The current deal environment is as challenging as ever and because of increased competition, acquirers need to take an offensive stance when pursuing deals. Today’s evolving data & analytics tools can provide dealmakers with the information they need to gain a competitive edge.
Buyers are at an information disadvantage during the due diligence process. Sellers and their advisers control and curate data and present their version of the business narrative, which tends to camouflage the negatives. Accelerated deal time lines further limit the due diligence process and increase the probability that an acquirer may not uncover substantial deal risks or other issues that would affect the target’s long-term valuation. Despite today’s more intense deal conditions, a large percentage of acquirers have not evolved their due diligence tools and continue to rely on traditional, manual, and defensive methods of performing due diligence. Focusing on historical earnings and using data summarized in an Excel spreadsheet is not the approach that will yield results that companies need to succeed. Acquirers need to adopt a more sophisticated, technologically advanced and data-driven approach to gain a competitive edge in the bidding process and to realize a deal’s full value post-close.
The use of data & analytics has taken on a particular importance in M&A and when used properly can transform the due diligence process and give acquirers much more control of the most important types of information. In a recent KPMG survey, over 55 percent of respondents said that data & analytics was a critical component of their due diligence, and almost 70 percent of respondents said their companies received raw data from the target and used their own team to analyze the data. The data & analytics capability that is now available is more sophisticated and comprehensive and therefore much more valuable than prior iterations.
The proliferation of data has been an ongoing trend for the last several years. Companies are generating more and more pieces of electronic information. One recent white paper estimates that by 2025, the global data sphere will grow to 163 zettabytes (i.e., a trillion gigabytes).
M&A professionals should also be aware that data & analytics is much more than a one-time-use disposable tool that is limited to the diligence stage of a deal. While the capabilities of data & analytics in the M&A context have advanced considerably in the last few years, not every deal professional is aware of the tremendous value these tools can provide to acquirers in the post-sign, integration, and value creation phases of a deal.