December 12, 2016

Report Surveys Corporate Executives on Mergers and Acquisitions and the Use of Analytics and Big Data During the Process

Sponsored by EY, The Economist Intelligence Unit (EIU) published the 15th edition of its Global Capital Confidence Barometer claiming that 57 percent of executives plan to make acquisitions in the next 12 months. "The need to respond to challenges while navigating a complex and fast-changing environment makes dealmaking an imperative, not an option. Executives are looking at more targets, and deals will tend to be smaller. However, as boards look to make innovative acquisitions, they are using analytics to make better decisions."

The Global Capital Confidence Barometer gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their Capital Agendas — EY's framework for strategically managing capital. It is a regular survey, conducted by the EIU, of over 1,700 senior executives from large companies around the world.

In addition to over half of executives expect to actively pursue acquisitions in the next 12 months, 49 percent of companies have more than five deals in their pipeline and 91 percent are using big data and analytics as part of their deal process.

With respect to the macroeconomic environment, "Most executives see the global economy as stable and say corporate earnings are back on track. But there are uncertainties ahead, both in the near and long term, including political stability in their home markets and tightening credit markets. As low growth and disruption continue, boards are focusing on mergers, acquisitions and alliances to create value."

The report addresses the topic of corporate strategy by saying: "Innovation, new technology and changing customer demands are challenging businesses to reinvent their products and operations. At the same time, greater regulation is adding complexity to corporate strategy. Most companies, with an imperative to reorganize their portfolios, are responding with a mix of buying and partnering to underpin future success."

From where do you see growth
within your company coming
over the next 12 months?
In fact, 45 percent of growth is expected to be inorganic, the report explains. Moreover, 57 percent of companies are actively reorganizing their portfolios and 71 percent are shifting skills and talent to take advantage of new working models.

The percentages below reflect those who intend to actively pursue acquisitions in the next 12 months:
  • Consumer products and retail — 71%
  • Diversified industrial products — 60%
  • Life sciences — 56%
  • Technology — 54%
  • Automotive — 54%
  • Oil and gas — 52%
How do you use analytics and
big data for executing your
M&A process and strategy?
In answering the question, "How do you use analytics and big data for executing your M&A process and strategy?" 55 percent of corporate executives use data analytics to better identify synergies and determine valuation of the targeted asset, 54 percent use big data to identify growth options and potential targets, just 4 percent say they are not using data analytics but are considering it.

Lastly, as someone who takes a strategic approach in global business, I appreciate the top five questions every executive needs to ask as they invest for growth:
  1. Are you capitalizing on the breadth of deal structures to realize your strategic objectives?
  2. Will geopolitical challenges derail your growth strategies?
  3. Are you using analytics and big data to bring greater clarity to complex deals?
  4. Is an off-the-shelf approach to integration the best recipe for success?
  5. Are you enhancing or destroying the value of acquired innovation?
Do you find this report useful for your business? Is your company considering making an acquisition in 2017 and if so, how are you using data analytics during the M&A process?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.

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