Organisations that make use of data analytics will improve their decision making as well as their chances of making the acquisition a success.
by Joshua Hedge and Mike Creasey
Data analytics is becoming a prominent feature of M&A deals, both during the pre-deal due diligence phases and to support more robust and detailed integration planning.
While companies typically use analytics in the M&A strategy development and screening of targets, Moorhouse is increasingly supporting clients to use data analytics during the due diligence and integration phases of the M&A lifecycle. The use of data analytics in M&A transactions will increase over the next few years and companies need to make use of the availability of data in order to drive informed decision-making and achieve more successful outcomes.
Data analytics means that public and private data sources can be used to identify business opportunities, commercial synergies and to support integration planning. Realising synergies is critical to any deal to make sure the value of the two companies, once successfully integrated, is greater than its individual parts. If you don’t get this right, dis-synergies may occur, leading to value destruction.
Recent research suggests that achieving a successful integration still eludes a large number of companies. While 62% of mergers were considered a strategic success, only 38% were considered a financial success and 30% an operational success1.
For many companies effective planning and delivery is still not there, and this can result in costly outcomes. When Daimler and Chrysler merged for $36Bn, combining two of the largest names in the automobile industry was seen as a highly strategic and synergistic move. However, poorly planned integration resulted in lost sales and market share. Subsequently, Chrysler was later sold for $7Bn at a significant loss. As this integration failure and the survey findings show, integrating two companies is no small challenge and the complexities should not be under-estimated.
Applying Data Analytics to M&A Integration
Data management and analytics in M&A transactions is increasingly important. Forty-seven per cent of respondents in a recent study thought that using data analytics within integration was the most valuable area of the M&A lifecycle, and 61% found that analytics would play a very important role within the next three years2. Using data analytics as part of the integration process can yield real benefits where a wide range of valuable internal and external data sources can be harnessed to refine synergy estimates and assumptions, as well as support more detailed planning.
For example, in a due diligence situation, employee data can be used to gauge the overall health of the business. HR data can be used to understand roles and responsibilities, average tenure of employees in each function, average salaries, employee satisfaction survey results and employee turnover rates. All this data can be analysed by a potential acquirer to de-risk their integration.
Armed with these data points and knowledge of gaps, companies can improve their chance of success through informed and tailored planning to address the gaps between key data points such as the harmonisation of terms and conditions. Developing a detailed comparison of core data across both companies is helpful when refining synergy assumptions, as well as supporting integration planning. Moorhouse is increasingly working with clients who want increasing levels of data in the areas of customers and markets, as well as employees and terms and conditions.
Going forward, data analytics is going to be a key tool in successful M&A deals and companies that ignore it, do so at their peril.
We will be discussing this and other key factors on how to drive integration success and overcome the challenges. We will be putting our points of view across on courage and talent, two of the major themes identified from our Barometer on Change survey. For more information on this and similar events, please see our Mergers & Acquisitions page.
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