M&A analytics essential for due diligence and deal playbooks

27 January 2021 Consultancy.uk 3 min. read

A few years ago, deep analytical capability through deal processes was seen as a ‘nice-to-have’. According to Steven Lee and Abhinav Agarwal from Alvarez & Marsal, it is safe to say that this is no longer the case: transaction analytics is an essential component of buy-side and sell-side playbooks today.

At Alvarez & Marsal, we expect different factors to combine to make transaction analytics even more critical for effective due diligence and eventual deal success. A summary of three key themes we expect to characterise the fast-moving transaction analytics space over the coming twelve months.

Starting the process early

In our experience, sellers are beginning their groundwork on data well before they formally kick off a sale process, with an eye on maximising value and removing uncertainty wherever possible. Potential buyers now expect to be able to leverage highly granular data. Sellers that have not adjusted to this new baseline expectation should expect prolonged processes and more complex conversations.M&A analytics essential for due diligence and deal playbooksBetter preparation is highly beneficial to all stakeholders, particularly in light of the market volatility created by Covid-19. This emphasis on starting early reflects how important robust data analytics is to the efficiency of a deal process, and we expect this trend to accelerate further over the next 12 months.

Covid-19 aftereffects

Incorporating advanced analytics into transactions was already a growth trend, but it has built even more momentum thanks to Covid-19. With pre-pandemic assumptions on underlying performance and stability now highly questionable, it is harder than ever to arrive at authoritative performance forecasts and operational metrics. Analytics can help deliver greater certainty when it comes to the numbers, potentially easing the concerns of buyers and sellers.

Almost every diligence exercise we see at Alvarez & Marsal now includes a Covid-19 component. Investors are asking: how did the management team respond to the pandemic? Did the operating model prove resilient? What customer or product groups were most significantly impacted? Answering these questions effectively depends on the robustness and specificity of data, which is now seen as a necessity by potential buyers.

Agility and granularity

Robust analytics can enable rapid responses to evolving issues. Many companies had to move from monthly operational reporting to weekly or even daily updates in the midst of the pandemic, and this move is likely to become permanent as we move forward through the recovery phase. In volatile markets, when customer demand and supply chain environments are evolving at pace, adjusting quickly is vital, and this begins with continuous and timely analysis of data for increased business transparency.

We expect companies to invest in building their analytics capabilities to be able to monitor their performance on a more real-time basis and extracting more value from their data.

To summarise, we expect that the level of analytical sophistication in deals will continue to increase through 2021. The need for data to inform decisions is greater than ever, and high-quality transaction analytics can ensure successful deal execution that delivers value to all stakeholders.