How to extract more value from M&A by using artificial intelligence and analytics
Digital technology has fundamentally transformed the M&A market, changing the way companies approach deal strategies – from the targets they’re chasing to the processes they have in place for deal execution and integration.
Wanted: digital assets
Companies are increasingly turning to M&A to strengthen their digital footprints, acquiring multiple businesses in quick succession to gain technologies they don’t currently possess. Digital fuels growth, and many large organizations are recognizing that they can’t build the digital capabilities they need as quickly as they would like to achieve that growth organically. Instead, they’re looking outside for new, emerging players to acquire innovation and technologies to stay competitive.
For example, Siemens has invested $10 billion in software companies since 2007 to help fulfill its digital strategy. As a result, in 2016, Siemens’ digital business generated around $4.6 billion, 12 percent more than 2015—with double digit growth predicted through 2020.
Digital needs are fast rivaling traditional reasons in spurring M&A events across all industries. Accenture Strategy research shows that acquiring new capabilities and the need for next-gen tech are on par with more traditional M&A triggers such as expanding into geographic markets or industries.
A new M&A approach
To make digital acquisitions a success and have them contribute to new business growth, companies need to transform their M&A approach from the get-go. More than three-quarters of executives agree they cannot rely on traditional M&A capabilities for digital deals. These deals require a different mindset, and different toolkit – companies getting it right are digitizing their processes from target screening to valuation, through to discovery, negotiation, integration and beyond. More than 60 percent of companies are already using a different pre-deal team and evaluation for digital transactions.
Digital technologies also allow companies to generate better insights faster, run a smoother process and extract more value from M&A. Analytics and applied intelligence play a key role in helping human deal analysts sort through vast amounts of data—from financials, to company communications, social media and customer sentiment.
Digital wealth for all
To realize an acquisition’s full potential, companies also need to spread that digital savvy across the organization. Currently, research shows most companies are failing to infuse the cultural DNA of their digital deals into the wider organization, with almost two-thirds keeping digital acquisitions as a standalone business. An increasing number of acquiring executive teams are realizing the value of harvesting the DNA that their agile upstarts bring, but integration must be done thoughtfully, not monolithically. For example, one approach that has proven successful is to foster a culture of cultures that allows new acquisitions to thrive in the parent company’s ecosystem, while creating commercial and infrastructure linkages that enable collaboration around market opportunities. Additionally, as companies acquire multiple digital entities, some may find stringing them together to create a new capability and meld the best of all cultures could create a competitive advantage.
- Develop a distinct process for digital M&A. From target screening to valuation, discovery and negotiation, a modified playbook can be a huge advantage.
- Determine the appropriate level of integration, to scale new business growth. The more digital acquisitions a company makes, the more necessary holistic integration strategy becomes.
- Double down on technologies like analytics and artificial intelligence to improve end-to-end capabilities for all acquisitions—traditional and digital. Companies will generate better insights faster, streamline the process and extract more value from M&A.
M&A activity related to gaining digital capabilities will only continue to increase. Those who move quickly to bring their company into the new with digital technologies are best positioned to reap the rewards.
J. Neely is managing director and global M&A lead within Accenture Strategy, where he focuses on working with clients across the consumer, retail and industrial sectors.