The impact of technology on M&A

Technology is constantly evolving, offering new tools, inspiring best practices, and creating benefits for today’s dealmakers. And it’s completely changing the way M&A is being done. Doug Cullen, Chief Product and Strategy Officer for Datasite, recently spoke with Alex Clemente, managing director for HBR Analytic Services, about how technology is impacting M&A.

How has M&A changed in recent years, especially in how deals are getting done?

New technologies are significantly impacting the way M&A deals are completed. They're reshaping various stages of the dealmaking process, automating repetitive tasks, powering data analysis, and easing processes across all phases of the deal, including pipeline management, outreach, preparation, and due diligence, improving efficiency, enabling data-driven decision-making, and enhancing collaboration among stakeholders. 

For example, the capabilities of AI are unmatched when it comes to sifting through extensive volumes of data and content to inform decision-making. In a matter of minutes as opposed to weeks, an AI engine can redefine how thousands of files are digested and organized for dealmakers, where an investment banking analyst might have spent weeks at a time analyzing, organizing, and categorizing the thousands of documents needed for review by potential investors and purchasers.

Now, AI-powered tools in a virtual data room where digital M&A documents and artifacts are securely stored can perform the jobs in seconds, simultaneously reducing human error and ensuring better regulatory compliance.

What do the internal M&A processes of the best companies look like today? 

Workloads for dealmakers have increased due to these challenging market events. Today's dealmakers need to manage more with less from anywhere at any time. Having one place to manage every stage of dealmaking gives dealmakers the flexibility to better manage their costs, reduce compliance risk, and increase their productivity. 

The real best practices hinge off those basic tenets. The dealmakers, the deal teams are running both buy-side and sell-side transactions at the same time. Companies that utilize platforms with seamlessly connected applications that can handle every transaction type and every phase of the deal simultaneously are the ones that really are succeeding today because the utilization of one platform with these seamlessly connected applications can handle every transaction type and every phase of the deal simultaneously from sourcing to integration, meaning dealmakers can easily and quickly source their next opportunity, move through due diligence, close their deal, and secure their data for future transactions.

How has due diligence changed in recent years? 

I think dealmakers are always trying to balance two objectives at the same time. You're always trying to do your work in a cost-effective way, and then ultimately delivering the long-term business value that is created when you do transformational technology acquisitions or divestitures. 

Effective due diligence is back in style now and really making sure you have the agility around how you work from the beginning of the deal to the end of the deal and really running very, very tight processes. The weekly cost of due diligence is costing companies around a hundred thousand dollars per week. 

Choppier market conditions, rising interest rates, and challenging financing conditions have resulted in dealmakers spending more time preparing deals and conducting due diligence than ever. In fact, due diligence times have lengthened by a median of 24 days since 2021.

I think pre-2022 a race was on to compete due diligence as quickly as possible. Now the pendulum has swung in the other direction and taking time pays off. M&A deals with longer prep and due diligence times on Datasite are more likely to report a successful outcome.