Technology is now widespread throughout all stages of the M&A process, from targeting to due diligence. It has transformed the way that transactions are done. The use of different platforms is facilitating the quick delivery of deal information to a wider group of participants. As a result, crucial stages in a transaction can now be done remotely and simultaneously by several deal parties.
Technology is also affecting other areas of the deal process. Negotiations between buyers and sellers can be less contentious with access to past data. With advanced technology, it has become easy to compare past deals and take away precedents that these parties can agree on and apply to current transactions.
However, despite the advantages, there remain risks. The proliferation of information has heightened the potential for possible leaks of confidential deal data. On top of this, sector-specific issues, particularly in tech-heavy industries, have their own regulatory nuances dealmakers must navigate.
With all these factors coming into prominence, Mergermarket and Vintage gathered five experts to discuss the growing role of technology in the M&A process. In particular, they look at how the presence of technology has unlocked value in M&A deals while tackling the issues of potential risks and regulatory scrutiny.
Q: How has technology evolved in terms of its use in the dealmaking process?
Matthew Epstein: Going back to the advent of the PC and calculation software, what used to take days can now be done in minutes. Since there were no computers in the early 1980s, investment bankers used to do everything by hand on spreadsheets. They used big pieces of graph paper that they placed on their desk and up on the wall to figure out calculations. By contrast, a model that will do thousands of scenario analyses can now be built. The Internet has also made it possible to do a vast amount of the M&A process remotely, including the due diligence process and a large part of the negotiation process.
Roger Griesmeyer: The technology that we as lawyers use has also evolved. Today there are products that will let you plug in the deal provisions and compare them with the most recent hundred transactions, giving you a percentage of them that have a particular provision. When doing deals, one always wants to know what the market standard is. Am I allowing terms in this agreement that everyone else in the industry has agreed on? Is this fair or am I getting the short end of the stick?
Before, these questions were answered solely based on industry experience, or it might take looking at the Securities and Exchange Commission’s (SEC’s) website to find the most recently filed merger and asset purchase agreements. Using these products gives a client and a lawyer comfort that not only do they know their market through their colleagues and experience, but that previous transactions show that they are on the same page as the industry
Richard Lukaj: Everything on the data side is so much more prolific today than it ever was, and dealmakers can access a collection of resources and fairly distributed market data. It gets a little bit more unique when transactions that need highly customized solutions are involved. But, in general, there are many options for accessing market trading and securities benchmarking information. There are new companies coming to the market all the time with new analytics tools to leverage that data and provide new information. This helps the dealmaking world.
James Rosener: Technology has clearly increased the speed at which deals are made, and broadened the use of auctions and the number of potential bidders given the ease of communication and distribution of materials. At the same time, remote communications and the ease with which documents can be incrementally changed without addressing the fundamental deal issues has, in some cases, increased the number of cycles that a draft agreement has to go through before the parties focus on the points necessary. Materials can be distributed more widely and with greater ease and documents can be generated more quickly. However, it is important to remember that it is the parties involved and not the technology that gets the transaction completed.
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