In a merger or acquisition transaction, the ability to swiftly possess content leading to a strong negotiable rate gives your acquisition team a strong advantage over other bidders in this time-intensive process. Due to this need, due diligence is not a matter that should be overlooked.
Due diligence, the process of an acquirer reviewing an acquisition candidate to make sure that its purchase would not pose a risk to its shareholders, is essential in achieving acquisition that nets positive company valuation. This phase of M&A activities occurs after a decision has been made to value the company of a certain business opportunity. While the scope and nature of due diligence activities vary, what is routinely acknowledged is that there are many records that are commonly needed to be preserved.
Preserving records are important for numerous reasons, encompassing knowledge of company culture, structure of the enterprise, holdings of intellectual property, and identification of financial status. This list, among other records that an organization holds, have the possibility of valuation in the millions of dollars. Knowledge of the information that is contained within these critical items can net immense benefit in negotiation. If the acquirer is able to identify these set items, they have the ability to confidently engage the acquisition candidate with strong knowledge on valuation. If these key records are not retrieved, the bidder has the ability to significantly decrease the bid, saving large sums of money.
In a study performed by PriceWaterhouseCoopers, “80 percent of M&A transactions did not finally create value for company shareholders”. There was no single reason found for why the failure rate was so high, but what was acknowledged is that many of the transactions occurred where acquirers had cut corners on due diligence. As an information dependent task, having proper controls and tools in place to help on both sides of the transaction can help bring forth confidence that your acquisition or divestiture will bring value.
The ability to leverage machine learning to classify information during the phase of due diligence allows your team to gain significant advantage over your competitive bidders. On the acquirer’s end, automatically classified information can be pulled using specified metadata to instantly start analyzing proper records for company valuation. The company taking part in the divestiture can also leverage automated classification to uncover information on intellectual property that they may be unaware of.
Another method to ensure confidence in your divestiture is through maintaining information in a centralized repository. Enterprise Content Management systems, a method of centralizing your information storage, helps ensure that you are storing the most up-to-date content and have no duplicate data. This will help immensely once the company has been acquired, as yielding the agreed upon content to the acquirer will be much more structured.
M&A is a time-constricted process that requires large teams to analyze information to proceed with proper and confident valuation of an organization being divested. Axyon Consulting has the tools and expertise to ensure success in performance of due diligence.