Acquisitions in digital transformation are set to continue as the share of corporate spending allocated to technology rises, though the nature of expenditures tells a story of a maturing industry. Companies that used to splurge on building out platforms are turning to investments in running them. “This suggests that companies are pivoting from core internal operational efficiencies to new digital products and services that enable them to get closer to their customers and generate revenue,” EY writes in a recent note.
It’s not just spending that’s increasing. Executives are also focused on returns. Nearly double the 23 percent of executives polled by a recent EY survey in 2020 now say they are measuring yields on digital investment. And the focus on results shows, well, results of its own. Those companies measuring digital investment returns report yields averaging 3.2 percent higher in 2022 than in 2020.
Like many new frontiers, however, digital transformation poses novel challenges. EY notes that few companies have systemic ways of measuring digitally-derived results across costs or working capital.
Cost reduction has been framed in terms of M&A, but partnerships also offer firms a way to diversify their cost bases. How that shapes up when asset prices surge should be notable for dealmakers pegging exit strategies to selling digital-heavy platforms.
–Brandon Zero
