Analysis

Corporate Development 2013

Pushing boundaries in M&A

Mergers & Acquisitions (M&A) is undergoing a profound transformation. From start to finish, the deal-making process is changing as a new wave of disruptive technologies—social media and advanced analytic tools—infuse themselves into both our business and our personal lives. In this year’s Corporate Development survey report, 435 survey respondents told us about aspects of deal-making they’d like to see improved—forecasting and the M&A decision process—and some of the ways they’re currently pursuing innovation through the use of analytics and corporate venture funds. With them, we look at how new technologies have already taken hold, and where they may have the most powerful effect on M&A in the years ahead.

2013 Survey Report

In this year’s Corporate Development survey report, 435 survey respondents told us about aspects of deal-making they’d like to see improved—forecasting and the M&A decision process—and some of the ways they’re currently pursuing innovation through the use of analytics and corporate venture funds. With them, we look at how new technologies have already taken hold, and where they may have the most powerful effect on M&A in the years ahead.
 
As disruptive technologies reshape the deal-making process, corporate development executives are gaining access to a wealth of opportunities to create competitive advantages.

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Business case forecasting requires the right team and laser focus on quality

Survey respondents report an almost universal desire to improve the quality of their forecasts, but many struggle with how to do it.
 
So what is the formula for success? There is no one size fits all solution but increasingly we are seeing companies develop forecast playbooks to establish the game plan and frame the depth and focus of the analysis up front. The playbook also helps to ensure that an experienced team is involved and that each player understands his role in the process, are using the best available information and leading analytical tools that suit the situation and that the forecast is provided to decision makers in a way that is easily digestible to shape their judgment on the deal.


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The use of advanced data analytics and social media in M&A may soon be table stakes

New technologies are proliferating, and deal professionals are taking note. Many are using cutting-edge tools to gain visibility into acquisition targets, negotiate deal terms, and smooth the integration process.

  • Over 40% of survey respondents are currently using some form of data analytics in their deal process, and 17% are considering it; numbers that could have been close to zero only a few years ago.
  • Roughly one-third of the respondents are already using social media channels as part of their M&A activities.

While there’s no substitute for on-the-ground due diligence and live meetings, it’s becoming increasingly imperative for deal professionals to think creatively about how these emerging concepts could enhance their evaluation and pricing of a target and give them an edge.

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Establish strategic clarity, executive access, and deal-making credibility for a swift decision process

Getting deals done efficiently yet prudently is an elusive goal for many corporate development teams. One-third of respondents indicate that six or more executives or committees must approve a transaction before it is completed; 15% must pass it by 10 or more.
 
Unfortunately, bottlenecks and back-channel dealings can still paralyze the process. To avoid a “Keystone Cops” situation, it is advisable to specifically define the deal process and to align decision-making (decision makers, influencers and those to be consulted) with the process.
 
One success factor that is often overlooked is the role that qualitative aspects like culture and judgment play in M&A decisions. It is essential to make sure that “org charts” are not driving the process, but rather that the people involved—from the most junior to the most senior—are truly equipped for the tasks that are set before them.

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Define your objectives in advance and consider corporate venture funds for an innovation edge

Roughly two-thirds of executives feel that these investment vehicles provide a competitive advantage, with access to new technology and new product innovation rising to the top of the list of benefits. About half expect to see more of these funds launched within their industries, particularly as this style of investing pushes beyond the traditional spaces of technology and life sciences and into new industries such as consumer products and basic manufacturing.
 
While financial return is important, corporate development professionals are in a good position to lead the charge and make sure that venture investments align with corporate strategy and are consistent with other types of inorganic growth.

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