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February 09, 2023 5 minute read

5 Reasons To Ditch Your M&A Spreadsheet

When you’re dealing with tens of millions of dollars in capital and hundreds of moving parts managed by multiple teams, you need a system that’s robust and collaborative. Unfortunately, popular spreadsheet programs like Microsoft Excel and LibreOffice are anything but.  While the traditional M&A spreadsheets may be comfortable, the risks and delays to your realized synergistic values may outweigh the fear of change.

Exit Excel During Your Next M&A Project

The corporate world’s current preoccupation with spreadsheets is a product of inertia — not efficiency. It’s important to take an in-depth look at places where spreadsheets are falling short in the M&A context, and examine the benefits that innovations like specialized M&A software can bring to your next M&A deal.

1. To Stay Current

To put it frankly, spreadsheets are too cumbersome, too slow, and too error-prone for the average M&A transaction.

One of the biggest problems with using spreadsheets to manage an M&A deal is the lack of real-time collaboration functionality. By design, spreadsheets are static and backward-looking. M&A deals, however, are dynamic and oriented toward the future.

When it comes to staying up to date, spreadsheets falter in two key areas: their tendency to silo information and their static nature.

Avoid Information Siloing 

Sharing information across teams can become difficult when your project is spliced into multiple spreadsheet files. Spreadsheets encourage teams and individuals to silo key information. This can create big problems when you are dealing with a large-scale, collaborative M&A project. 

In contrast, excellent cross-team collaboration can help you identify potential pitfalls and blindspots early on while also creating a fertile breeding ground for powerful insights and new ideas. 

Strive for Real-Time Updates and Analysis

Spreadsheets are largely static. Manual entries still predominate, which makes for a slow and cumbersome updating process. Not only do spreadsheets tend to lag behind current developments, but any analyses you create are virtually guaranteed to be backward facing. 

This might’ve sufficed twenty years or even a decade ago, but given the recent advances in technology, there simply is no excuse for dealing with anything less than the most current data.

2. To Save Money

Spreadsheets can cost you a lot. Simple user input errors have led to billions of dollars of losses for at least one major bank. Meanwhile, a lack of compliance can get you in hot water with the government, and spreadsheets even open you up to the possibility of internal fraud.  Built-in auditing functionality of an M&A tool can shore up your defenses in this respect.

Even if everything goes smoothly, spreadsheets represent a serious misallocation of human capital. Labor inefficiencies can cost your firm dearly as spreadsheets distract employees from more vital tasks.

Reduce User Error

Various studies have confirmed that 88% of all spreadsheets contain at least one error. This problem afflicts businesses of all sizes and orientations. In 2012, JPMorgan Chase lost more than $6 billion as the result of its now infamous “London Whale” debacle. Among the root causes of this financial catastrophe was a simple copy-and-paste error on an Excel spreadsheet. This is far from an anomalous incident. Lazard Ltd (an investment bank) cost SolarCity Corp $400 million due to a small spreadsheet error caused by a single analyst. 

Consider how many separate inputs the average M&A deal requires. Manually adding these inputs to spreadsheets practically invites user error. Compared to more modern data-crunching solutions, it’s very difficult to parse through and double-check a sea of numbers nestled side by side in a vast honeycomb system.

Achieve Compliance

Virtually anyone can change a spreadsheet and leave no trace. In a highly regulated corporate environment, this poses massive liability risks. Excel isn’t built with audit trails in mind. It lacks key features, such as the ability to attach vital documents to their corresponding numbers, and the lack of standardization across spreadsheets represents a potentially expensive headache in the case of an audit.

If SOX compliance appears on your M&A checklists, you will definitely want to get a software system that comes equipped with M&A tracking tools. These can help your firm maintain regulatory compliance.

Stop Fraud

Spreadsheets are an Achilles heel within the M&A process. A lack of tracking tools and easy manipulation makes it easy for someone on the inside to commit fraud. A savvy embezzler or corporate saboteur could wreak havoc with a few innocuous inputs or altered pieces of data.  Something as simple as merging together cells or shifting font color can put a serious dent in any business’s bottom line.

Avoid Time Sinks

Spreadsheets consume an inordinate amount of labor. Valuable hours are spent on grunt work like account reconciliations and adjustments. This cuts into time that could be better spent on more valuable work, such as performing critical analyses. Overvaluation routinely tops the list of reasons why M&A deals fail. On the other hand, freeing up your employees to perform mission-critical tasks related to due diligence and acquisition valuation can save you tens of millions of dollars. 

The law of comparative advantage is hard at work in the world of M&A. Don’t let your workers slave away on repetitive tasks that add little to your business’s bottom line. 

3. To Expand Insights

Excel has a frighteningly steep learning curve. If you’re anything less than a spreadsheet wizard, you’re losing out on the best insights that your data set has to offer. Modern M&A software solutions will give meaning to your data. 

All numbers tell a story, and you shouldn’t need to master a complex skillset to tease out the meaning behind your next acquisition’s data. Ditch the spreadsheets for software that is tailor-made to tease out vital insights from the types of leviathan datasets that are all too common in M&A deals.

4. To Monitor Issues

The task of double-checking your work can approach Herculean proportions as the number of cells that you must monitor multiply exponentially. A simple cut-and-paste error wiped out 10% of the TransAlta Corporation’s annual profits back in 2003, a $24 million dollar mistake

This human error, which caused the company to overbid on less competitive transmission paths, could easily have been corrected. Unfortunately, as businesses scale up, the sheer volume of data makes simple checks increasingly difficult. The chances that a tiny yet costly error like this could fall through the cracks increase with every added cell relating to a complicated deal. 

5. To Scale Your Business

Spreadsheets were never meant to be used in the buying and selling of billion-dollar businesses. They work fine for SMBs but fall apart under their own weight once you start managing tens or hundreds of millions of dollars. After a certain point, balance sheets become unwieldy.

To handle this, you can:

  • Put on a brave face and forge on, only to miss key insights while subjecting yourself to unnecessary headaches
  • Dice up your information into separate tabs and files 
  • Use a bespoke M&A management system that lets you easily manage massive and complex datasets 

If you choose the third option, you’ll want a secure M&A software solution that can scale with you.

Swap Out Your Spreadsheets for Devensoft

Extract the most value from your next deal by ditching your M&A spreadsheets. Instead, use Devensoft to manage your next M&A project. Devensoft can help manage your entire M&A deal from start to finish with its comprehensive array of M&A tools, which facilitate everything from document tracking to cross-team collaboration. 

Use Devensoft to transform your data collection and analysis procedures. Monitor important information in real-time, utilize industry-specific data interpretation tools, and reduce costly mistakes. 

Schedule your free demo today to learn how Devensoft can eliminate your dependency on unwieldy and error-prone spreadsheets.

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