PE Investors Demand More: Cybersecurity Testing Isn’t Optional
Private equity (PE) firms are no longer treating cybersecurity as a back-office issue. As cyber threats escalate in frequency and sophistication, investors are bringing cyber risk front and center in deal sourcing, diligence, and portfolio management. For companies seeking PE investment, the message is clear: you need to operate at a higher level of cyber maturity — and that means more than compliance checklists. It means real, ongoing testing, transparency, and resilience.
What’s Changing: Tightening Cybersecurity Expectations
From the recent QBE-North America survey (300 PE risk managers/CISOs) of firms with $1B–$50B assets under management: 
Due diligence is now a must: Nearly half (49%) of PE firms require regulatory compliance assessments; 46% check third-party/supply chain cybersecurity practices. 
Incidents are widespread: Over the past year, more than half reported up to 25% of their portfolio companies had a cyber incident; many of those incidents involve ransomware, data breach, cloud/IT vulnerabilities, etc.
Mandatory technical & governance controls:
Controls like multi-factor authentication (MFA), privileged access management are now required. 
Governance: incident response plans, asset classification, data governance policies are being demanded. 
Ongoing oversight: It’s not enough to pass initial diligence. PE firms are now doing quarterly, monthly, semiannual reviews to ensure cyber hygiene post-acquisition.
Why PE Investors Care (and Why You Should Too)
Risk to value: A cyber incident in a portfolio company can damage valuation, slow exits, or even force write-downs (or worse).
Reputational exposure: Investors, limited partners (LPs), and other stakeholders are increasingly sensitive to cyber failures.
Insurance dynamics: With increasing PE demands, cyber insurance terms are changing—higher coverage expectations, more scrutiny, and sometimes the need for standalone policies rather than endorsements. 
Competitive advantage: Companies that can demonstrate strong, tested cyber defenses may negotiate better deals, attract better terms, or simply be more attractive investment targets.
What “Good Enough” Looks Like: Proactive Cybersecurity Testing & Practices
For firms seeking PE investment (or those already in deals) to meet the rising bar, here are practices that go beyond checklists and toward true resilience:
Regular Penetration Testing & Vulnerability Assessments
Get external testers to probe your systems (web apps, network, cloud) to find weaknesses before attackers do.
Red Team / Adversarial Simulation
Simulate real-world attack scenarios. Test how people, processes, and technology respond to breach conditions.
Incident Response Plan (IRP) Testing & Tabletop Exercises
Draft, maintain, and regularly rehearse IRP. Include stakeholders across the company.
Third-Party / Vendor Risk Assessments
Since many incidents come via supply chains / vendors, you need rigorous vetting and ongoing monitoring of vendor security.
Continuous Monitoring & Logging / Threat Detection
Deploy tools to detect suspicious activity; maintain logs; have visibility into your environment.
Employee Training & Phishing Drills
People are often the weakest link. Ongoing awareness and simulated phishing help reduce risks.
Governance & Policy Infrastructure
Asset inventory, classification, data governance, access control policies. Make sure you have documented policies that are aligned to best practices like NIST, CIS, ISO etc.
Engage with Insurance Providers Early
Understand what your cyber insurance provider wants: often, proof of testing, risk assessments, controls in place. This may affect premiums and coverage limits.
What Businesses Should Do Now
For any firm looking for PE investment, or trying to stay ahead of investor demands, here’s a suggested roadmap:
Baseline assessment: Conduct a gap analysis. Where do you stand relative to standard frameworks and market expectations?
Prioritize high-risk areas: Identify your crown jewels (data, IP, customer data, etc.) and where vulnerabilities are most likely (cloud, vendor, legacy systems).
Invest in testing now: Bring in external resources if needed. Pen tests, IRP drills, threat modeling—start early.
Document & report: Keep records of testing, governance, response plans. Be ready to show prospective investors your history of proactive cybersecurity work.
Monitor & improve continuously: Cybersecurity is not a one-time push. Set up regular reviews, metrics, and tracking.
In today’s environment, strong cybersecurity is no longer “nice to have” for companies seeking PE investment—it’s table stakes. Investors are looking not just for promises or policies, but demonstrable, tested resilience. The firms that do cybersecurity proactively—through comprehensive testing, governance, monitoring, and response preparations—will win trust, better terms, and ultimately protect value. At Mile High Cyber, we help companies do just that.
Contact us today to discuss building or improving your cybersecurity program!