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Data-driven solutions for a successful M&A

Mergers and acquisitions (M&A) are big business. Financial Times reported that M&A were only down about 5% in 2020 over 2019, even amidst a global pandemic. In 2020—even during the pandemic—the value of global M&A hit $3.6 trillion. Yes—trillion. Pretty impressive for a period when big deals (like everything else) seemingly came to a screeching halt.  

But when you think about it, it makes sense. You can adapt to a lot of things by changing processes and being innovative, but when it comes to combining two companies into one, you can’t do that without a lot of expert (and expensive) help. 

Along with that professional help, it’s worth investing in some data-driven solutions to help boost your chances of M&A success, including relationship intelligence tools, AI, and data automation.

Bring in the M&A experts 

Hiring professional counsel in the areas of legal and finance is an absolute must for any companies starting the M&A process. Companies should only bring in those who specialize in M&A—according to Forbes, experts in “tax, compensation and benefits, employee matters, real estate, intellectual property, cybersecurity, data privacy, antitrust, and international trade,” should be considered, depending on the deal. Legal teams who have worked together on previous M&A deals are preferable, as things can move fast. 

An experienced M&A investment banker is also a recommended teammate for the M&A process, who will bring to the table a vast amount of knowledge and support on meetings, negotiations, buyer prospecting, market valuation, response to due diligence requests, and much more. 

Due diligence 

According to Forbes “the buyer will want to ensure it knows what it is buying and what obligations it is assuming, the nature and extent of the selling company’s contingent liabilities, problematic contracts, litigation risk, and intellectual property issues, and much more.” Sellers should be prepared to answer due diligence requests throughout the M&A process, and the most efficient way to handle due diligence is by setting up an online data room. 

An online data room is a secure, web-based home for all important documents and information from the seller that the buyer might possibly need to review. Online data rooms can report back to the investment banker on who viewed what, how often, and when—giving valuable insight into the interest level of the potential buyer.

Consequences of unsuccessful M&A

Despite M&A being valued at more than $2 trillion annually, most studies show between 70 and 90 percent of M&A end up unsuccessful. So why do so many fail? 

According to an M&A expert at Harvard Business Review (HBR), it’s usually integration problems, across the board. From company culture to collaboration to tech stack—integration can make or break M&A. Many companies who embark on M&A get distracted by their idea of diversifying in order to grow revenues and forget about putting time and effort into proper integrations. 

According to an HBR M&A Playbook, “executives incorrectly match candidates to the strategic purpose of the deal, failing to distinguish between deals that might improve current operations and those that could dramatically transform the company’s growth prospects,” which in turn sees companies paying the wrong price, and integrating the acquisition incorrectly. Unsuccessful M&A can also be caused by poor due diligence.

IT challenges with M&A

Like any complicated, high-stakes business deal, M&A comes with a specific set of challenges, specifically in the area of IT and data. Lack of integration, visibility, compliance, and security have been reported as the major technology challenges in M&A. During the M&A process it’s important to have both companies synced up as fast and effectively as possible; systems and databases must be integrated properly, and everyone should be set up for a successful changeover. 

Both companies will bring their own tech partners, financial systems, and applications to the equation, making technological integration a big undertaking. It’s best to tackle this challenge as early as possible. When the two companies that are merging are similar in nature, there may even be an overlap in client data and information, making the need for data clean-up crucial. In some cases, when data security and visibility are not aligned, entirely new processes may need to be designed and implemented in order to get both parties on the same page.

Avoiding IT and data migration obstacles in M&A

As we’ve established, M&A comes with a huge undertaking in respect to IT and data migration. And, as we’ve learned, failure to integrate properly can lead to M&A failure. So, like any large project, setting up for success means creating a clear action plan when it comes to data migration and IT integration. There are a number of considerations when planning for the merger or acquisition that will help companies define a plan and budget. 

According to DBTA, start by asking questions like do you need to integrate the company you just bought into your system? If you are the seller, do you need to separate data for the divested units from your current system? Does the company you’re acquiring have the same ERP system? Are there any regulatory issues that may affect the process? Looking at these kinds of considerations will help you define your action plan and data needs. 

Involving IT professionals from the beginning can be a huge help in setting up a successful integration strategy. Bringing them in later in the process to troubleshoot is never a good idea. Be sure to give the IT team a full picture of business goals and strategies so that they can align their efforts and plan accordingly. According to DBTA: “Companies that align their business strategy and IT implementation see the most success from M&A transformations due to the greater understanding gained and the flexibility enabled.” 

Since data integration is very labor-intensive and there are countless repetitive tasks, part of the integration strategy should leverage any available technologies that can possibly save time and money. Integrations can take a really long time to complete, so consider how long your company can lose revenue while it undertakes the process, or how long you could sustain an interruption in client services. 

The good news is that there are already technologies that exist which can speed up the process. As DBTA puts it: “The tedious processes that plague most carve outs can be automated, ensuring fast, secure results, with the added benefit of automated audit trails.” They go on to describe a use-case where a financial and professional services firm needed to convert vast amounts of historical data, timed with the finalization of an acquisition—while looking to completely avoid interruption in client services, to boot. To achieve their goals, the firm partnered with an automation-driven company and everything was done on time successfully. 

Solutions that help

Since integrations are the biggest challenge for most M&A, focusing on effective ways to communicate as two companies come together is very important. Companies that leverage their tech stacks to find ways to make integrations go more smoothly will no doubt be in a better position to achieve a successful merger or acquisition. 

A solution that can help open up communication between two companies that are coming together is to use relationship intelligence tools—showing you who knows who from day one. Perhaps you’re merging with a company that has a relationship with a priority target account you’ve been prospecting for years prior—how will you connect the dots? Solutions using AI-powered data analysis can help align sales teams and give valuable insights during the M&A process. 

Merging the ethos and teams of two companies is no doubt a huge M&A challenge, especially if the businesses are similar in nature and were formerly competitors. Mapping relationships across the newly formed business pushes for a more cohesive team through open communication and client knowledge.

Transparency is a wonderful catalyst for achieving team harmony and synergy (which is the reason you merged in the first place). Relationship intelligence, along with AI and automation capabilities are great tech tools to bring along for the ride and can help your M&A story have a happy ending.

Want to know more?

To learn more about solutions that can help boost the success of your merger or acquisition, download our Finacial Services and Fintech Disruption Pitchbook.

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