M&A is hot, but creating value may require a deeper dive for insights

A message from
 
PWC

Colin McIntyre, U.S. Deals Digital Leader at PwC, breaks down how M&A has evolved since the start of the COVID-19 pandemic and how companies looking to grow can better understand, react to, and succeed in this new environment.

1. First things first: How has the digital deals landscape changed in the last few years?

McIntyre: We all know the amount of data available in business has grown exponentially, and that’s never been more critical in M&A. 

But the real shift is in how buyers and sellers use the right mix of technologies — cloud, automation, AI, and others — to unpack that data and create insights that enable more informed decisions to unlock value.

  • A bunch of Excel files on a dozen different laptops doesn’t cut it. Predictive targeting, analytics, scenario planning … these aren’t merely options anymore. They’re essential if a deal has any chance of delivering value.

2. Why it’s important: Why should a company care about digital transformation, and why is it important in deals today and going forward?

McIntyre: Well, because its customers and rivals care, and it’s crucial for driving growth in a highly competitive world. 

Consider that 84% of executives told our firm that they plan to increase investment in digital transformation over the next three years. 

  • The pandemic forced businesses to rethink business models and how they interact with employees and customers, accelerating opportunities to further evolve or even reinvent themselves.
  • But with company valuations remaining high, returns on acquisitions will increasingly depend on how well buyers and sellers are positioned for this changed world.

3. Here’s how: How can organizations make more confident data-based decisions and improve the deal process?

McIntyre: Data is only as smart as the analysis it enables, and analysis is most valuable when it leads to actionable insights. 

The key is to think beyond a specific tool. Investing in connectivity, collaboration, and communication can create a digital ecosystem of key stakeholders that can be invaluable in all stages of a deal.

  • In due diligence, for instance, conducting a multi-dimensional analysis using multiple data sets can present different scenarios that show the cause and effect between the deal’s sources of value. 

4. On the other hand: What could happen if a company doesn’t invest in digital capabilities and continues with M&A as usual?

McIntyre: There may be cases in which you can do what’s worked before and hope for the same result. But those are harder and harder to find when competing against peers that have embraced and invested in their digital transformation. 

And the competition for assets is fierce. There are so many potential acquirers with so much capital to spend, and high-quality M&A targets command a hefty price. 

  • Buyers may have money and be willing to pay more than before. But if you don’t figure out how you can go beyond simple cost synergies, the pressure to prove to shareholders that a deal was a success is much greater.

5. The results: What outcomes can businesses expect from investing in digital capabilities that aim to protect and create value in deals?

McIntyre: Here’s one example: We worked with a tech company that was going through an integration after a recent deal and was also planning to spin off a business unit. They wanted to do it in about seven months, which was aggressive for any company, much less one still integrating. 

  • The solution was a single platform to gather the data from several hundred source files across multiple reporting periods. 
  • This also was a “collect once, use many” approach that had other benefits. Beyond meeting its immediate deadline, the company gained insight to support strategic and operational plans going forward, and it was better positioned to focus on its core business.