HIPAA Compliance Is Just the Start: Cybersecurity as a Strategic Advantage in Digital Health M&A

According to an article by the Foley firm, cybersecurity has become a critical factor that can determine the success or failure of mergers and acquisitions (M&A). Digital health companies seeking growth through M&A must now demonstrate a robust cybersecurity posture, including stringent HIPAA compliance, a mature security program, and transparent handling of any past incidents. 

Buyers increasingly scrutinize these elements because any cybersecurity weaknesses can derail deals, reduce valuations, or expose acquirers to significant regulatory and reputational risks post-transaction.

Cybersecurity due diligence has effectively become synonymous with overall deal diligence. Buyers not only review documentation but also evaluate a target’s historical vulnerabilities, breach response capabilities, and governance frameworks. 

The article notes that proactive CEOs are responding by preparing for M&A readiness through internal audits, penetration testing, and fostering a culture of security that involves leadership and stakeholders. Demonstrating a solid incident response history is especially important; rather than being a red flag, a well-managed breach can build buyer confidence if it shows operational maturity, compliance with HIPAA notifications, remediation efforts, and executive involvement.

However, the article says that HIPAA compliance alone is no longer sufficient to address today’s diverse cyber threats, including ransomware and third-party SaaS vulnerabilities. Digital health companies must adopt dynamic risk management strategies that integrate security into product development and governance, utilize modern detection tools, and maintain partnerships with response experts. This strategic approach elevates cybersecurity from a compliance checkbox to a competitive advantage essential for winning enterprise clients, payors, and partnerships.

For digital health CEOs, cybersecurity readiness is foundational, not only for M&A but also for capital raising and business growth. Regular risk assessments, rigorous vendor due diligence, encryption of protected health information, workforce training, incident drills, and insurance coverage are critical steps. 

Looking ahead, as AI diagnostics and remote health tools increase complexity, embedding security deeply into organizational DNA will be key to building trust, securing contracts, and scaling responsibly in the digital health ecosystem.