CMMC Compliance for Private Equity
Private equity is becoming a major force in the defense industrial base acquiring manufacturers, AEC firms, and solution providers with ties to DoD contracts. But with those deals come complex CMMC obligations that can directly impact contract eligibility and company valuation.
Top CMMC Pain Points in Solution Implementers
Decentralized Ops
Dozens of operating companies (Opcos) with some handling CUI, ITAR, or EAR-regulated data.
Unknown Risk
Many acquisitions lack clear visibility into their defense obligations or how far CUI spreads.
Shared IT
Holding companies often centralize IT or HR, but shared infrastructure is often non-compliant.
Exit-Ready Compliance
You need CMMC without inflating costs or losing certs during future sale events.
Options for Private Equity
Shared Enclave or Per-Opco Enclave
Flexible, scalable approach based on your exit or holding strategy.
- Host multiple Opcos in one shared Gov Cloud enclave
- Or deploy individual enclaves per Opco for sell-off readiness
- Supports engineering tools + secure data segmentation
- Keeps CMMC certification with the asset when sold
Ideal for: Firms balancing hold/sell strategies or spinning up 8(a) entities
All-In Approach
For defense-heavy Opcos that require full migration.
- Full GCC High environment per company
- Includes licensing, implementation, and managed support
- No dual systems—fully compliant from user one
Ideal for: Opcos where >15% of users handle CUI
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Frequently Asked Questions
Are PE-backed companies at higher risk for CMMC violations?
Yes—especially when portfolio companies share resources or operate under centralized control without proper compliance boundaries. The Department of Justice recently penalized a PE firm $1.75 million for allowing unauthorized access to CUI through shared oversight and IT access. If a PE firm or its employees have any visibility into CUI systems, they’re considered External Service Providers (ESPs) and must meet NIST SP 800-171 requirements. Risk increases when firms impose central IT, finance, or legal services across the portfolio without strong governance.
How can we ensure acquired companies meet CMMC requirements?
Start with a CUI scoping and gap assessment as part of your M&A due diligence process. Review their current environment against NIST SP 800-171, confirm if they handle CUI, and evaluate their SPRS score documentation. Summit 7 helps private equity clients evaluate acquisition targets, prioritize remediation, and define go-forward enclave strategies. Waiting until after the deal closes often results in costly surprises and compliance delays.
What compliance clauses must be included in M&A agreements?
Legal language should require:
- Disclosure of existing CMMC or DFARS 7012 obligations
- Current SPRS scores and supporting documentation
- Affirmation of CUI scoping
- Remediation timelines and accountability post-close
Can we build a shared enclave for multiple portfolio companies?
Yes, but only if each entity has clearly defined boundaries within the enclave. This includes role-based access controls, per-entity audit logging, and CUI segmentation. Multi-tenant environments are technically possible in GCC High or Azure Gov, but require careful planning and justification during assessments. For most PE firms, a better approach is to build standardized enclave templates and deploy them individually per portfolio company.
What are the implications of giving offshore teams access to CUI?
Access by non-U.S. persons to CUI—especially ITAR or EAR-regulated data—is a serious compliance breach. Even viewing technical files without modifying them constitutes an export violation. This risk extends to offshore developers, contractors, or outsourced IT providers. PE firms must ensure their portfolio companies enforce U.S. person-only access for sensitive environments and do not contract with global vendors for CUI systems unless proper export licenses are in place.
How do SPRS scores affect valuation during acquisition?
SPRS (Supplier Performance Risk System) scores provide a snapshot of a company’s cybersecurity posture. A 110/110 score submitted without valid documentation can trigger False Claims Act investigations. If the score is inaccurate, your acquisition could carry significant financial and legal risk. Verifying the SPRS score—and ensuring supporting evidence is in place—is essential. A falsified score can lead to DOJ enforcement, fines, and contract loss, affecting both valuation and deal viability.
Should we invest in GCC High or VDI for rapid deployment?
GCC High is generally more cost-effective for most small to mid-sized portfolio companies. While VDI (Virtual Desktop Infrastructure) offers strong isolation, it requires expensive infrastructure—Azure Sentinel, Log Analytics, Azure Firewall, etc.—which can double the cost compared to a well-scoped GCC High deployment. For rapid compliance and scalability across the portfolio, Summit 7 typically recommends a “big bang” migration to GCC High as the more straightforward path.
Can compliance be centralized across a portfolio?
Some functions—like policy templates, governance frameworks, or centralized CUI training—can be centralized. But technical environments and system boundaries must be unique to each entity unless you’re operating a validated shared enclave. Summit 7 provides repeatable compliance blueprints that PE firms can deploy across their holdings, allowing for standardization while preserving assessment integrity.
What happened in the DOJ case involving a PE firm and CUI exposure?
The Department of Justice settled with a 70-person defense contractor and its PE firm after Egyptian nationals were given unauthorized access to CUI. Despite the company self-reporting and cooperating, the total penalty reached $1.75 million. This case set a precedent that PE firms can be held accountable—not just their portfolio companies—when they influence or allow improper CUI access. It emphasizes the need for proper controls at both the portfolio and investor level.
How can we mitigate compliance risks before exit or recapitalization?
CMMC readiness can materially impact valuation and deal terms. To mitigate risk:
- Verify all SPRS scores with evidence
- Conduct enclave scoping and gap assessments across your portfolio
- Document flow-down compliance and subcontractor controls
- Build a compliance roadmap aligned to CMMC Level 2
- Ensure any shared service models don’t cross compliance boundaries
"We wanted to be a company that was known for partnering with the best. We knew Summit 7’s Microsoft G5 License with its compliance suite would increase our value to a potential buyer – they would know we are aligned with a partner that is truly the best in class."
– Jeff Smedley, J&J Worldwide Vice President and Chief Information Officer
J&J Worldwide Services: Enhancing CMMC compliance with Microsoft Purview and the M365 G5 License Stack
J&J Worldwide Services (J&J) provides a variety of facility services, facility management, and operational support for Department of Defense military bases.
As a prime DoD contractor and with federal contracts as their chief source of revenue, it was imperative that J&J find a premiere provider to maintain compliance and safeguard their top revenue stream.
As a fast-growing company J&J saw their compliance posture as a key strategy for increasing their value to potential buyers.
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