Reducing costs, improving efficiency, generating new insights and enhancing deal agility.
Over the past decade technology has become a catalyst in corporate transactions with its role now expanding across all stages of the deal process with drivers for usage attributed to one of the following qualities: reducing costs, improving efficiency, generating new insights and enhancing deal agility. These qualities coupled with the ease of use and scope for specialisation have convinced stakeholders to invest in technology in a way that helps drive deals.
...use technology in most aspects of M&A
A recent survey1 conducted on M&A stakeholders, (defined as strategic buyers, legal firms and financial investors) to measure the level of technology uptake, found that three-quarters of lawyers use technology in most aspects of M&A, whereas this was only the case for half of financial investors and a quarter of the strategic buyers.
The reason for this disparity may be that strategic buyers are often involved in smaller and targeted acquisitions which are likely to be less dependent on the M&A-specific technology, but access to insight through specialist advisors. Lawyers were found to use technology more for simple tasks than the other groups and this may be given that in their capacity as advisors their responsibilities are broader. Top reasons given by parties for using technology in M&A were to facilitate secure storage and sharing of critical data and reviewing and capture of information in documents.
The most prominent way that we have seen technology being used in M&A is through cloud computing, which allows for global firms to connect every part of their organisation into a central location for access to real time information. These digital platforms bring together multiple parties that previously would not have collaborated, making it easier for deal professionals to practically digitalise workstreams in some shape or form, to capture the efficiency and transparency. Nowhere has this been more prevalent as in the case of virtual data rooms (VDRs).
VDRs have become a normality and their benefits are easy to understand; they allow connection on a global platform and access to information flows at a level of speed which does not compromise the security protection. Although VDRs are primarily associated for use within due diligence, users found that there were other useful applications such as: the distribution of marketing material; negotiation and amendments of draft agreements; and storing closing book post completion. Almost sixty percent of respondents use it to store the post-deal completion book, which suggests that parties are increasingly open to the idea of using VDRs as a post-closing resource, and potentially as an aid to integration.
The same survey also found that many of these stakeholders were also using VDR to maintain a historical database of M&A deals with lawyers in particular keeping documents for referencing when needed to compare against previous similar acquisition or in cases of dispute resolution.
Advances in cognitive technology, such as artificial intelligence means that there is now the ability to mimic human intelligence in a way that allows parties to identify information and track patterns and develop projections in a time and cost-effective way.
The use of AI in M&A is currently limited, however, where it has played a role, is to enable lawyers and financial advisors to rapidly sift through hundreds of contracts to identify key provisions and items and, in some cases, analyse word combinations for comparison to provisions that may be written differently but have the same meaning. The impact of this is several; not only reducing the resourcing required for conducting an otherwise manual task and thereby reducing transaction costs but also allowing for a faster paced and potentially friction-less negotiations.
[1] Mergermarket and SRS Acquiom Q4 2019 survey of 100 senior M&A executives from law firms with an M&A practice, strategic buyers and financial investors