Why it’s time for mergers and acquisitions to embrace digital transformation
In the midst of complex mergers and acquisitions negotiations, deals more often than not face unexpected developments that can cause significant delays.
Even the most common hurdles – such as misplaced documentation – can have a significant material impact on a business’ speed-to-market and share valuation. This is a key reason why it is time that those involved in M&A negotiations must embrace virtual deal room technologies.
Whether they are buy-side or sell-side, dealmakers need to take a holistic view of every single step of the process, from networking and idea generation, sourcing and marketing, to due diligence and integration planning.
Speed and efficiency through the deal lifecycle
Each of these processes takes up considerable man hours, pressuring M&A professionals amidst a challenging industry backdrop to adopt better, faster tools to ensure speed, efficiency and continuity throughout a deal’s entire lifecycle.
The financial services industry has been rapidly transformed by digitisation in recent years, with the British fintech boom a clear example of how this has impacted the sector. However, while trading floors are now almost entirely driven by algorithms, investment banking has remained wary of adopting these new streamlined, automated digital processes.
The truth is that many people within the investment banking industry simply feel as though it does not lend itself to automation, viewing success as reliant on the strength of personal relationships. The reality, however, is a fear that new processes could end up reducing the number of jobs available.
New tech means better deals and more jobs
Selecting the right technology has the ability to enhance investment bankers’ knowledge and capabilities, allowing them to become more efficient, competitive and therefore attract greater amounts of business.
Virtual deal room technology, to use one prime example, can change the way in which investment bankers go about the M&A process, through provisioning a safe space for parties to manage and store their critical information during negotiations.
Being able to provide this unique tool allows investment bankers to close deals faster rapidly, accelerating speed-to-market and maximising the transaction value for both buyers and sellers, all the while minimising security that can compromise a deal – i.e. information leaks and data hacks.
Easy online networking & speedier information flows
The old world perception of a well-connected investment banker, doing face-to-face deals with his personal network on the golf course or in the private members club is rapidly becoming an outdated myth when it comes to the reality of how the industry works in practice.
Clearly, it is impossible for an M&A professional to know every buyer in the market, which is why fast and efficient online networking is a key way in which they can transform the ways they identify potential buyers out there.
Additionally, there is still far too much of the investment banking workflow that takes place through cumbersome tools like Excel, PowerPoint and email. Such tools slow the deal-making process and, more worryingly, put sensitive data at high risk of unwanted disclosure.
There are a number of ways in which innovative technology can help improve this necessary flow of investment information – I have outlined three of them below:
- Buyer Identification – Bankers typically spend years building relationships with potential buyers, both financial and strategic. Barring perhaps a handful of industries, it’s impossible for an M&A banker to really know every buyer in the market – especially when the market is now global. Online networking – the world’s biggest Rolodex – can bring the right people together at the right time to expand everyone’s opportunities.
- Information flow– Much of the investment banking workflow still takes place through Excel, PowerPoint and email. Not only do these tools slow the deal-making process, but they can also put sensitive information at risk of unwanted disclosure. Sending, sharing and storing NDA files or the due diligence Q&A process on a secure electronic platform can massively improve efficiency and security.
- Artificial Intelligence (AI) – Some banks are beginning to explore whether tasks like modelling can be more effectively handled by AI. Such tools can read, review and analyze vast amounts of information in mere minutes, thereby expediting knowledge-based activities to improve efficiency, accuracy and performance.
The three points above offers a snapshot of the key areas in which the investment banking industry is clearly ripe for technological process improvement.
Adopting these new technologies – particularly for the old-guard who have done the job ‘their own way’ for generations – is certainly going to take the initiative of a few early adopters to show success before the rest of the community crosses the chasm.
The bottom line is this: it’s no longer a matter of if these changes are necessary. It’s merely a matter of how long this digital transformation of the investment banking industry will take, and who will be leading the charge.
By Philip Whitchelo, VP for strategic business development, Intralinks
August 18, 2022
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