August 26, 2019

Money Ball: Using Advanced Analytics in M&A

Today’s high M&A valuations mean that buyers often face daunting challenges when it comes to achieving an appropriate return on their investment. This McKinsey report says that the emphasis on advanced analytics that helps keeps small market MLB teams competitive may be the key to extracting value in M&A. Here’s an excerpt:

For M&A, an area where few companies now apply advanced analytics, there is the potential to enhance all activities. During due diligence, companies may mine new insights from external data, if available. These analyses may be an important source of additional insights, since companies have limited access to internal data during the due-diligence phase.

Advanced analytics may also uncover opportunities for synergy that would have otherwise been overlooked. At the negotiation stage, when transaction documents are being created, companies can use behavioral analytics to understand their potential partners more thoroughly. With this knowledge, they can improve their negotiation strategy. Finally, when the deal is signed, companies can apply advanced analytics to derive maximum value from the transaction.

In addition to the soaring premiums paid in M&A transactions, the report says that another reason the time is right for applying analytics to acquisitions is the dramatic decline in data storage costs & the  dramatic increase in processing power.  These developments allow companies to more easily manage vast amounts of internal and external data – and as data management improves, it will enable companies to make better decisions and meet tight integration deadlines.

John Jenkins