Technologies such as AI and machine learning are helping reduce the time and resource costs associated with M&A transactions, helping close deals faster
Merrill Corporation, the premier technology provider for M&A professionals around the world, announced that technology has cut the time required for the due diligence process for 64% of EMEA-based M&A practitioners. Due diligence now takes less than three months – from sourcing a deal to deal completion – for a single successful transaction, according to a survey of M&A professionals commissioned by the company.
Technology and digitisation are already accelerating many of the central processes in M&A due diligence, with 70% of survey respondents reporting that technology has sped up the process of reviewing and analysing contract text. Other activities which technology has helped accelerate include: running multiple scenario analyses or financial modelling (52%) and visualising financial performance data (41%).
Merlin Piscitelli, Head of Sales for EMEA at Merrill Corporation, highlights that: “Speed is crucial in M&A due diligence. The longer the process runs, the higher the risk that the deal goes cold and potentially unravels. In the past decade due diligence has accelerated, thanks in a large part to the advance of technology and digitisation. The question is just how swift can the process be in the future, as we move into 2019 and beyond?”
M&A Due Diligence in 2019
The expectation for 2019 is that the speed of M&A due diligence could accelerate further. Data analytics is expected to be the main accelerator behind future improvements. Over 30% of EMEA practitioners (32%) stated that being able to harness data analytics will accelerate the due diligence process the most; followed by a larger due diligence team (20%) and standardisation of documents and processes (14%).
However, the speed of many deals may remain restricted by data and information management. EMEA practitioners report that, despite technological advances, accessing, gathering, verifying and reviewing documents, information and data continue to slow the due diligence process the most. Poor – or non-existent – strategy, planning and communication during the due diligence process is another drag on transaction time.
Merlin Piscitelli continues: “Over the past two decades, the scope of due diligence has widened considerably. Where once a check of the financial and legal documentation was considered a thorough job, due diligence today routinely covers human resources, information technology, environmental impacts, regulatory concerns and compliance, commercial or market intelligence, tax, insurance, property, intellectual property, customer and operations.”
“This information explosion has created its own challenges – and more potential hurdles to speedy due diligence” adds Piscitelli. “Indeed, this is indicated as the factor most responsible for slowing due diligence. Combine the vast scope of documentation with the lack of clear strategy, planning and communication between all parties, and you face another roadblock to overcome.”
“The advance of technology and digitisation has naturally enabled practitioners to better manage information and speed up the increasingly complex operation that is due diligence. The hope is that new technologies – from AI and machine learning to data analytics – can help solve some of these organizational and access challenges and potentially transform the operation entirely.”