For truly transformative M&A – the type that seizes on market opportunity, becomes a competitive differentiator and lends itself to business-model improvement – companies need to look no further than the M&A activity of the world’s most dominant technology players.
Information Technology within companies has moved from a position in which it is seen as a cost to one in which it is seen as an asset. In the digital era, in which customers increasingly expect service anytime, anywhere, IT is at the core of meeting and exceeding customer expectations. Consequently, the IT integration aspects of M&A are becoming increasingly important.
On May 25th, 2018, the major data privacy legislation known as General Data Protection Regulation (GDPR) takes effect. GDPR introduces substantial changes to existing European Union privacy laws and provides a regulatory framework for the treatment of personal data belonging to EU citizens. Given the linkage between personal data exchange and M&A transaction activity, teams engaged in deal making need to understand the implications to their due diligence and transaction processes.
We are excited to have partnered with Peter Zink Secher, author of The M&A Formula, to introduce The Goldman Gates Deal Scoring Tool. In The M&A Formula, this tool is a way to screen targets and make a quick 'Go' or 'No Go' decision. Peter discusses his Formula and the Goldman Gates model in our recent webinar.
Few industries are undergoing shifts and transformation the way retail banking is today. An industry that, for decades, has struggled under the burden of regulation, complexity and legacy systems – appears poised to emerge. As technology increasingly becomes an enabler of better customer experience and more efficient operations, the sector is on the cusp of transformation. Transformation is not easy, however, and the growing pains are real. Banks are being stretched by the forcefulness and breadth of change - in addition to customer demands. Executive leadership must contend on multiple fronts. And the change is multi-faceted change too – evolving categorically with technology, customer service, demographic, behavioral and regulatory implications.
Whether the objective is obtaining a new business unit by acquisition or merger, re-organizing different divisions of a company or building up an in-depth partnership, a successful integration can be a challenge. Creating an operative base to reach strategic M&A goals may take a long time – indeed, integration processes often take much longer than expected, causing frustration and requiring patience from both parties.
The impetus for corporate venturing is obvious: a corporation’s investment in startup companies can create new means to drive growth, financial return and advance strategic priorities.
Technological advancement is changing the way companies compete. The torrid pace of innovation requires commitment to digital transformation in a way that few companies can keep up with using internal capabilities alone. This is why M&A transaction rates continue to climb - see here. Companies with well-oiled deal processes find that these campaigns safeguard and advance their business models, while keeping them at the forefront of industry leadership.
First, the bad news. HBR cites research suggesting that 60% of significant mergers actually destroy shareholder value. Other published research notes deal failure rates of anywhere between 50% and 85%. One KPMG study found that 83% of deals were unsuccessful in delivering any discernible business benefit. While a separate study by A.T. Kearney concluded that total returns on M&A were negative (source).
For many companies, M&A pipeline management is a misnomer. The term suggests an organized, collaborative and efficient evaluation of targets. In reality, it often resembles a clumsy lurch through the deal process where companies are left hoping that value awaits on the other side.