Article

Not using analytics in M&A? You may be falling behind

Using AI during M&A can help

Data analytics is revolutionizing how M&A deals are done, and artificial intelligence is taking analytics to the next level – enabling smarter, faster decisions throughout the M&A lifecycle.

The traditional approach of relying solely on spreadsheets to analyze data is quickly becoming a relic of the past. In its place is a major shift towards more advanced, integrated and dynamic analytical tools, processes, and techniques that can deliver what used to seem impossible: a combination of big-picture insights and microscopic levels of detail. All in less time, with less effort, with more precision.

How can you leverage analytical and AI insights throughout the M&A lifecycle? 

Within the tight timeframe typical of most M&A deals, AI-powered analytics can provide a rapid yet in-depth analysis of a target company’s value drivers and associated value creation opportunities and risks, conveying the real story behind the numbers and delivering valuable insights every step of the way.

Diligence: Data analytics enables detailed analysis of transaction-level data about a target’s cashflows, assets and operations to uncover key insights faster. With analytics, you can dive deep into the data to find out what’s really going on—before it’s too late. Analytics can answer:

  • What is the true source of this company’s growth? Specific customer segments? Products? Markets? 
  • How successful is this company in retaining its customer base? 
  • How margins have evolved over time for specific products, locations, or customers?

Negotiation: Analytics provides valuable insights within a short timeline, allowing your deal team to act fast. With quicker and deeper insights, bidders can decide whether to pursue a target or move onto another target. Analytics can answer:

  • Does this pursuit warrant a counter offer? Should the offer be increased? Withdraw from the auction process?
  • Which risks are we likely to encounter in doing this deal? (Operational risks, critical employees, product lines, geographies, etc.)

Post-Merger Integration: Buyers are turning to analytics to help identify potential synergy opportunities, risks and hurdles to prepare for integration and post-deal execution. Once the deal is signed, analytics can help provide insight into areas such as optimizing business activities, tracking synergies, and identifying other potential value creation opportunities between the merged companies. Analytics can answer:

  • What is the probability of achieving identified synergies? What risks should be prioritized during integration to ensure value is created and not destroyed?
  • Where should we pursue renegotiations with customers or suppliers to quickly achieve cost savings or revenue improvements?
  • How are customers responding to the change in ownership? How has our risk profile changed as a result?

How AI is being used for M&A

AI is taking M&A analytics to the next level, with much of the effort currently focused on “smart automation” – making automation tools and processes smarter and more efficient.

Deloitte’s M&A analytics platform iDeal is currently using AI and machine-learning on the front end to organize and tag massive amounts of data as part of the workbook creation process. This effort has traditionally been time-consuming, labour-intensive, and required significant human judgment. Now, iDeal can take a first pass and get most of the work done with little or no human involvement. Even better, when humans make corrections, the adjusted results are fed back into the system so it can learn from its mistakes and becoming increasingly accurate and reliable over time.

iDeal will soon also be able to use natural language generation and other AI technologies to analyze M&A data and create reports – further improving speed, accuracy, and efficiency.

Deloitte is currently developing an M&A market sensing platform that will transform how we monitor market trends and deal insights. The sensing tool will expedite proactive and strategic identification of emerging risks and value creation opportunities to enable our clients to identify transaction opportunities quicker and ahead of the competition.

Bottom-line benefits

AI-powered M&A analytics can generate game-changing benefits when it matters most. Here are a few benefits most frequently cited by our clients:

Get there faster. In M&A, insights are most useful when they are generated in time to affect decision making. With near real-time delivery, AI-powered M&A analytics makes it easier to generate and leverage deal insights. For example, the process of nailing down an SPA typically engages a wide range of time-strapped participants in a race to complete the agreement. It’s a process that can be inefficient and time-consuming—when time is of the essence. AI-powered M&A analytics makes it easier to analyze more data and deploy it in a more intelligent manner. Not only is it faster, it’s smarter.

Enhance the value of data. Today, many M&A-focused analytics insights are used for highly focused moments or decisions in deal execution. However the value of the data used in these scenarios, combined with 3rd party or external public data, can have an equally important impact in other phases of the M&A lifecycle, such as integration and post-integration.

Go deeper and get real insights. Too often, surface-level data tells a misleading tale. With the ability to analyze micro-level details and correlate them to macro-level decisions, M&A leaders are better equipped to uncover the real story behind the numbers.

What now? Get serious about analytics and AI in M&A

Around the world, deal makers already recognize the key role that artificial intelligence will play in the future, and are moving aggressively to build AI capabilities. Here’s how you can get serious about using analytics and AI in M&A

Answer questions that are worth asking

Use targeted analytics and AI to address questions and issues that may have a material impact on the M&A deal decision and valuation. Don’t analyze everything under the sun just because you can.

Dare to be different

One of the biggest barriers to embracing the power of analytics and AI for M&A is fear of the unknown. In the high-pressure, time-compressed environment of an M&A deal, it’s tempting to stick with the tried-and-true methods of analysis, even when they are merely adequate. Now is the time to use analytics and AI technologies in the M&A process. After all, when it comes to doing deals, a company that can make decisions smarter and faster than everyone else doesn’t just have a slight competitive edge. It wins the whole game.

Start small. Start now.

Begin familiarizing yourself with M&A analytics before you need it. On your next deal, consider setting up a “shadow” parallel effort using both standard spreadsheets and advanced analytics to mitigate risk.

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