EMEA Lags in Adopting Digital M&A Processes with Company Culture and Cyber Security Concerns the biggest Barriers Uncovered by Due Diligence
- Cybersecurity , Compliance , M&A Deals
- 25.09.2020 04:48 pm
Leading cloud-based technology provider for the M&A industry, Datasite, has launched its annual EMEA M&A report: The New State of M&A – An EMEA Perspective, a sub section of its global research project.
The report found that dealmakers in EMEA lag their peers in other regions when it comes to adopting mergers and acquisition (M&A) processes that are digitally mature and technologically sophisticated. However, they also recognise that new technologies will shorten the time it takes to complete due diligence, flagged as the most time-consuming phase of the process. Interestingly, according to the survey, company culture is a particular barrier to adoption in the UK, and cyber security concerns are the most common issue uncovered by due diligence.
Another key finding for the region is the importance of environmental, social and governance (ESG) criteria as a consideration in M&A due diligence. Here, EMEA dealmakers diverge from their peers - while most dealmakers around the globe say ESG criteria is an important or very important consideration, notably fewer EMEA dealmakers currently say this.
The report, carried out in conjunction with Euromoney Thought Leadership Consulting, surveyed over 2,200 M&A practitioners from corporations, private equity firms, investments banks, law and professional services firms across the Americas, EMEA and Asia Pacific (APAC) on the current state and outlook for M&A – 860 of those surveyed practice in EMEA.
The findings show that 67% of EMEA dealmakers say the M&A process at their company will have a high level of digital maturity and technological sophistication by 2025, while 60% say the same of the M&A process industry-wide. This compares with 77% in the Americas who predict the M&A process at their company will have a high level of digital maturity and technological sophistication by 2025 and 71% who say the same of the M&A process industry-wide.
In addition to new technologies enabling more robust data management and communications, analytics and reporting, and the administration of multiple scenario analyses or financial modelling, EMEA dealmakers say new technologies will enhance the security around the M&A end-to-end process. This is a particular concern in the UK, where 54% of dealmakers – the highest percentage across EMEA – say data or cyber security concerns are the most common issue uncovered in due diligence that causes the withdrawal from a deal. This compares to 36% of global respondents who said cyber security was the most common issue exposed by due diligence.
Merlin Piscitelli, Chief Revenue Officer for Datasite, EMEA, commented: “Using the right technology to manage the M&A process is critical for companies to generate efficiencies and achieve financial targets and revenue growth. The speed at which businesses are able to respond and adapt is critical to their ability to survive and thrive. This becomes particularly important, given the risks posed on the global market by the COVID-19 crisis. Having the right tools and processes can mean the difference between M&A success and failure.”
Still, in the next five years, dealmakers in EMEA do see new technologies such as artificial intelligence transforming the mergers and acquisitions (M&A) process by decreasing the time it takes to perform due diligence. Of the 860 EMEA-based M&A practitioners surveyed, 64% believe due diligence will take less than one month by 2025. In the UK, this sentiment was even more pronounced as 71% of dealmakers there say they expect due diligence to take less than one month by 2025. Today, the process takes one to three months to complete a deal in EMEA and the Americas, and between three to six months in APAC, according to the report.
Piscitelli added: “New technologies, such as AI and machine learning, are making the entire M&A process, not just due diligence, faster and less labor-intensive. These new capabilities are valuable in managing all corporate actions, including M&A, initial public offerings and restructurings, which are increasingly taking place due to the market downturn brought on by COVID-19.”
Other key findings from the report include:
- 39% of EMEA practitioners say incomplete or inaccurate deal documents and information is the factor that slows due diligence the most.
- 47% of EMEA dealmakers say a lack of insights on buyer behavior across mandates is the most challenging aspect of marketing an asset for sale.
- 93% of EMEA practitioners say the ability to load large volumes of data quickly is most useful in a restructuring situation.
- 60% of EMEA practitioners say data privacy regulation (e.g. EU’s GDPR) will be a very important consideration in M&A due diligence in five years’ time, up from 9% today.
The survey was conducted by Thought Leadership Consulting, a Euromoney Institutional Investor PLC company, for Datasite between February and April 2020. To learn more about the new findings, please visit: www.datasite.com.