Catch the Emerging M&A Wave by Embracing New Tech: Three Things to Watch

The M&A market operates in cycles, and every recession triggers a new wave of activity for mergers, acquisitions, and restructuring. Following a down year in 2020, we're experiencing a financial boom. Well into the second half of the year, 2021 global mergers and acquisitions already total a record $3.6 trillion, surpassing the total value in all of 2020. Fueled by an abundance of cheap money and pent-up demand, the emerging wave looks to dwarf even the 2008 rebound.

What's even more impressive than this explosive volume is how today's M&A market looks completely different than years past. This emerging wave of M&A is digital at its core. Digital transformation enables companies and leaders to lean on digitized infrastructure to accelerate scaling, weather uncertainty, and maintain market position. This increased flexibility has made companies nimbler, opening the door for a broader swath of M&A options.

My practice has been involved in 115 of the largest M&A and divestiture deals over the last two years. Working across those, I’ve noticed three significant changes reshaping the market: evolved leadership, comprehensive digitization, and transformation during the transaction.

1. Evolved Leadership. Leadership teams – having evolved during COVID-19 – now have the opportunity to engage and attack M&A from different perspectives and create completely new structures and systems. One of the biggest arbiters of successful M&A activity has always been how willing leadership teams have made tough decisions. Now, as we jump into post-pandemic recovery, every leader has gotten better at making tough decisions after doing it nonstop during a tumultuous 18-month stretch. As a result, we see experienced leadership teams who are now willing to see things differently – and that's driving fundamental transformation. ??
2. Comprehensive Digitization. The M&A lifecycle is now digitized end-to-end, enabled by automated access to large sets of data and supported by sophisticated AI tools like machine learning (ML) and natural language processing (NLP). This allows it to deliver increased accuracy and efficiency at every stage. From bespoke and smart deal origination to better estimates of a deal's benefits and growth potential to precise and timely tracking of cost savings and growth, a digitized and AI-supported M&A can accelerate revenues and cost synergies with lower costs and reduced risks.
3. Transformation During Transaction. The scope and scale of assets available from digitized companies offer a major opportunity for organizations in the process of an M&A transaction. While traditionally fact-finding would be an arduous, time-consuming process, today, businesses can begin to align in the midst of the deal to expedite the integration process. The transformation process also creates a more favorable dealmaking environment, addressing key questions about transactional fit before they even arise. Transformations, of course, vary dramatically from deal to deal. Undertaking a transformation on a deal that doesn't require one is an inefficient use of resources. However, when the business case is sound for structural change, getting a head start is cost-effective and can help drive a quicker result.

These three trends can bring M&A organizations and teams tasked with finding a better way to change the knowledge and capabilities. Finally, we have leaders and teams who can see the change. We have better tracking that can measure success, and we can coordinate real-time transformation to set up deals for short- and long-term success. M&A transactions are long, complex processes that demand time and resources, but new tech can offer significant advantages that create efficiency and set up successful integrations.

It begs the question: Are you ready to catch the wave?