By: Brian Kennedy

 

It sounds extreme, but it happens more often than you’d think, especially when it comes to cybersecurity. A small vulnerability that seems insignificant can open the door to catastrophic consequences. Just ask the owner of a staffing company who was on the verge of closing a lucrative deal after years of hard work, only to see everything fall apart, because of a fish tank thermometer. 

The company had a beautiful saltwater aquarium in its office, and the owner installed a WiFi-connected thermometer to monitor the water temperature remotely. What he didn’t realize was that the device had no security controls and was connected to the company’s network. A hacker exploited this tiny vulnerability, gained access to the firm’s entire system, and deployed ransomware, locking down all their data, including payroll records, candidate information, and client contracts.

The company was forced to pay the ransom, but the damage was done. The buyer walked away from the deal, citing cybersecurity negligence as a major risk factor. The seller’s firm, once highly valuable, had lost millions in potential deal value over a $30 mistake.

This is not a hypothetical scenario. It really happened. And it underscores why cybersecurity is no longer just an IT issue, it’s an M&A dealbreaker.

 

Meet the Experts

To explore how cybersecurity impacts staffing M&A and what firms must do to protect themselves, I spoke with two of the leading experts in cybersecurity and enterprise architecture from Charter, a company which has driven successful digital transformations for clients globally since 1997.

Mike Glover – One of Canada’s most highly regarded enterprise architects, with deep expertise in business strategy, technology integration, and large-scale cybersecurity transformations. He has advised companies facing high-stakes M&A transactions where data integrity and risk management are paramount.

Krisann McDonnell – An M&A and cybersecurity leader specializing in assessing and mitigating risks in high-value transactions. Holding TOGAF, CISM, and NIST certifications, she leads security practice at Charter and works directly with firms to uncover hidden vulnerabilities and ensure compliance.

Both Mike and Krisann have seen firsthand how cybersecurity can turn an acquisition from a growth opportunity into a financial and operational nightmare.

What This Series Will Cover

Over the next four articles, we’ll take a deep dive into the most critical cybersecurity challenges facing staffing firms in M&A transactions:

• Why Cybersecurity is Now a Dealbreaker in Staffing M&A – Understanding how cyber risks influence valuations and transaction terms.
• Hidden Cybersecurity Risks in Staffing Acquisitions – Identifying the most overlooked vulnerabilities that could compromise a deal.
• Post-Acquisition Cybersecurity Integration – Addressing challenges in merging security systems and ensuring a smooth
• How to Strengthen Cybersecurity Before Entering the M&A Market – Practical steps staffing firms can take to protect themselves and enhance their marketability.

Cybersecurity is no longer optional in staffing M&A. It is a core business risk that must be addressed proactively. By leveraging the expertise of Mike Glover and Krisann McDonnell, this series will equip staffing firm owners, buyers, and investors with the critical insights needed to execute secure and successful transactions.

Keep reading for Part 1, where we explore why cybersecurity has become a deciding factor in staffing M&A deals.

 

Part 1 – Why Cybersecurity is Now a Dealbreaker in Staffing M&A

Mergers and acquisitions in the staffing industry have always been driven by financial performance, client contracts, and operational efficiency. However, in today’s market, cybersecurity has become a major factor in deal success or failure. Buyers are scrutinizing security postures more than ever, and firms with weak cybersecurity protocols are increasingly facing reduced valuations or even deal cancellations.

To understand why cybersecurity is now a make-or-break issue in staffing M&A, I sat down with Mike Glover, one of Canada’s most experienced enterprise architects and a leader in cybersecurity for M&A transactions, and Krisann McDonnell, an M&A and security expert at Charter.

Brian Kennedy: Mike, cybersecurity wasn’t always a top priority in staffing acquisitions. What changed?

Mike Glover: “A few years ago, buyers treated cybersecurity as an IT issue they could deal with after the acquisition. That’s no longer the case. Now, buyers want proof of strong security practices before closing a deal. If they uncover security gaps, they’ll either walk away or use them as leverage to lower the valuation.”

Brian: Why is cybersecurity an even bigger concern in staffing M&A than in other industries?

Mike: “Staffing firms handle enormous amounts of personally identifiable information: candidate resumes, payroll details, client contracts. If that data gets compromised, the entire business model is at risk. A breach doesn’t just impact one company; it can expose thousands of candidates and clients. Buyers don’t want to inherit a data security mess, and they’re going to pay less, or not buy at all if they sense risk.”

Brian: So how does cybersecurity affect valuation in real-world deals?

Krisann McDonnell: “Buyers aren’t just looking at EBITDA anymore. Cybersecurity risk is now a major factor in valuation. A firm with a strong security posture can command a premium price, while one with poor security might see its valuation drop overnight. I’ve seen firms lose millions in potential deal value simply because they didn’t have proper security controls in place.”

Mike: “I worked on a deal where the seller assumed security wouldn’t impact valuation, but when the buyer’s tech team did a deep dive, they found unencrypted payroll records and no multi-factor authentication. The buyer immediately cut their offer by 20%. The seller was blindsided, but in today’s market, buyers aren’t willing to take that risk.”

Brian: What security red flags are most likely to make buyers reconsider a deal?

 Mike: “There are a few major ones:

• Outdated software – Staffing firms often use legacy applicant tracking and payroll systems that lack modern security controls.
• No multi-factor authentication (MFA) – If employees can log into critical systems with just a password, it’s an easy target for attackers.
• Third-party vendor risk – Many staffing firms use third-party providers for payroll, background checks, and CRM tools. If those vendors have weak security, the risk extends to the buyer.”

Krisann: “I’d add past security incidents to that list. A lot of sellers don’t realize that previous breaches, even if they were resolved, can still impact valuation. Buyers want full disclosure, and if they find out about a breach the seller didn’t mention, it immediately raises trust issues.”

Brian: So for staffing firms thinking of selling, what should they do now to avoid cybersecurity hurting their valuation?

Mike: “Start preparing early. Sellers should:

1. Conduct a cybersecurity audit before a buyer Fixing problems before due diligence prevents last- minute deal surprises.
2. Ensure regulatory Staffing firms operate across multiple jurisdictions, and buyers don’t want compliance headaches.
3. Harden access controls. Remove ex-employee access to critical systems and require multi-factor authentication for sensitive data.”

Krisann: “Also, be ready to prove your security maturity. Buyers love seeing a cybersecurity due diligence package that outlines your policies, recent audits, and security improvements. It signals that security is a priority, which builds confidence and protects valuation.”

Brian: Final thoughts? What should staffing firms take away from this conversation?

Mike: “Cybersecurity isn’t just an IT issue anymore. It’s an M&A deal factor that can determine whether a transaction moves forward or collapses. Sellers who ignore it risk losing millions.”

Krisann: “Security preparedness isn’t just about avoiding penalties, it’s an opportunity to increase valuation and buyer confidence. The firms that address cybersecurity early will have the most leverage when negotiating a deal.”

Conclusion

Cybersecurity is no longer optional, it’s mandatory in today’s M&A environment. For staffing firms looking to enter the market, taking proactive steps to strengthen cybersecurity before the process begins can make a world of difference.

By conducting audits, upgrading systems, training employees, and ensuring compliance, firms can increase their marketability, protect their valuation, and set themselves up for a successful transaction.

Take Action Now.

If you’re considering selling your staffing firm, don’t let cybersecurity be the reason you lose value or delay your deal. The risks you overlook today could be the very reason your deal falls apart tomorrow.

As someone who specializes in selling staffing companies, I can tell you that the firms that address cybersecurity issues upfront are the ones more likely to get top dollar. It’s a marketable characteristic of your enterprise. If you want to make your business as attractive as possible to buyers, it’s crucial to address any cybersecurity vulnerabilities now.

Charter can make that process easier. They offer confidential cybersecurity assessments that help firms identify weaknesses, improve their digital hygiene, and ensure they’re ready for a successful transaction.

No cost. No pressure. Just real insights.

Schedule a complimentary, confidential consultation with Charter today: [kmcdonnell@charter.ca]

You can also ask us your M&A  questions: brian@racohenconsulting.com and be sure to check our Resources Library out here: https://racohenconsulting.com/library

Your business value depends on it.

 

In the Part 2, we’ll examine hidden cybersecurity risks in staffing acquisitions and how buyers can uncover potential threats before closing a deal.