Private equity (PE) firms thrive on building value — acquiring companies, scaling them, and exiting at a profit. But in today’s digital-first economy, cyber risk has emerged as a potential threat to exit valuation. A ransomware attack, a compliance violation, or a major data breach can erode your brand, earnings, delay exits, or even completely devalue your investment.
Cybersecurity risk is no longer a “back-office IT issue.” It’s a board-level concern, and increasingly, it’s a deal-critical factor for PE firms.
A growing challenge in cyber insurance is cost. Premiums have risen sharply in recent years, and many smaller portfolio companies struggle to afford coverage.
This is where PE firms benefit from working with GainSide to:
- Fast-track access to appropriate policies.
- Simplify the process of insuring multiple portfolio companies.
- Unlock discounted premiums — often 30–50% below market rates for comparable coverage.
This not only makes cyber insurance more attainable for portfolio companies but also creates consistency across the portfolio — reducing variability in risk exposure.
Cyber Due Diligence Is Now Standard Practice
Forward-looking PE firms are embedding cyber assessments into their due diligence process. Just as financial audits uncover hidden liabilities, cyber audits reveal weaknesses that could derail growth or lead to regulatory penalties.
Due diligence often includes:
- Assessing whether the target company has experienced prior breaches.
- Evaluating data protection and compliance with regulations (HIPAA, GDPR, SEC rules, etc.).
- Reviewing vendor and third-party cybersecurity practices.
- Determining whether cyber insurance coverage exists — and if not, estimating the cost of adding it.
For many firms, if cyber risks are too high or insurance coverage isn’t attainable, the deal terms may be renegotiated — or the deal may not move forward at all.
Cyber Insurance as a Portfolio Safeguard
Once an acquisition closes, the real work begins. During the holding period, PE firms face the ongoing challenge of protecting portfolio company performance and valuation. Cyber insurance plays a key role here:Risk Transfer: Even with strong controls in place, no company is breach-proof. Insurance transfers financial risk to the carrier.
- Regulatory Protection: For regulated industries like healthcare, finance, and energy, insurance can cover fines, legal costs, and mandated customer notifications.
- Business Continuity: Policies help cover lost revenue during downtime caused by ransomware or other incidents.
- Exit Readiness: Demonstrating robust cyber coverage and risk management can make a portfolio company more attractive to buyers.
- The Partner Advantage: Access and Affordability
Cyber Insurance as Part of the Value-Creation Playbook
PE firms are realizing that cyber insurance isn’t just a cost of doing business — it’s a strategic lever for value creation:
- Protects revenue streams during the holding period.
- Reduces the chance of unexpected financial shocks.
- Improves compliance posture, especially for regulated industries.
- Enhances exit multiples by reassuring future buyers that risks are managed and transferable.
In short: cyber insurance is no longer an afterthought. It’s becoming a key component of both acquisition strategy and portfolio management.
What you can do now
Private equity is about unlocking value and delivering returns. In today’s environment, that requires recognizing cyber risk as a core business risk. By incorporating cyber insurance into both acquisition diligence and portfolio oversight — and by working with GainSide to access trusted carriers and discounted premiums — PE firms can protect their investments, safeguard portfolio companies, and position themselves for stronger exits.
Cyber insurance isn’t just protection. It’s smart portfolio management. Reach out today for a complimentary evaluation.
