Mergers and acquisitions are becoming larger, more complex, and more valuable than ever before. Recent years have seen a rise in “mega-mergers” such as Disney-Fox, AT&T-Time Warner, CVS Health-Aetna, and Heinz-Kraft—each one worth tens of billions of dollars.
What’s more, it’s not just giant corporations that are merging. According to Accenture Research, 87 percent of firms have acquired another company in the past two years.
As this growth in M&A activity continues, businesses will need cutting-edge technological solutions in order to successfully execute the transaction. In this article, we’ll discuss 3 ways that technology will transform M&A in the short and medium term.
1. Digital Deals
For starters, technology is changing the types of M&A transactions that companies are interested in doing.
Thanks to the proliferation of digital technologies, it’s often said that regardless of your industry, “every company is a software company.” From manufacturing and agriculture to entertainment and defense, nearly every industry can benefit from the application of the right tech stack.
Of course, most businesses aren’t in the tech industry themselves, but they can acquire these competencies through mergers and acquisitions. According to the Accenture survey, 43 percent of companies engage in M&A because they have a “need for next-gen technology,” and 42 percent do so because they want to acquire new digital capabilities.
2. Performing Due Diligence
Due diligence is one of the most vital (yet time-consuming) parts of the M&A process. In order to be confident in executing the transaction, the buyer must confirm that the seller’s financial statements and contracts are accurate and up-to-date.
With hundreds or thousands of documents to review, analyze, and confirm, due diligence can be a painstaking process. Until recently, due diligence for a major M&A deal could take anywhere between 6 and 9 months, which is far more than the recommended 60 days.
Thanks to the use of artificial intelligence, however, this timeline has been slashed to only 3 months on average. AI-enabled software can parse the files stored in a virtual data room orders of magnitude more quickly than your human employees. As a result, 78 percent of companies believe that by 2022, due diligence will take an average of
Note that digitizing the due diligence process doesn’t come without its share of risk. Virtual data rooms can be a tempting target for hackers and corporate espionage. Make sure that you choose a data room with strong security for your M&A deals.
3. Improving Integrations
According to most estimates, the failure rate of M&A transactions is between 70 and 90 percent. One of the biggest reasons for M&A failure is the inability to successfully integrate the two companies’ processes, workforces, cultures, and management after the deal is complete.
When used effectively, digital technology can be a game changer for the success of the post-deal period.
For example, companies that are expanding into a new vertical can use business process management (BPM) software and application programming interfaces (APIs). These tools make it easier for the post-M&A organization to quickly recompose these IT building blocks, improving flexibility and efficiency.
Meanwhile, companies that are merging research and development operations can use analytics software in order to determine the R&D initiatives that appear most promising, while cutting back on other projects that are less important or duplicating work.