of mind that no critical detail will be overlooked. After all, your team is likely doing an M&A once in a blue moon, whereas an MSP has guided many companies through similar transitions and seen the pitfalls to avoid . Why not leverage that experience?
As you embark on your next merger or acquisition, make compliance a cornerstone of your strategy. Centralize your documentation, unify your monitoring, assess risks proactively, and tackle remediation head-on. Doing so not only keeps regulators happy, but it also preserves the value and trust youāre building with this deal. In the long run, strong compliance practices will help your merged company accelerate forward without the drag of surprise audits, fines, or security incidents.
If ensuring seamless IT integration and rock-solid compliance sounds daunting, you donāt have to go it alone. This is exactly where Meriplex can assist. We offer IT due diligence services and post-merger integration support to help businesses navigate these complexities with confidence. From mapping out your 30/60/90-day IT integration plan to providing ongoing compliance monitoring, our experts act as an extension of your team to keep your merger on track . Donāt wait for a compliance issue to become an expensive lesson. Reach out to explore our IT due diligence services or schedule a consultation to discuss how we can help your organization stay secure, compliant, and audit-ready through every stage of M&A. Your next big growth move should come with big opportunities ā not big compliance headaches ā and weāre here to ensure exactly that.
