Part 1 of our series on social media looked at how new technologies have started infiltrating the M&A landscape. But the question we aim to answer here is: to what end?
A recent article in the Wall Street Journal considered just that, noting that new technologies – and specifically data analytic technologies – can be used at various stages throughout the M&A lifecycle as a means of bolstering deal analysis and business forecasting.
While their processes can take many forms, data analytics effectively afford companies an advanced means of aggregating, synthesizing and modeling complex information with a view to revealing trends, confirming or invalidating hypotheses, exposing alternatives and/or reinforcing decision making. JR Reagan, leader of the Deloitte Analytics HIVE (Highly Immersive Visual Environment), was interviewed as part of the Wall Street Journal article and had the following to say about how data analytics can improve M&A:
Companies are increasingly turning to analytics to address such needs as how to gather information internally, how to develop a database to compare various aspects of the deal, such as financials and other issues. M&A is an area where data analytics can play a valuable role, particularly given the time constraints that deal professionals face in an M&A situation.
In its 2013 Corporate Development Survey, Deloitte also spoke to the key advantages of data analytics:
This analytic capacity is an essential component for almost any corporate project and not surprisingly, it is also a hallmark of the deal-making process. We’re using analytics on almost every deal and in almost every stage, from customer and vendor analysis, to pricing realignment and even post-merger workforce planning.
Deloitte isn’t the only company to have jumped on board the data analytics bandwagon. According to its survey, nearly 60% of the respondent companies either already use data analytics in their deal-making processes or are considering it.
Most often, the product of data analytics is used to research or vet a target company or to assist with due diligence, but such information can also used for more general purposes such as identifying industry patterns, predicting future trends, and scrutinizing the customers and/or markets of competitor or targeted companies.
While there is unlikely to be any move towards replacing basic human judgment and analysis with data analytics in M&A, analytic technologies are readily available to businesses and can be a valuable complement to traditional deal evaluation methods.
Sara Josselyn (firstname.lastname@example.org / +1 416.203.4463) is a lawyer in Norton Rose Fulbright’s Toronto Corporate and commercial practice.