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Deloitte M&A focus on: Analytics
The growing role of analytics in M&A
Technology-driven data analytics is poised to play a critical role in the world of mergers and acquisitions (M&A). Deloitte’s survey of 500 corporate executives reflects that, not only are the majority of companies surveyed using data analytics today, more than 80 percent see data analytics becoming increasingly important in the future of M&A. From richer, more detailed information, to careful reviews of digital economic indicators, data analytics provides insights that can fundamentally change the value of a deal.
Deloitte M&A focus on: Analytics
How technology-driven data is changing deal-making
By Brian Bird, Director, M&A Transaction Services, Deloitte & Touche LLP
Many of those who engage regularly in mergers and acquisitions (M&A) have started to make technology-driven data analytics a critical part of their toolbox, whether in the initial search for potential targets, analysis of financials, or other elements of the due diligence process. Data analytics—the term widely used for technology solutions that help organizations interpret data and analyze business trends—provides a level of sophistication and precision that previously was not available, or available only at great cost in time and money.
Responses from our recent survey, Deloitte M&A Focus
Respondents say their use of data analytics has risen steadily in recent years, and more than eight in ten respondents see data analytics becoming increasingly important to M&A activity in
Our survey shows that 40 percent of respondents view data analytics as a “core component” of M&A analysis; another 28 percent say it is used in “select areas” of analysis. Of those 21 percent not currently using M&A data analysis, nearly half said they are considering it.
The likelihood of using data analytics appears to be closely correlated with firm size; 58 percent of firms 5 billion dollars and up use it as a core component of M&A analysis, while only 29 percent of firms at $50m–250m do.
Part of the reason for the increase in interest is availability:
But data analytics is not just about running data sets through sophisticated analytics software. In all cases, it requires a strategic approach and qualified teams to conduct and manage the process.
What’s more, data analytics includes careful and energy-intensive reviews of social media and other digital economy indicators. Tracking the metrics of a business in social media and other digital economy channels provides color—and sometimes major insights—that can significantly impact the valuation of a deal.
Our view is that data analytics is an essential tool. Board members and investors increasingly expect it as part of the strategic review of a potential transaction
Having a data analytics advantage can help a buyer see the story behind the numbers, understanding the target at a much more granular level. For example, we have seen acquirers use social media metrics to track consumer attitudes about a company in a far more sophisticated and market-sensitive way than they have in the past. Or, the careful use of data analytics has helped an acquirer gain a richer sense of how a business was operating, quarter-to-quarter. The outcome invariably is a transaction where the buyer is often more likely to integrate the asset successfully and manage it for growth.
The pool of potential data is enormous and growing each day, and those surveyed show a willingness to analyze both structured data and unstructured data. The advantages of structured data are
The fact that data analytics is on the cusp of transforming the deal-making landscape shouldn’t be surprising; players in many industries say they expect data analytics to have a rising impact. Respondents from health care (86 percent of survey respondents reported that data analytics will become more important in the coming three years), financial services (85 percent), manufacturing (83 percent), retail and distribution (89 percent), energy (90 percent), and technology (86 percent) industries all report that they expect to tap insights buried deep within mountains of data.
What is a critical next step for any organization looking to pursue a transaction? To deploy data analytics for their most powerful and impactful end-use. In the coming weeks, we will explore how data analytics is changing the way deals are evaluated and executed, and how data analytics can help bring higher levels of confidence to each transaction.