Data-Driven Research during Mergers and Acquisitions [M&A] Part 1
Companies have announced more than $2 trillion in deals so far in 2018. Many expect this trend to continue throughout 2019 as digital transformation becomes a build, license or buy decision.
A data-driven approach to M&A Research delivers a quantitative approach to drive better insight and quicker decision-making during the mergers, acquisitions and divestitures process.
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Leveraging analytics can help to identify risk more quickly and help buyers and sellers close deals faster.
M&A Due diligence is an investigation or audit of a potential investment or product to confirm all facts, such as reviewing all financial records, plus anything else deemed material. (Investopedia — What is Due Diligence)
M&A Research on the other hand is the process of assessing characteristics and features of a business that can be used to deliver value and/or growth.
M&A Due Diligence as well as M&A Research is often initiated or performed by internal teams within companies who are seeking to make an acquisition, internal teams within companies seeking to sell their company, equity research analysts, fund managers, broker-dealers, and individual investors.
Within both practices, the buyer of the service is looking to surface deal risk from an external point of view while gaining key insights or perspectives around growth opportunities that exist within a target and it’s surrounding market.
When engaging as a buyer of an asset, buyers often have other partners — typically banks or alternative asset funds who partner in financing. In most cases, these partners have strict requirements to reduce risk on their end.
M&A Due diligence typically commences the moment both parties have signed the letter of intent (LOI).
M&A Research, on the other hand, can begin prior to informing the target of acquisition intent.
Some of the benefits associated with M&A Research are:
- Provides a fact-based, rigorously quantified assessment that helps you ward off deal fever, spot synergies and prepare for integration long before your deal is completed.
- Identify risks, address challenges and seize new opportunities during post-merger integration.
- Obtain a Detailed Brand Equity Assessment.
- Obtain a Detailed Competitive Landscape Analysis.
In both cases, the data and research compiled has to be protected and locked. This is where Data Rooms come into play. An “online data room” or “virtual data room” is an online warehouse of key documents about a company.
The online data room is populated with the target company’s important documents: contracts, intellectual property information, employee information, financial statements, capitalization table, and much more.
The online data room allows the selling company to provide valuable information in a controlled manner and in a way to help preserve confidentiality.
The online data room avoids the need to have a physical data room where the documents are kept, and helps expedite an M&A process. (For More Info on Data Rooms Read: The Importance Of Online Data Rooms In Mergers And Acquisitions)
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Related Article: Understanding SaaS M&A Due Diligence