AI Magazine Issue 11 2018

Acquisition International - Issue 11 2018 45 With global M&A increasingly viewed as critical to growth in many sectors, companies are keen to ensure they will be able to leverage their increased scope and scale after the deal is agreed. To do this, they must have access to accurate and up-to-date data. But what can be done during the implementation phase to smooth the way to successful integration? fter a record year for global M&A in 2017, activity has continued to grow strongly in 2018 and agreed deals are expected to be worth in excess of $4tn by the end of the year – a figure which has not been achieved since the global financial crisis. At a time when money is cheap, many corporates have come to consider global M&A activity a key element of their strategic growth planning and an important means of delivering shareholder value. At the higher-value end of the market, mega-deals tend to be motivated by a desire to strengthen market position in the face of intense global competition – as seen with Comcast’s £37bn recently agreed acquisition of Sky. Meanwhile, the disruption caused by rapid technological changes, across many industry sectors, has become a primary motivator for deals at both ends of the market as corporates increasingly target technology companies to accelerate delivery of their strategy. Irrespective of deal size and strategic rationale, boards are increasingly focusing on the synergy benefits that can be achieved from an acquisition, in particular the benefits which can be delivered in the first 100 days and then the first 12 months. This focus is important as an acquisition where synergies and integration are not achieved rapidly will ultimately increase costs and dilute margins, the exact opposite of the likely rationale for the deal. Due diligence carried out for cross-border transactions will normally cover areas such as transfer pricing and making sure local rules and regulations are fully considered. However, analysis of cost synergy opportunities, supply chains and logistical considerations may not go far enough. As a result, dealmakers may lack access to the insights they need to inform their decision-making. Good data on these areas of an acquisition is becoming increasingly attainable with improved data science techniques and is critical to support the development of a synergy benefits case. For example, a deal could carry a high risk of disruptions arising among supply chain partners. To mitigate this risk at an early stage, the acquirer may require access to data indicating the supply partners’ capacity, proximity to market, service record and commitment to quality. Based on the findings, it may be possible to build covenants or hold-back provisions into any documents being prepared, Company: Vendigital Website: Data is key to leveraging post-deal value A Oct18076 ensuring the acquirer is not hit with unexpected costs after completion. From a cost base point of view, speed is everything. A clear data picture regarding the cost base of an acquisition will allow the identification of efficiencies across product portfolios, product footprint, direct and indirect procurement and business processes. Planning for these to be delivered rapidly will mitigate the risk of the new, larger business failing to adapt to the increased complexity due to the addition of overheads. The clear data picture is essential in this journey as it facilitates rapid, informed decision- making, enabling the desired leverage from the increased scope and scale of the business. Even with the right data to support decisions, the deal-making process doesn’t always run smoothly, and geopolitical factors are a key barrier. Despite being approved by shareholders some time ago, United Technologies’ proposed takeover of Rockwell Collins for a consideration of $23bn, is currently being reviewed by the Chinese authorities, a situation which has probably not been helped by trade tensions between the US and China. If this deal does go through, rapid achievement of the planned efficiencies will be even more important. Cross-border M&A remains a major opportunity for corporates across industry sectors but in a climate of growing geopolitical risk it is becoming more important to ensure value can be leveraged post- deal. Boards need access to better quality data to help them to decide which strategic risks and opportunities are worth taking, and which are not. Roy Williams is managing director of management consultancy, Vendigital.