MANAGEMENT

CFO Insights: How Digital Tools Are Helping Unlock M&A Value

Companies pursue mergers and acquisitions (M&A) as a way to drive value, but, for a variety of reasons, the end result may not always meet expectations. Given the expanding array of digital tools available to help address the M&A process, however, CFOs now have the opportunity to not only play a greater role in M&A strategy, but also guide such efforts toward success.

Today, CFOs are approaching M&A from a more holistic perspective, getting involved in the earliest stages by helping to identify acquisition targets, articulating the thesis behind proposed deals, and addressing due diligence in a broader context

CFOs, it seems, are already starting to deploy such tools as they take a more digital approach to deal-making. The 2018 M&A trends report by Deloitte, for example, found that a majority of respondents (63%) use tools other than the trusty spreadsheet to address a variety of M&A-related tasks, including streamlining integration and reducing costs. Of those who are not using these new tools, 62% plan to tap into them in pursuit of the aforementioned benefits.

Why the apparent growing interest in digital M&A? As we head into 2018, the factors that have been driving M&A for the last few years—low interest rates, inexpensive financing, healthy balance sheets, and an economy that’s growing at less than 4%—remain intact. To win in this environment, CFOs may need to leverage tools that can help their companies gain advantages in speed, efficiency, and value creation.

In this issue of CFO Insights, we will discuss how the expanding array of digital tools can be used at different stages of the M&A process.

Digital M&A: Propelling the CFO to the role of strategist

The advent of these digital tools is fortuitous in several ways. For starters, they can provide a way for CFOs and their deal teams to keep up with the heated pace of M&A.

The 2018 M&A trends report found that both corporations and private equity investors anticipate brisker M&A activity in 2018 versus 2017, and 2017 represented an uptick from 2016. In fact, while companies surveyed in Spring 2016 chose “organic growth” as the most likely use of their cash at the time, the most recent survey found that M&A is now the top choice, cited by 40% of respondents.

These new digital tools may also help CFOs play a more strategic role in M&A. While senior finance executives have long been involved in the execution of M&A, their traditional responsibility centered around post-deal integration.

Today, however, CFOs are approaching M&A from a more holistic perspective, getting involved in the earliest stages by helping to identify acquisition targets, articulating the thesis behind proposed deals, and addressing due diligence in a broader context. As deals progress, they are also heavily involved in keeping them on track, monitoring anticipated synergies, and taking ownership of the entire integration process.

Meanwhile, given how company valuations have risen in the current bull market, the pressure to deliver value is becoming more intense. That fact is not lost on CFOs.

Consider, for example, that in the Spring 2016 survey, 40% of respondents said that more than half the deals they completed did not deliver the expected results. While that statistic has fallen to 12% in the most recent survey, there is still plenty of room for improvement. More than half of corporate respondents (55%) said that up to a quarter of their deals fall short of meeting or beating expectations.

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