The value of data analytics in mergers and acquisitions
Mon 18 May 2015
Brian Gentile, senior vice president and general manager at TIBCO Analytics, discusses the importance of data and analytics to support billion dollar mergers and acquisitions…
The billion dollar acquisition is back with a bang. Over the last few months alone, we’ve seen multi-billion dollar deals across a range of industries – BT buying EE, Expedia acquiring its US rival Orbitz, and the current rumours about how British Airways is interested in taking over Aer Lingus. The mergers and acquisitions (M&A) market was valued at 115 billion euros last year, with more than 3,000 transactions taking place across Europe. The mammoth numbers make the news pretty glitzy and exciting.
This part of the story is actually very well told. What isn’t explored as often is the key ingredients needed for mergers and acquisitions to be a success – specifically the role data analytics has to play. The reality is that today we are at the stage where advanced analytics and big data can help to make or break a merger combination, whether it is from the thorough due diligence that is required ahead of every deal, or the guarantee that data from both parties can be quickly understood for synergy again after. In this article I will explain some of the challenges that are faced throughout the M&A process and how data analytics can help to overcome these.
Challenge one: picking your target
Every merger or acquisition requires a well-thought-out and structured plan, carefully explaining how the deal enhances the company’s core strategy. For this to happen, thorough market research, number crunching and due diligence is naturally required, meaning data analytics has a critical role to play while a merger or acquisition is being targeted.
Using data analytics while planning an acquisition can help stakeholders to visualise the bigger picture, allowing for comparisons, combinations or cutting of duplicate resources to be made to help maximise revenue and minimise costs. Whilst the acquisition is going through the buying process, predictive data analytics techniques can also be used to see how the market will likely respond after a deal is made. Ultimately, such specific analysis offers the security required to justify such an important activity.
Challenge two: information overload
Yet it is once the deal has been made that the true power of data analytics in this environment can be found. The reality today is that businesses of all sizes are drowning in data. Data is doubling in size every two years, yet only 22 percent of it can be effectively analysed. This is a challenge that clearly needs to be overcome, but it is also one that becomes even greater during a merger or acquisition, after all, there is now twice the amount of data to be put to work.
Not only that, but when merging with another company, data is inevitably stored in different silos. Customer data remains separate to financial data which remains separate to HR data. What is needed is a way to quickly analyse these disparate data sets, so that actionable intelligence across the organisation can be quickly found. The value in so much information is that new business models and sources of revenue can be built more fluidly. Without a commitment to analytics (both tools and skills), these opportunities will be missed.
Challenge three: speed vs richness
A factor that is often overlooked during M&A is just how quickly data needs to be put to work. What is more important to your business, for example: accessing a richly defined data set for broad analytic use, or getting hold of data quickly?
Businesses must recognise that some data needs curation time, dimension and rich definition in order to unlock its value, while other data needs to be put to work immediately as a business decision may be reliant upon it, coming to be known as ‘fast data.’ Before any business plan to unlock data is put into place, having a firm understanding of the trade-off between dimension and speed is important. After all, this speed versus richness characteristic will ultimately determine the best information architecture to put in place.
Challenge four: culture clash
When one organisation acquires another, there is often a clash of personalities, minds and ultimately cultures. When defining a new organisational culture, it’s worth keeping in mind that the most successful ones are where all employees can use company data to make better informed business decisions.
There is a greater opportunity than ever before to build upon employee interest and encourage the training of a wider skillset so that every employee possesses the analytic skills needed to thrive in this data-driven economy. When armed with a full repertoire of analytic technologies and mind-sets, businesses will be able to improve the speed and confidence in all future business decisions. What better common cultural bond to build than creating a data-driven approach into the business so success is made clearer with each insight and answer.
It’s important that all employees are able to use and digest company data to make better informed business decisions. The most successful acquisitions are often defined by how quickly this process can be managed. What many don’t realise is how effective and intelligent data management and analytics can help drive M&A success. No matter how a business utilises the silos of data that it sits on, there is no doubt that today, an enterprise lives or dies based on its ability to make decisions in an accurate, timely and effective manner. With the availability of so much data and the capability of modern Analytics tools, an improving success rate for mergers and acquisitions should be right at hand.