Identity Governance in Mergers and Acquisitions - A Hidden Risk

Mergers and acquisitions (M&A) are often positioned as growth catalysts — opportunities to enter new markets, acquire talent, expand offerings, or streamline operations. But while financials, legal exposure, and cultural alignment often dominate the M&A due diligence process, one critical area is frequently overlooked: identity governance.

When two organizations join forces, their IT ecosystems must be integrated, aligned, and secured — and identity is at the center of that effort. Yet in many cases, identity and access management (IAM) challenges surface only after the deal is signed, when integration is already underway. By then, it’s often too late to prevent the risks: over-provisioned accounts, orphaned access, regulatory gaps, and delayed synergies.

In today’s digital-first enterprises, failure to address identity early in the M&A process isn’t just a missed opportunity — it’s a hidden liability.

Why Identity Matters in M&A

When two companies merge, their user populations double overnight. Employees, contractors, partners, and systems must quickly gain access to shared resources — from collaboration tools and business applications to customer data and internal systems. At the same time, access must be governed carefully to prevent security breaches, conflicts of interest, or compliance violations.

This rapid scaling of access often introduces chaos:

• Duplicate identities across directories
• Inconsistent role definitions and entitlements

Legacy identity systems with conflicting architectures

• Unknown privileged accounts or unmonitored third-party access
• Incomplete or missing audit trails
  
  

These challenges become particularly acute when the organizations involved operate in regulated industries such as finance, healthcare, or energy, where identity governance is tightly tied to compliance mandates.

The Hidden Risks of Poor Identity Planning

Without proper identity governance, M&A activities can introduce multiple categories of risk:

1. Security Risk: During integration, users often retain access to their original environments while gaining access to new systems. This results in excessive privileges and elevated attack surfaces — especially if former employees or contractors aren’t promptly deprovisioned.
   
2. Compliance Risk: Inconsistencies in how identities are managed across organizations can lead to violations of policies like GDPR, HIPAA, or SOX. Audit readiness becomes more difficult when there’s no central visibility into who has access to what.
   
3. Operational Risk: Manual provisioning, mismatched systems, and access delays create inefficiencies that slow down productivity and frustrate users. These delays can impact the very synergies the M&A was supposed to create
   
4. Reputational Risk: A high-profile breach during the integration period can damage customer trust and undermine the perceived value of the acquisition — especially if the root cause is a known issue like ungoverned access.
   

IAM Due Diligence: A New M&A Priority

Identity governance must become a formal component of M&A due diligence. This means evaluating the maturity, architecture, and risk posture of each entity’s IAM program before integration begins. Key questions to ask include:

• What IAM platforms and directories are currently in use?
• Are there central identity repositories or multiple silos?
• How is privileged access currently managed and audited?
• Are there documented access policies and role definitions?
• Is access provisioning/deprovisioning automated?
• What non-human identities (e.g., service accounts, bots) exist, and how are they managed?
  
  

By answering these questions upfront, organizations can identify integration gaps, anticipate challenges, and begin to define a roadmap that aligns with both security and business goals.

Identity Integration Strategies

There is no one-size-fits-all approach to identity integration during M&A. The right strategy depends on the size, complexity, and timelines involved. However, the most effective approaches share three key characteristics: visibility, unification, and governance.

Here are four common strategies:

1. Directory Federation
   A short-term solution to provide access across environments while maintaining separate directories. Federation reduces friction but doesn’t address long-term governance or duplication.
   
2. Directory Consolidation
   A longer-term play that involves merging identity repositories into a single authoritative source. This simplifies management but requires careful planning to avoid disruption.

3. IAM Platform Standardization
   Selecting one IAM platform to serve both organizations going forward. This enables consistent policy enforcement, automation, and visibility — but necessitates migration planning and stakeholder alignment.
   
4. Hybrid Governance with Central Oversight
   Allowing each entity to retain operational control while establishing shared governance policies and reporting. This model is particularly useful in acquisitions where full integration is not immediate or practical.
   
   

Regardless of the model chosen, the integration must be governed by clear policies, documented processes, and continuous monitoring.

Post-Merger Identity Risks to Watch

Even with a solid strategy in place, the post-merger period brings unique identity risks that must be proactively managed:

• Privileged access overlap: Ensure users don’t inherit excessive admin rights across both environments.
• Orphaned accounts: Verify that all deprovisioning is automated and reconciled during workforce changes.
• Third-party access: Review vendor and partner access that may have expanded or shifted during integration.
• Policy drift: As systems are merged, ensure that identity policies and controls are applied consistently to avoid compliance gaps.
  

IAM leaders should create a post-merger identity scorecard that tracks key metrics — such as number of identities reconciled, accounts decommissioned, and policy violations resolved — to guide integration efforts and report progress to leadership.

Making Identity a Strategic Enabler

Rather than being a drag on M&A execution, IAM can be a powerful accelerator — if approached strategically. Mature identity governance accelerates onboarding, simplifies audit preparation, and increases organizational agility during a time of high change.

Imagine being able to grant access to new systems in hours rather than weeks. Or having a unified view of all user entitlements across both organizations. Or being able to assure the board and regulators that access to sensitive systems is fully under control.

This is the promise of treating identity not just as a technical function, but as a core M&A capability.

Don’t Let Identity Chaos Undermine Your M&A Success

A well-planned IAM strategy doesn’t just prevent disasters—it accelerates integration, ensures compliance, and protects your investment.

Ready to secure your merger with a proven identity governance strategy?

Visit Bridgesoft today to learn how we help enterprises turn IAM from a risk into a competitive advantage.