TMT companies are leaders in data creation. But how good are they at effective management and use of that data? The answer to that question has significant implications for buyers considering M&A in the sector. Adopting a holistic data strategy and getting it right is a data imperative for companies.
In a KPMG survey of more than 300 TMT executives in North America, Europe, and Asia Pacific, more than 80 percent said they were underutilizing their data volume and failing to capture competitive advantage, albeit partly due to the need to deal with pandemic related priorities.1 In fact, fewer than 10 percent of respondents considered themselves world-class when it came to data monetization, data management and architecture, and data quality and governance. Most TMT companies don’t have an adequate data strategy right off the shelf.
This has important implications for M&A. When you acquire another company, you also get its data. Maximizing the value of an acquisition involves monetizing its best data, rather than just bolting it onto an existing database. That means your data strategy is best developed alongside your acquisition strategy and post-merger business plan. Start thinking early about data integration. The sooner you determine what to do with the target company’s data, the sooner you can start to propel your business using data-driven insights, making better business decisions along the way.
The data imperative raises the stakes for buy-side due diligence. In valuing the target company’s assets, be sure to ask: Where is the data stored? How many systems have access to it? What’s the security level? Does the target’s data governance follow best practices? Overlooking problem areas before the deal is consummated could greatly complicate post-merger integration.
In short, doing more—much more—with data is crucial for TMT companies. They know that data insights can help them develop new go-to-market strategies, discover new revenue streams, and capture market share from competitors. Indeed, 75 percent of surveyed executives replied that using enterprise data effectively could radically change their business models. Our survey respondents agreed that the areas most impacted by effective data usage are transactional, operational, and back-office functions, employee experience, and cybersecurity. Even so, the need to address more pressing business issues means better data utilization often falls lower on companies’ priority lists.
The bottom line is that effective data management can transform a company’s business model and operational effectiveness. If TMT companies succeed in fully realizing the data advantage from an acquisition, they can expect cost reductions, as well as improved return on investment, profit, and revenue.
- Source: KPMG and HFS Research, “The data imperative,” November 2021