It’s hard to believe, but it’s now almost 24 months since I launched this blog. As we approach the two-year milestone, this month’s post marks the start of a new series showcasing another key aspect of my professional activities: mergers and acquisitions (M&A). From now on, M&A – in particular, the role of tech in transactions of this kind – will be the focus of every other blog published here. Read on and find out more.
Technology Is Driving and Transforming Today’s Mergers and Acquisitions
As regular visitors to this blog will know, I’ve been advising travel and logistics players on technological innovation for a number of years and started sharing my thoughts on tech trends in these sectors back in early 2018. While M&A hasn’t featured in this blog to date, the tech side of such transactions has been a major part of my day-to-day work for quite some time.
So why the decision to put M&A center stage? A couple of years back, I noticed a marked shift in mindset in the field of mergers and acquisitions – a shift that I call “from traditional tech M&A to transformational tech M&A”. From a technology perspective, this is a significant development.
The Changing Face of Tech M&A
Of course, tech mergers and acquisitions are nothing new. With traditional approaches, however, it was usually considered safest to quickly lift and shift IT unchanged from the seller to the buyer. While this had the benefit of reducing reliance on the seller’s capabilities, it also tended to push up software licensing and run-related spending (for example, due to inefficient server utilization), resulting in costly architectural workarounds.
Lift-and-shift may well be effective in mitigating tech-related risk, but it has the major drawback of tying up the buyer’s IT resources – putting the brakes ongoing technology projects and ultimately delaying potential synergies when it comes to run-related IT costs.
Transformational Tech M&A: Smoothing the Way to Success
This is where transformational tech M&A comes into play. This new paradigm leverages precisely the kind of state-of-the-art digital technologies that today’s companies are looking to acquire to help smooth the way to successful mergers – enabling businesses to realize coveted synergies faster and more efficiently than is possible with traditional approaches.
Thanks to technologies such as cloud computing, cloud storage, analytics and Software as a Service (SaaS), buyers can now use their newly acquired technology stack or even totally new products as a springboard to leap directly to the desired target state, avoiding the detour via the seller’s existing IT.
This is great news: But it inevitably makes life more complex for the buyer’s IT and business organization, because to make the most of these technologies, these organizations not only have to deliver significantly more hands-on support; they also have to gain a firm grasp of the seller’s business processes. This requires the seller’s active involvement – which is typically strictly limited, based on contractual agreements.
Leveraging Technology to Lighten the Load and Keep Tech Projects Moving
Transformational M&A deploys today’s technologies to accelerate the M&A process from the get-go. So, as indicated above, instead of physical moving servers from one data center to another, buyers can now opt to move the seller’s (and their own) systems to the cloud. This not only saves the time and effort of relocating acquired hardware to the new data centers; it also allows the buyer to sidestep upgrades to the legacy IT – and all this without derailing vital digitization projects.
Of course, this transformational approach entails its own risks (and costs). And here, too, the latest technologies can help buyers mitigate risk and budget accurately. In our example, powerful analytics solutions would enable the buyer to crunch vast volumes of data, providing a clear, reliable picture of how best to transition to the cloud.
The above examples are just a foretaste of the potential that disruptive technology holds for streamlining digital deals and accelerating the realization of synergies. One key takeaway here is that transactions of this kind are never about simply bolting acquired tech onto existing business approaches.
If companies want their digital acquisitions to succeed and contribute to scaling new business opportunities, digitizing the value chain, or providing digital products and services, they must transform their M&A approach. And that means applying digital technologies to their own processes. This not only gives them a decided competitive advantage in the digital sphere – it also greatly enhances traditional M&A transactions.
In my next M&A-themed blog, to be published in April, I’ll be digging deeper into a topic with considerable significance for mergers and acquisitions: big data. In particular, I’ll look at how sophisticated analytics tools and tech can nip the risk associated with potential deals in the bud.