Let’s Make a Deal: Analytics and Social Media in M&A
Updated: Aug 7, 2020
How acquisitive companies are using technology to better understand their targets and make more informed M&A decisions.
Advanced analytics and social media are fast becoming mainstays of the M&A tool kit. Even so, some companies are still struggling to leverage these tools in ways that support M&A goals and business strategies according to Deloitte’s 2013 Corporate Development Survey.
In April 2013, 435 professionals involved in corporate development decisions responded to an online survey. Roughly 40 percent indicated their companies currently use data analytics in the deal process, and another 17 percent said their organizations are considering doing so.
Meanwhile, one-third of the respondents indicated their companies use social media channels as part of their various M&A activities. The primary uses for social media among these respondents are target identification (56 percent), due diligence (30 percent), negotiations (7 percent), and valuation (4 percent).
J.R. Reagan, leader of the Deloitte Analytics HIVE (Highly Immersive Visual Environment) and a principal with Deloitte & Touche LLP, discusses how CIOs can help deal teams use data analytics, visualization, and social media to enhance their evaluation and pricing of a target, and their due diligence efforts. At the HIVE, visitors can test drive the latest analytics technologies and approaches themselves, using their own data.
How are deal teams using data analytics in the M&A process?
Reagan: M&A is an area where data analytics can play a valuable role, particularly given the time constraints that deal professionals face during transactions. We see companies using data analytics across the M&A spectrum of activities—from vetting potential targets, to analyzing big data to gain insights into industry trends, to performing more in-depth due diligence. They are also turning to analytics to scrutinize and categorize critical information, and then to help evaluate various aspects of a deal, such as financials, synergy targets, and risk.
What role can visualization tools play in M&A?
Conceptualizing and putting together a deal requires an incredible amount of information and analysis and an understanding of historical patterns, as well as the ability to forecast. While spreadsheets can help capture data, they are generally less effective at revealing patterns. When you’re dealing with millions and billions and even trillions of rows and columns of information on companies, with conditions and hypotheses that support or refute a business case for a deal, visualization becomes very important.
Research shows that humans can recognize patterns and pictures 60,000 times faster than a page of text. The amount of information in a spreadsheet model can be overwhelming. Visualization can help, not only in revealing patterns, but also in producing richer insights than those obtainable from a purely financial model.
What types of analyses can be visualized in the M&A context?
Visualization can be used for depicting various “what-if” scenarios. For example, if the CIO and IT can capture X post-deal synergies that deliver Y efficiencies and cost savings, how might that affect projected deal value? Or if numerous parties to a deal come to the table with 50 different spreadsheets and 50 different ways of modeling, they will need a common starting point to look at everything. Visualization tools can help them get to that point.
The goal is to be able to use those analyses, data, and insights to make more informed M&A decisions. Sometimes data analytics is merely interesting; other times it can reinforce or change a decision. Good analytics focuses on what is relevant to the current decision.
What role could big data and visualization play in M&A?
An executive might be thinking, “I have an idea what is happening in a particular region and I also have meeting notes to rely on.” Traditionally, we would intuitively sum up this input in our heads. Now we have the ability to take a more fact-based approach to using information of that sort to inform decisions.
Relying on intuition and heuristics for complex decisions like M&A has been known to result in poor decisions. Leading analytical and visualization methods synthesize models and data from multiple sources to provide a more defensible foundation for making big-bet decisions. The simulation model might tell us about the likelihood of achieving targeted synergies in a deal, and visualization of big data can then provide a way to investigate, challenge, or reinforce the assumptions about achieving those synergies. Intuition, of course, can supplement this process.
What value can social media bring to the M&A process?
Social media can be a source of unconventional, qualitative data that companies might consider as they evaluate potential targets. It serves as a platform for customers to share their opinions. As such, if an acquirer wants insight into how real customers feel about a particular company’s products and services—and also about competitors and their offerings—social media can often provide that unfiltered commentary. Some people may be concerned about the reliability of social data and assume that it is just a lot of noise. In fact, for the purposes of investigating potential targets, social data is not unlike survey data—it is a potentially valuable source of additional information that can complement, not supplant, other sources.