The technology space is in a constant state of flux, and the constant deluge of innovation and breakthroughs has led to sweeping changes in other industries. The world of mergers and acquisitions (M&A) may feel like one that could not be strongly influenced by technology. After all, it’s all about human interaction, communication, and old-fashioned business ethos.
However, technology innovation has exerted a strong influence on the M&A space in recent years - so much so that it has changed the landscape for good. The major influence technology holds over M&A is the emergence of tech innovations in all areas of business and within all industries.
M&A professionals will now have to be aware of technology attributes within businesses as part of the M&A agreements. From AI to data collection to online presence, matters of technology have seeped into M&A discussions and are often primary factors in deal decisions and negotiations.
Due diligence
M&A experts working in today’s technology-informed space must do their due diligence in exploring the tech makeup of every business or organization they approach. The key component of due diligence within a tech-informed space is understanding a business’ technology stack. M&A advisors should start exploring the tech stack by making a comprehensive list of all software and hardware assets. Depending on the business and industry, this could be a simple list of process-related software or massive amounts of IT hardware required to keep the business up and running.
The advisor handling the merger or acquisition must fully understand the architecture and set-up of the technology stack they are acquiring. As such, a software audit should be done so that any proprietary software - as well as open-source or third-party software - can be fully assessed.
Of course, there will be costs associated with maintaining the current technology stack and software array, as well as costs associated with transferring or scaling software licenses post-merger or acquisition. Each of these costs needs to be woven into the finalized M&A deal.
Integration of technology
Technology is not just a consideration within the scope of the deal, but a tool that M&A advisors can use to make their negotiations and ultimately their jobs easier. For instance, some advisors are now using advanced analytics and data technology - informed by AI - to help their clients analyze large data sets and identify potential M&A targets that align with their client’s strategic objectives.
In some cases, predictive data analysis can help M&A advisors analyze whether a particular merger or acquisition will ultimately succeed. Predictive AI has become so intuitive that it can effectively predict future performance and fit of an acquisition with relative accuracy, taking some of the guesswork out of M&A.
Technology - specifically AI advancements - can also help with the aforementioned due diligence requirements by quickly analyzing vast amounts of data, software integrity, and hardware performance. AI is also adept at analyzing financial documents, contracts, and risk assessment documents, which are crucial in any M&A deal.
Technology has also furthered the accessibility of face-to-face interaction, which is critical to thorough M&A negotiations. Virtual data rooms have emerged as a way for parties to share information confidentially and speed up the due diligence and negotiation process. Through video conferencing and virtual reality technology capabilities, global teams can still “meet” and have productive conversations as if they were all sitting in the same room.
The role of cybersecurity in M&A
Before moving forward with a merger or acquisition deal, organizations are now paying closer attention to cybersecurity during the due diligence process. Those with a target for a merger or acquisition should evaluate that company’s security policies and incident history, and ensure the target company is compliant with regulations. A cybersecurity audit should be performed as part of the merger or acquisition process to uncover potential security threats, reveal how past breaches may have occurred, and show the overall maturity of the cybersecurity system.
A cybersecurity threat could potentially negatively impact the value of an M&A deal, as there will be potential costs associated with fixing any lingering or potential security threats, as well as future costs to prevent the threat from reappearing. Liabilities from past breaches must also be evaluated to assess how those costs will impact a merger or acquisition.
Combining IT infrastructure, data, and systems also needs to be properly evaluated before an M&A deal is set in writing. Companies seeking to complete a merger or acquisition need to assess whether they can combine these systems safely.
The future of technology in the M&A space
The future of the M&A space will be aimed at creating better efficiency, enhanced security, and the use of data analytics for better insight. As AI continues to advance, and more advisors learn to use it effectively, it will transform how data rooms operate, help predict which documents are most relevant to a deal, and help flag potential issues in contracts or other due diligence materials. This will prevent delays that can be created by legal teams becoming involved in a transaction, let advisors perform better valuations, and help forecast post-merger or acquisition challenges.
The future will be informed by technology advancements in every industry. Within the M&A space, advisors, experts, and clients will need to lean on technology advancements to make the process quicker, more efficient, and more informed.
