Navigating Identity Challenges in M&A: A Checklist

The mergers and acquisitions (M&A) market is in constant motion, driven by evolving AI, ongoing digital disruption, and the need for firms to adapt to a rapidly changing environment. Against a backdrop of economic uncertainty, M&A has remained resilient because strategic deals drive firms to strengthen their organizations and streamline operations.

But one of the biggest challenges enterprises face during M&As is large-scale identity management. This is made even more complicated by what we like to call, the “APPocalypse” where companies must integrate an influx of new users, applications, and data all at once—not gradually, as with organic growth.

Besides, IAM groups usually encounter several difficulties when building all the systems and processes in the post-merger period, which may take longer and be more complex in the case of an unplanned acquisition. IAM teams should ensure a smooth handover through thorough testing of systems, planning, and consistent communication with users throughout the process. Addressing these challenges requires a business to adopt an identity management checklist for M&A transactions. The checklist guides an organization in identifying possible identity security risks, assessing the impact that these risks will have on operations, and coming up with solutions to reduce these risks through good identity management.

Challenges for Incorporating Acquisitions

Multiple Identity Platforms (IdPs)

The ability to manage and integrate organizations with multiple IdPs remains one of the biggest challenges in handling identities and access management in merger and acquisition deals. This is because the target company operates as an independent system acting as an authoritative source for HR/SSO. To address this, the enterprise should ensure that the target company’s disparate systems are synchronized with a single system of truth (SoT) that must be the central authentication system or migrate all identities to a common platform.

This challenge is further complicated when mergers involve two distinct technology ecosystems, each with its mix of software, hardware, network infrastructure, and applications—often including incompatible customer-facing technologies. The integration process requires transferring the systems’ content and sensitive user data, leading to heavy workloads, delays, and potential disruptions. For IT teams already managing the broader integration process, these additional complexities can be particularly overwhelming.

But things get even worse when the merging companies start integrating their respective technology ecosystems. Software, hardware, network infrastructure, applications, and customer-facing technologies are often incompatible, requiring the transfer of system content and sensitive user data. This adds significant workload, creates backlogs, and can lead to downtime—all of which pile onto an already overstretched IT team whose jobs also involve ensuring the delivery of full integration.

Rapid Scaling 

One of the biggest challenges with identity management in mergers and acquisitions is the rapid scaling that significantly increases the attack surface area without allowing time to onboard or train additional team members to cope with the sudden influx of identities. When two companies merge, so do their IT systems, overnight multiplying privileged accounts, cloud permissions, and access points.

The speed and scale of expanding identity data raise the stakes of unauthorized access and cyber threats in cloud environments, via third-party partners, or through old systems. For example, organizations that merge their operations with multi-clouds or the latest cloud architectures, like those using containers and microservices, face an even larger challenge, as their machine identity attack surface grows exponentially. Failing to account for non-human identities across systems and applications can create serious security gaps, leaving the organization vulnerable.

Legacy Identities/Lack of Context

The next major challenge is managing legacy identity and lacking context. Most organizations retain machine identities instituted for automated workflows, outdated accounts such as ex-contractors’ accounts, or otherwise in their systems. Most background information on legacy identities is lacking when acquiring a new company. Changes or deletions without full knowledge of their impact are risky. This lack of context furthers the avenue to unauthorized access or taking down critical systems unintentionally.

Besides this, most of the acquired technologies are not designed with robust security, complicating the effort to secure RESTful services and APIs. Poor integration also means the functionality for the customer and partner is limited. More importantly, onboarding new applications and users is tricky, adding complexity when establishing a safe and seamless identity management framework during post-merger integration.

Staff Consolidation -> Increase in Orphaned Accounts

Most organizations have orphaned accounts that are no longer managed but still have access to critical systems. These shadow IT accounts can also allow non-admin users to quickly increase their privileges to an administrator. This is an account that can easily bypass conventional IT processes, adding to security management complexity.

These are further increased in a merger where both organizations bring unmanaged or little-monitored accounts into the integration. It’s easy for orphaned and shadow IT accounts to fall through the cracks without anyone noticing and allow undetected security gaps. Such weaknesses might remain hidden without efficient identity governance and threat detection, leaving the organization vulnerable to insider threats and other outside attacks. Effective identity management during integration goes a long way in solving all these issues, ensuring a secure environment for IT.

Increased Risk 

An overlooked aspect of M&As is the risk added by giving new people and applications access to the core data of the parent company. When required, employees of the subsidiary organization may be given access to privileged information of the parent company to fulfill operational functions. This may be a simple platform for accidental security vulnerabilities stemming from a potential lack of security awareness or training for existing personnel.

These may well be some of the most pressing problems to face at the start of a merger, such as rapid and transient access to people, contractors, and third-party vendors that precede their security vetting. This short-range access may provide an opportunity to go to the organization without considering security threats through comprehensive access control, such as secure remote login, multi-factor authentication, and exhaustive threat protection of the identity. It gives unrestricted, unvetted, and unsupported access rights, which increases the likelihood of insider attack or a security breach.

Checklist Items for Identity 

Cloud Delivery

Traditional on-premise, monolithic architectures struggle with identity integration during M&As, especially when multiple brands rely on legacy systems. As mergers scale, managing identities, access, and security across diverse platforms becomes increasingly inefficient, leading to operational bottlenecks, heightened security risks, and slow integration due to mismatched security frameworks and inconsistent identity practices.

This means one thing: it needs a cloud-based architecture. It is a better architecture in terms of scalability and adaptability and is apt for addressing identity management from several brands under one roof. At this point, cloud delivery models ensure seamless integration with the enterprise’s legacy systems and involve central implementation of identity controls and the most advanced security controls. It also allows quick scaling of access controls, automating identity governance and user provisioning with a strong security framework across diverse environments.

Fast Integration for Cloud Apps

While the rapid integration of cloud applications presents challenges for any organization, it becomes critical when companies acquire businesses frequently. The more rapid the acquisitions, the more the requirement and need to integrate those new systems into your IGA strategy quickly and seamlessly. If an organization buys several companies in a year, it’s unrealistic that integration efforts should take years; the teams must work fast, one after another, without degrading security or compliance.

This can only be achieved through automation and standardization of processes while onboarding new systems to achieve rapid alignment with the parent company’s IGA strategy. It requires a flexible and scalable cloud-based solution seamlessly integrated into various third-party applications, platforms, and identity management systems to scale up quickly to handle a surge in users, applications, and resources.

Powerful/Flexible Connectivity for Custom Apps

Identity management requires secure, adaptive connectivity for custom applications. Every organization has some legacy or homegrown technology that needs to be properly integrated with state-of-the-art identity systems. This challenge multiplies manifold during M&As. Most custom applications, whether developed in-house or brought into the fold through an M&A, often sit on older architectures or proprietary platforms not designed to be compatible with standard identity management frameworks.

Such challenges require agile connective solutions to bridge the gaps in diverse systems, enabling seamless identity provisioning, access management, and uniform security enforcement across legacy and modern technologies. This allows quick, secure integration of custom applications by a company driven by M&A, with sustained identity management practices and maintained security standards in the entire technology stack.

Visibility into Local and Machine Identities

Complete visibility in today’s fast-moving integration environment means no application or identity falls through the cracks. This will be important for finding those critical access control holes and properly handling user and machine identities. Auditing local and machine identities involved in automation processes, services, or devices related to the quick integration of an acquisition is recommended to ensure the identity is valid and meaningful.

This involves identifying and removing inactive, orphaned, or unmanaged identities—accounts that no longer serve a purpose but may still have access to sensitive data or systems. These leftover identities from former employees, contractors, or outdated automated systems pose a serious security risk if left unchecked.

The Lumos Way

M&A does not need to challenge identity management or disrupt operations. Lumos offers a frictionless approach to integration that secures, streamlines, and boosts the efficiency and satisfaction of your workforce. Acquisitions can be onboarded in their current state through rapid and agile connectivity with minimum delay and disruption.

So you don’t miss a single application or identity, Lumos provides four different channels of app discovery: direct integration, IdP integration, email subject line scanning, and financial statement analysis. This combination of channels uncovers shadow IT and provides total visibility. Beyond integration, the ability to use automation, access policies, and centralized management tools enables organizations to shore up and strengthen their identity systems for a single, uniform, and secure model.

Successfully integrating an acquisition isn’t just about technology; it’s about experience. Employees will be much more likely to adopt a system if it’s easy. The Lumos platform provides them a frictionless way to request and obtain the access they need precisely when needed. At the same time, managers can avoid tedious manual work with automated access reviews and intelligent policies to focus on strategic priorities.

Lumos helps organizations simplify identity management, enhance security, and smooth transitions during M&A activities. To learn more, book a demo here.