How to find and maximize digital value in any M&A deal post-pandemic

Merlin Piscitelli, CRO, EMEA at Datasite, advises finding and maximizing digital value in any M&A deal.

The Covid-19 pandemic accelerated digital investment as companies looked to maximize digital value, pivoting their operating model to ensure resilience and competitiveness.

Traditionally, M&A deals have been notoriously relationship-driven, with regular in-person meetings, conferences and social engagements throughout the process to push forward deals. However, 2020 saw the M&A industry, like other sectors, dramatically change as employees in businesses across the country found themselves immediately dispatched from their offices to begin the biggest’ work from home’ experiment in history.

While this digital mandate isn’t new, it has been a catalyst for businesses to embrace digital transformation. For many dealmakers, the pandemic stimulated much needed digital transformation in the sector, pushing dealmakers away from traditional processes of face to face meetings and instead towards zoom conference calls, remote collaboration and digital tools seemingly overnight.

Thanks to the rapid acceleration and adoption of digital transformation, M&A has continued to thrive and exceed expectations despite much uncertainty and economic disruption. According to Datasite’s HY DealDrivers report, there were €578bn worth of deals during H1 2021, a 15% rise on H2 2020. Deal volumes also grew in the first half of 2021 with 4,691 deals across the EMEA region, an increase of 9% on the second half of 2020 and a 42% rise on the same period of last year.

With 66% of dealmakers believing virtual dealmaking is set to stay post-pandemic, maximizing and leveraging digital value moving forward will become ever more important if the M&A industry hopes to stay competitive post-pandemic.

So, why should M&A professionals look to maximize digital value in M&A long-term?

The benefits of digitalization in any M&A deal

M&A can often be a time consuming and unnecessarily complex process, but by implementing the right technology and tools to streamline the M&A management process, dealmakers can protect the two key indicators crucial to success in any deal: time and efficiency. Digitizing the entire M&A lifecycle is crucial for companies looking to generate efficiencies, achieve financial targets and revenue growth. In many instances, having the right tools and processes can mean the difference between M&A success and failure.

To drive value as soon as possible, acquisition speed is critical. One of the most timely processes is due diligence, which can usually take between three to six months. However, by digitizing the process the time it takes to perform due diligence can be decreased. In fact, a recent Datasite survey found that by maximizing digital value in M&A, 71% of UK dealmakers expect due diligence to take less than one month by 2025. As most parties and advisers to a M&A transaction work remotely, more due diligence is being completed virtually in data rooms.

Digital tools also enable more robust data management and communications, analytics and reporting and the administration of multiple scenario analyses or financial modelling. This can make the entire M&A process more accurate, faster and less labour-intensive.

It is also very important for teams to leverage digital communications, as well as tools and platforms for collaboration and project management to make decisions and resolve issues.

Dealmakers are also finding that by digitizing the process, they can make it more secure. This is a particular concern in the UK, where 54% of dealmakers say data or cybersecurity concerns are the most common issue uncovered in due diligence that causes the withdrawal from a deal.

How AI-enabled services assist in the M&A lifecycle

Companies and dealmakers must look to AI-based digital tools that can execute tasks efficiently, particularly as hybrid working arrangements largely remain in place to maximize digital value in dealmaking.

By adopting AI-based technology, M&A professionals can tackle pre-existing efficiencies by automating time-consuming tasks, such as collecting and categorizing the due diligence materials, redaction, and contract analysis. As we’ve seen, AI-powered tools are quickly becoming commonplace in helping the sell-side prepare deals and conduct due diligence.

Although it sounds straightforward, one of the most challenging parts of the M&A process is organizing and preparing the files needed for review by potential investors or purchasers. The average investment banking analyst will often spend weeks at a time analyzing thousands of documents to collate, organize and prepare the documents or assets required by potential investors or purchasers.

However, by implementing AI and machine learning, content organizing and categorizing can be automated and streamlined, resulting in a faster and more precise outcome. Processes can be condensed to a matter of minutes instead of weeks, allowing dealmakers to redirect their focus to more pressing activities.

Navigating the balance between human decision making and technology in M&A transactions

The right balance between human decision making and technology can be difficult to strike. While AI is making the M&A process easier and faster, there is a very human element in dealmaking that cannot be replaced – from relationship building, networking and human collaboration.

Strategy, negotiation and deal preparation all require human intelligence, experience and expertise. Unfortunately, these are processes that cannot be automated. As it stands, no technology can replicate everything needed for a successful M&A strategy and deal. New technologies are capable of augmenting the work of advisors, but they will never be fully replaceable.

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Still, it is more than clear that technological innovation is moving the dial in making deals more efficient, even post-pandemic. With the right AI and machine learning digital tools, dealmakers can speed up the process and enhance the entire M&A lifecycle. Therefore, it’s vital that the barriers to technology adoption throughout the M&A process are addressed and rectified. According to Datasite’s UK M&A report, 89% of UK practitioners reported that financial or investment constraints are one of the main barriers to their company adopting M&A process-related digital technologies. Therefore, investment in technology and digital capabilities will be critical for M&A professionals looking for new avenues for growth and optimization post-pandemic.

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