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Succession Resource Group is a boutique succession consulting firm based in the Pacific Northwest, serving clients across the country. SRG was founded by David Grau Jr., MBA in 2012 after nearly a decade of helping advisors with valuation and succession planning. SRG's team of experts leverage their industry expertise, combined with best-in-class resources, to help advisors, agents, and accountants manage the equity in their businesses...

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6 min read

How Technological Advances are Revolutionizing the World of M&A

Dec 22, 2021 7:16:51 AM

As a small business owner, you are a go-getter with a well-thought-out plan for your company. The opportunity to grow and expand your company via acquisition and innovative marketing efforts is the next logical step in your plan. Or do you prefer a different path?  One that involves more sand between your toes and less ink on your fingers. You are ready to pass your small business onto the next generation and shift your focus to more relaxing endeavors. But there is so much involved in the process of buying and selling businesses. The integration of technology innovations in the world of mergers and acquisitions (M&A) is striving to revolutionize M&A deal-making processes. 

Merger and acquisition

The Need for Technology in M&A

The field of mergers and acquisitions (M&A) is a bustling one and activity has trended upward for decades. Eighty-seven percent of participants in recent research by Accenture Strategy acknowledge their firm acquired another company in the past two years, while nearly a third acquired five or more companies.

All of this acquiring requires a lot of time and effort. For years, due diligence teams have manually reviewed thousands of documents looking for supplier contracts and capturing key terms and provisions, working to assess potential liabilities and opportunities hiding in contracts. This is a time-consuming and costly process. Humans tend to get tired, distracted, and overlook information after hours of scanning paperwork. Good news! There is a way to significantly speed up the M&A process and free up resources.

M&A professionals are beginning to understand that technology can help change the process of M&A. Sanjay Hebbar, a leader of business development for The RW Exchange, cites a recent study by Accenture Strategy where over 40 percent of all companies polled view technology as a “disruptor in their growth strategies.” He states, “technology has been used as a catalyst during the due diligence process, as well as the expedition of post-closing integrations. The bottom line is that technology will soon be seen as a requisite part of a dealmaker’s toolbox – it is not a question of ‘if’ but more so, ‘when’.” 

Joni Young, a managing director for an M&A supply chain, shares a real-world example of the need for technology in M&A. “One company we worked with recently”, she says, “spent eight weeks (and $400,000) and had nine reviewers combing through more than 1,000 contracts. That work could have been handled in no more than three weeks for approximately 20 percent of the cost had the company brought in the right advisor to leverage available technology for their contract review.”

As a small business owner, saving time and money is important. Whether growing your business or retiring, you want to have a provider on your deal team that is an expert in deal strategy and state-of-the-art technology in the M&A field. 

Technological Advances in M&A

Much of the minutiae of M&A due diligence revolves around data. The M&A world is obsessed with it. So much so, that as of 2018, more than 2.5 quintillions (that’s 18 zeroes!) bytes of unstructured data is created in a day. That makes the idea of organizing the data in M&A contracts even more daunting. This data obsession has led to the largest technological advancement in the M&A world: the creation of cognitive technology. 

One piece of cognitive technology that has already had a lasting impact on the M&A process is the virtual data room. This online storage vault stores millions of paper documents and information online, making critical information accessible around-the-clock from any device connected to the internet. Hebbar cites that “the use of virtual data rooms is now ubiquitous and a vast improvement in security and efficiency from the days of their physical counterparts.”

Due to their 24/7 access, virtual data rooms have influenced the rise of cloud computing. Crucial deal documents are stored in one place and can be viewed from anywhere in the world, at any time, allowing deal teams to better collaborate through cloud applications. 

Artificial intelligence (AI) software is the second key piece to the cognitive technology puzzle. AI is still in its infancy yet is “poised to exponentially increase the automation of the M&A process.” Newly created artificial intelligence (AI) software is a key player in automating various low-key tasks when it comes to organizing and sorting data, such as document naming conventions, metadata and categorization, and other tasks that are more than eighty percent administrative. Thousands of contracts and documents can be reviewed in mere weeks instead of months, making the dream of growing or passing on your business more quickly realized. The future of AI allows overworked M&A professionals the chance to take on full due diligence on a target company in under a week’s time, without worrying if they missed something important.  

Another advantage of AI software is the ability to have a cloud platform to map out an entire M&A deal from start to finish. New employees can learn faster, store documents in the correct place and complete deals in less time with a roadmap to the M&A process. Viewing documents on the cloud enables everyone involved to work on the same document at the same time, encouraging collaboration. 

M&a technologies

Utilizing M&A Technology

All of this new technology sounds amazing but can be overwhelming to consider. Here are some considerations you should discuss when looking to utilize M&A technology.

  • Embrace it. The use of technology in all areas of the M&A process is quickly gaining popularity in the industry and is here to stay.
  • Do your research beforehand. Not all technologies are created equal so it is important to participate in demonstrations, talk with other customers and discover what your business needs and requirements are before jumping into technology. 
  • Be mindful of its risks and limitations. Even though its use is inevitable, be aware of security risks such as data leaks and breaches. Consider using a firm with security measures in place such as two-factor authentication, cyber insurance, and an accurate and well-kept audit trail.
  • It is not a substitute for people. The use of technology provides speed and accuracy but does not replace the benefits of personal interactions. These interactions allow for in-person negotiations that technology cannot duplicate. 

“The benefits of technology far outweigh the risks of using it though dealmakers should still be sure to vet and then remain vigilant with their devices.”

— Steven Vanden Heuvel, M&A Insurance Solutions

Regardless of your thoughts on advancing M&A technology, remember the importance of having an M&A expert on your side to support and guide you down the best path for your business. SRG is equipped with valuable tools and resources to guide you, such as MyCompass, a site that lists available practices for sale, and LendingWell, a free matchmaking solution for advisors looking for capital to buy, sell or merge a business. SRG is dedicated to helping small business owners value, grow, protect and plan for the transition of their business. 

David Grau Jr.

Written by David Grau Jr.