The Business Case for Purpose-Built M&A Software

The Need for Speed in M&A

Let’s face it, M&A is challenging and not for the faint at heart.  We hear every day from teams struggling to manage their deals, often due to broken or ad hoc processes and tools.  For years companies have been using spreadsheets, emails, and home-grown solutions to manage across their M&A lifecycle, and while those may have been workable solutions in the past, today’s rapid pace of change and highly competitive environment requires a new approach.  “Good enough” is not a viable option to compete effectively and deliver the value that we expect our deals to achieve.

It’s unfortunate that even after decades of lessons in M&A, we’re still seeing disappointing results. The chart below, from a study conducted by Statista of 750 executives, illustrates some of the main reasons why M&A deals and their subsequent integrations fail to generate their expected value.

Many of the reasons above can be addressed by building and implementing more effective processes and tools to address the challenges on both the deal side and integration side of the M&A lifecycle. The frustrations we hear most often from M&A teams include:

• Information is spread across multiple tools leading to multiple versions of the truth
• Poor communication tracking with internal and external stakeholders
• Ad hoc and inconsistent processes
• Lack of visibility into progress, risks, issues, and decisions needed
• Poor accountability and management of workplans and workstream inter- / intra-dependencies
• Distraction of one-off reporting and lack of standardized tools

A recent article published by Nitin Kumar, a veteran in the world of M&A, surfaced some important insights. He interviewed approximately 100 M&A integration leaders on what factors influence the end state of an integration and value creation of the transaction.  Here are his findings:

Nitin goes on to explain that:

“At $100 million planned synergies, each week of delay due to lack of decisions postpones realization of ~$2 million in EBITDA.”

Hampered by outdated and inefficient tools, M&A teams are ill-equipped to keep up with the increasing demands.   Tools have become something to manage, rather being an enabler of the process.  It is time for a more effective approach.

Enter Purpose-Built M&A Software

There’s a well-known saying in M&A, “the longer it takes to integrate a company, the longer it takes to realize the value of the deal.”  Closing deals and integrating or divesting quickly is the key to value creation in M&A.

Companies with a long history of acquiring and integrating businesses realize that using spreadsheets and emails are hampering their ability to be agile and move quickly in M&A. As a result, purpose-built M&A software has been quickly gaining momentum.

We’re often asked, “when does it make sense to adopt purpose-built M&A software?” The answer depends on several factors:

• How many deals do you plan to close per year?
• How complex are your deals?
• How many people are involved?
• What are your plans for deal volume over the next few years?
• Is inorganic growth a strategic component of your growth strategy?

Even if you do only one deal and it’s complex then purpose-built M&A software will certainly lower the level of project risk, facilitate better analysis and more effective decision making, and add value to your end-to-end process.

M&A software has been available for years, but it’s not until recently that awareness has accelerated adoption. There are two primary reasons for this: 1) increased awareness of the value of these tools; and 2) heightened urgency to compete effectively and increase shareholder value. 

To better illustrate the state of the M&A software market, I’ll use the graphic below from Gartner, which combines several well-known curves.  Although Gartner has not officially analyzed purpose-built M&A software in its research, the consensus among M&A software company CEOs is that we’ve crossed into the Slope of Enlightenment (just past 5% adoption). 

Early adopters have been using M&A software for years and have proven the value it generates for their businesses. This is supported by the rapid software adoption across our enterprise customers.  We also see a high percentage of repeat business from M&A leaders changing companies. 

In their eyes, this is table stakes to be competitive.

Purpose-built M&A software, like Devensoft, defines a new category of software, so it’s difficult for companies to grasp the enormity of the opportunity.  These platforms combine CRM, due diligence, virtual data room, sophisticated project management, synergy tracking, analytics, and configurable reporting into one solution, creating a single source of truth for timely and informed decision-making.  Bottom line is that they allow teams to move quickly and execute more effectively.

Leading Change

One thing that makes market leaders stand out above the rest is that leaders have a culture of continuous improvement, innovation and a willingness to embrace change across the organization.  Companies that have adopted M&A software have demonstrated their commitment to being successful with M&A and accelerate their ability to close deals and realize synergies faster.

However, effecting change requires planning and commitment across multiple levels in the organization.  Having implemented our software for hundreds of companies worldwide, we understand the critical success factors that impact widespread software adoption.  These include a commitment from senior leadership, building a sense of urgency, creating and communicating a vision and strategy for the team, and generating short-term wins.  When done successfully, this can have lasting value to the organization, as we’ve seen time and time again. 

Selecting the Right M&A Tool

To make the right decision on which software to adopt, you should first agree on what you are trying to improve in your M&A process.  Next, develop a list of must-have and nice-to-have requirements with input from stakeholders across your company.

Once you have built your list, then it’s time to reach out to M&A software companies to understand which ones would likely meet your requirements.  I highly encourage you to run a short trial or proof-of-concept with two or three solutions so you can get a sense of the user experience, functionality and look-and-feel of each software.  Gather feedback from your team and score each vendor according to your requirements.

M&A tool selection is an in-depth subject that I will be addressing in a separate article.

Closing Comments

If you have any questions on how to build a business case for your company, feel free to connect with me on LinkedIn at https://www.linkedin.com/in/nickperdikis/. 

If you want to learn about the Devensoft M&A management platform, please visit us at www.devensoft.com.