How Technology-Driven Data Is Changing The Way Deals Are Made
For those who regularly engage in M&A, a large majority of them have begun to make technology-driven data analytics a crucial part of their toolbox, whether in the initial search for potential targets or other elements of the due diligence process. The term is one that is widely used for technology solutions to aid businesses interpret data as well as analyse business trends. Additionally, it provides a level of both sophistication and precision that was previously not there.
A recent survey showed that 68% of 500 corporate executives surveyed use the analysis of data as part of their M&A analysis and 64% of those same executives said they have increased the use of analytics in some manner.
Respondents say that their use of examining raw data has steadily risen in recent years, with more than 80% of them recognising it as increasingly important to M&A activity in the years to come. The survey also went on to show that 40% of respondents see it as a ‘core component’ of M&A analysis, with a further 28% say that it is used in select areas and finally those 21% not currently using M&A data analysis, almost half are said to be considering it.
The likelihood of using data analytics appears to be closely correlated with firm size, with 58% of firms $5bn and up using this as a core component of M&A analysis, while only a mere 29% of firms at $50m – $250m do.
One of the reasons for the increase in interest is availability, as data sets are now richer and more detailed, they provide greater and more up-to-date insights into companies on both a public and private basis. A company looking for acquisitions can now identify targets using an array of potential sources of information, then once they are identified, can dig deeper into the company’s financials to come up with a valuation.
However, data analytics isn’t just about running sets of data through sophisticated analytics software. In every case, it requires a strategic approach as well as qualified teams to conduct and manage the whole process. In addition, data analytics includes careful reviews of social media and other digital economy indicators, which provides colour and, from time to time, major insights that can impact the valuation of a deal in a significant manner.
Board members and investors increasingly expect analysis data to be a part of their strategic review of a potential transaction. The reasoning behind it is relatively simple; expert deployment of it can raise confidence levels on transactions, which can confirm suspicions regarding the direction of a business as well as help to provide a better sense of factors that drive valuations and deepen awareness of potential risk factors.
A data analytics advantage can work to help a buyer in identifying the story behind the numbers, as well as gaining an understanding of the target at a much more granular level. An example would be in the way we have witnessed acquirers use social media metrics in order to keep track of consumer behaviours/attitudes about a company, in a much more sophisticated manner than in previous times gone by. The outcome invariably is a transaction where the purchaser is often more likely to integrate the asset successfully and manage it for growth.
The range of potential data is huge and continues to grow on a daily basis, with those surveyed displaying a willingness to analyse both structured and unstructured data. The advantages of structured data are well known, but those particular sets of data can at times be hard to acquire. On the other hand, unstructured data requires more initial effort to collect, interpret and manage, but are usually revealing.
The fact that data analytics is on the brink of transforming the deal-making game shouldn’t come as a surprise, with players in a number of industries saying they expect it to have a rising impact. Respondents from health care (86% of survey participants reported that data analytics will become more important in the next 3 years), financial services (85%), manufacturing (83%) retail & distribution (89%), energy (90%), and technology (86%) industries all reported that they expect to tap insights buried deep within mountains and mountains of data.
A crucial step for any organisation seeking to pursue a transaction is to deploy data analytics for their most powerful and impactful end-use. In the weeks to follow, we will explore the way in which the analysis of raw data is changing how deals are evaluated and carried out, and just how it can prove to be beneficial in bringing in higher levels of confidence to each transaction.
With experience in a number of key sectors and representation throughout the Americas, Europe, Africa and Asia, Benchmark International can connect you with the right opportunity. To find out more, visit http://www.benchmarkcorporate.com.