Technology has been closely linked with mergers and acquisitions (M&A) for many years. Major technology companies such as Adobe, Microsoft, Apple, and Facebook have all been heavily involved in M&A activity. For instance, Adobe’s acquisition of Figma, Microsoft’s acquisition of LinkedIn, and Facebook’s acquisition of Instagram are prime examples of this trend.
Mergers and acquisitions (M&A) can be complex transactions that require extensive preparation, planning, and collaboration. As M&A practitioners are expected to evaluate the loads of company data involved in transactions, it has become a must to use technology as it enhances and streamlines the deal sourcing process.
In this article, we’ll explore the role of technology in M&A deal origination, the latest trends in this area, and the tools that dealmakers are using to stay ahead of the curve.
What are some of the specific ways that technology is helping to expedite the M&A process?
In the past, sourcing new deal opportunities for mergers and acquisitions (M&A) was a time-consuming process that relied heavily on personal networks. Investors often had to research multiple unstructured datasets to identify suitable investment opportunities, due to a lack of available data on corporate financials, leadership teams, capital raising history, and comparable company valuations. In fact, Social media platforms like Twitter and LinkedIn have become critical tools in M&A planning, particularly in deal sourcing.
However, with the tremendous amount of information now available on completed M&A transactions and industry trends, dealmakers have now found a way to leverage this data to structure and value future transactions and anticipate areas of potential disputes using various technologies.
The due diligence process, which can be tedious and painstaking, can now be streamlined with the help of tools that perform analysis. They can easily find suitable target companies based on solid data rather than just intuition. Research that would have taken months of manual labor can now be done in seconds, allowing investors to consider multiple factors and understand their influence on one another when making potential investment decisions. For instance, investors can examine the work history of executives, the number of patents filed, the amount of capital invested in a particular space, lines of business supported, the education of the founding team, and the experience of the investment partners. Deal negotiation can be accelerated, and more accurate valuations can be obtained with the help of technology.
Trend and tools to watch in M&A
Technology has played an increasingly important role in providing dealmakers with a range of powerful tools and resources to help them identify, evaluate, and execute potential deals. Below are some of the trends every M&A deal maker should look out for:
Artificial Intelligence Tools
One of the most powerful Artificial Intelligence (AI) applications. The capacity to sift through complex contracts and papers, looking for significant text, data, or context, has become increasingly important in recent years.
This type of labor has traditionally included teams of reviewers poring over the material for weeks or months at a time as part of the due diligence process. This was a significant drain on resources, costing hundreds of thousands of dollars at a time.
The essential data may be promptly extracted through software at a degree of precision that even experienced legal personnel would be satisfied with thanks to AI and ML development services.
This includes information about a company’s lease obligations (large companies are likely to have several hundred leases at any given time), the terms of contracts with internal and external stakeholders, and a variety of other potential risk areas such as compliance, dispute resolution, and pending litigations.
Data Visualization Software
Before making a deal, businesses collect large amounts of data for their due diligence process. However, sifting through this data can be overwhelming without a way to synthesize it quickly to identify results and outcomes.
To address this challenge, data visualization software can be utilized to convert numerical and textual data into charts, graphs, tables, maps, and other visual figures that are easy to understand. Data visualization can be used at any stage of the deal-making process, from origination through to integration.
Data visualization software can also be paired with other industry research sources. With this, M&A strategy professionals can:
- View top liquidity, coverage, leverage, and operating ratios for improved interpretation of financial data, and
- Obtain competitive analysis to improve a company’s business strategy and learn how to differentiate from the competition to attract a larger market.
Data visualization software provides a powerful tool to help businesses synthesize large amounts of data quickly and efficiently, making it easier to identify trends, potential weaknesses, and opportunities for improvement during the deal-making process.
Project Management Software
Although technology has undoubtedly made M&A deals easier for dealmakers, the complexity of the process, particularly during the due diligence phase, means that the number of tasks involved continues to grow.
To address this challenge, project management software can be used to organize tasks and ensure that businesses stay on track. The software can handle the complexity of managing multiple M&A deals simultaneously, organizing and managing information and tasks based on a company’s needs throughout the entire transaction.
The software is equipped with features for prospecting, completing due diligence, and managing the transaction. It allows companies to stay on top of necessary documentation while collecting feedback from relevant team members. The software can create individual requests and projects for each team member, providing companies with more insight into each part of the due diligence process and allowing them to manage the transaction more efficiently.
A project management software is a powerful tool for M&A dealmakers, allowing them to streamline the process, stay organized, and manage multiple deals simultaneously. With features like task organization and individualized projects, companies can complete due diligence more efficiently and successfully manage all aspects of the transaction.
Transform your M&A deal origination process
Savvy M&A professionals are using technology to transform the M&A deal origination process. The latest trends in technology provide dealmakers with powerful tools and resources that enable them to expedite transactions, better manage risk, and achieve successful outcomes. By leveraging technology from deal origination to completion and staying ahead of the curve, dealmakers can maximize the benefits of technology and improve their chances of success in this dynamic and rapidly evolving field.
One example of a tool that utilizes AI for finding and evaluating deals is Cyndx’s platform. This platform allows investors to search for potential companies and gain insights into new investment opportunities on a scale never seen before. With over 22 million global public and private companies in its database, the platform provides an unparalleled view into the private capital markets that would not be possible without the use of AI and Natural Language Processing (NLP).