By Merlin Piscitelli, Chief Revenue Officer, EMEA at Datasite (www.datasite.com)
Economies around the world have been brought to their knees as they deal with the COVID-19 pandemic. Many businesses find themselves on the brink of collapse as state aid begins to be rolled back. Some companies have already filed for bankruptcy, while others are seeking to explore strategies to address their sustainability through restructuring or financial repositioning. There is little doubt that mergers and acquisitions (M&A) options are being seriously considered by both those struggling and those seeking to invest in viable businesses.
However, while technology is making these transactions easier and faster for all those involved, not everyone is using them the same way or as much. Plus, new tools powered by new technologies have emerged that are changing how the entire M&A process is conducted end to end.
To help identify and understand what the process of completing M&A looks like today and what it will look like in five years' time, we surveyed 2,235 M&A practitioners around the globe, 860 of which were based in Europe, the Middle East and Africa (EMEA), just as the COVID-19 crisis began to rear its head on a global scale. Our report, The New State of M&A: an EMEA perspective, highlights key areas that are barriers to the technological and digitalisation of those processes. The global pandemic has reinforced the need for remote and virtual working practices but, it turns out, there are still barriers to adoption.
EMEA lags peers
EMEA dealmakers lag their peers in other regions when it comes to adopting M&A processes that are digitally mature and technologically sophisticated. The survey shows that 67% of EMEA dealmakers say that process at their company will have a high level of digital maturity and technological sophistication by 2025. This compares with 77% of Americas dealmakers who predict the process at their company will have a high level of digital maturity and technological sophistication in five years and 71% who say the same of the M&A process industry wide. In APAC, only 43% of dealmakers say the M&A process at their company will have a high level of digital maturity and technological sophistication by 2025 but 72% say the same of the M&A process industry wide.
At a time when business is being conducted online more than ever before, what's holding EMEA dealmakers back? A full 77% recognise that new technologies will enable greater analytical capability in the due diligence process in five years' time, but a staggering 83% admitted that the biggest barrier to adopting relevant digital technologies was financial or investment constraints. This was followed by data security and privacy issues and integration challenges with existing systems and tools. According to the report, company culture is also a barrier, especially at companies in the UK, France and central and eastern Europe.
AI to cut down due diligence time
Yet, these same dealmakers do recognise that new technologies will shorten the time it takes to complete due diligence, what they identified as the most time-consuming phase of the process. In fact, dealmakers in EMEA see new technologies such as artificial intelligence (AI) transforming the M&A process by decreasing the time it takes to perform due diligence. A full 64% believe due diligence will take less than one month by 2025 from the one to three months it takes today. Key to speeding up the process is the use of virtual data rooms. When they were first
introduced, they vastly improved the security and efficiency of the process, and now, a decade later, they are doing it again through AI and automation. For example, one of the most challenging and time-consuming parts of any M&A process is organising and preparing the files needed for review by potential investors or purchasers – this can take weeks and even months to perform. AI and similar technologies can streamline this process, allowing deal makers to concentrate their time and energy on other parts of the deal. In fact, 93% of EMEA practitioners surveyed said that the ability to load large volumes of data quickly is the most useful tool in restructuring situations.
In an increasingly digitalised world, there are also other ways that technology can help dealmakers and their organisations move forward.
- To streamline key activities in early deal making, dealmakers can take advantage of tools which fully automate outreach to and tracking of potential buyers of assets. These tools can not only help enable a better understanding of buyer or creditor habits which leads to better visibility into essential business metrics, but they can also provide project status reviews, all in one place. No longer will there be questions about how many teasers have been sent, how many NDAs are still in negotiation, or how many CIMs have been sent and declined.
- AI and machine learning capabilities can now automatically categorise thousands of documents in minutes, allocate and index these into appropriate folders, and bulk redact sensitive information and data in seconds to ensure regulatory compliance (with GDPR and/or CCPA.)
To be sure, technology can help only so much. More than one third of EMEA dealmakers said that incomplete or inaccurate deal documentation and information is the factor that slows the M&A process down the most. Additionally, survey respondents agree that dealmaking still depends on human soft skills, including people, connections, collaboration, sentiment and confidence. Interestingly, a further 47% of practitioners in the region referenced a lack of insights on buyer behaviour across mandates being the most challenging aspect of marketing an asset for sale.
Still, it is more than clear that technological innovation is moving the dial in making the deal more efficient. The right technology can help, and is helping, dealmakers take control over the entire lifespan of a deal, including preparing it, marketing it, conducting due diligence on it, and managing post-merger integration. By using tools supported with the latest technology, including artificial intelligence and machine learning, dealmakers can speed up and address all the pain points of managing a deal across its entire lifecycle.
The world is changing faster than we ever believed possible. Moving forward, adopting the right technology to efficiently and effectively manage the entire M&A process will be critical for companies to not only survive but to thrive in the 'new normal.'