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The Role of Big Data in M&A Valuation

Home » Insights » The Role of Big Data in M&A Valuation

The Role of Big Data in M&A Valuation

by Khadija Tahir

Big data has revolutionized the once-traditional methods of analyzing, making it possible to source more data at a much faster rate and with a lot of variables. Companies that curate these massive databases do so to help businesses across all industries make more carefully calculated business decisions.

Big data sources revenue from software, hardware, and professional services. It encompasses security, storage, infrastructure, networking, discovery tools, applications, and analytics, just to name a few.

The power of big data has grown with the widespread use of smartphones, social media, and apps, and its technology continues to grow into edge environments, such as network nodes and industrial machines. Data is flowing between organizations of all sizes to help save time, save money, improve relationships, provide valuable insights, and advance technology. Big data is a major player in automation, artificial intelligence, cloud computing, and the Internet of things—innovations that are impacting virtually every industry in the world.

In an increasingly digitized society, everyone is looking to get a piece of the data pie. Technology companies are on and around data. Advertising agencies look to acquire data companies in order to gain a competitive edge when it comes to understanding consumer behavior and targeting ads to audiences. Healthcare companies are spending billions on data companies to transform everything from precision medicine to medical records. In education, teaching and learning methodologies are being transformed using big data. Mergers and acquisitions firms are using big data to improve target company searches and results. Essentially, there is no industry that is not somehow touched by the use of big data, and that results in sweeping opportunities for M&A transactions.

Get a Head start on Mergers and Acquisitions with Big Data Analytics

During the merger or acquisition process, there is a lot of waiting around. While commercially sensitive data is careful, a clean team is set up to comply with antitrust laws, and legal counsel is sought to provide guidance.

Analyzing this kind of data also requires you to adhere to strict limitations. So even when the data is available, you need to be extra cautious in how you use it. Not ideal.

However, M&A consultancies are waking up to the fact that there is also a wealth of the public. Non-sensitive data is freely accessible online on social media, review sites, and forums.

This data is full of useful and accurate insights about the target company’s brand health, and user feedback about their products and services – all vital information for the due diligence process.

Identify challenges and opportunities

Big data helps you to quickly get up to speed with the challenges and opportunities faced by the target company of your merger or acquisition.

Use customer sentiment analysis to discover the most common customer pain points. Delve deeper by subtopic to find out exactly what users are saying.

Customer sentiment can also reveal key selling points. What are the main reasons consumers are choosing the target company over their main competitors?

Since all the data is publicly available you can use the same parameters to conduct competitor analysis. Find out which brands in the target industry have the largest share of voice by comparing brand mentions. Look at brand mentions over time to identify key moments in the industry. For example, notable campaigns, PR successes, disasters, etc. Find out whether the target’s brand mentions are generally trending upward or are they in decline.

Find out whether the target company is a good match with the company you’re evaluating. Does the target company successfully market a desired niche of customers? Do they have specific talent or assets that could add significant value to the potential partner/parent company? While publicly available big data might not be able to tell you the precise value of the assets. User feedback can give you strong indicators of the successes and challenges faced by the target company.

Talent Management

What kind of workforce are you likely to inherit through your merger or acquisition? Use employee review sites such as Glass Door to assess employee satisfaction. Just as with consumer sentiment, Symanto uses natural language processing (NLP) to measure how employees perceive every facet of the target organization.

You may discover that the employees invest in training and development, creating a skilled (and therefore more valuable) workforce. You may discover that employees are leaving because they don’t feel adequately compensated. This implies that there would need to be a significant investment to prevent employee churn.

Accelerate Integration

Going through the merger process is like wading through honey. Everything slows as decisions are and new priorities are set. By using big data analytics to get a head start on the mergers and acquisitions process. You can bring forward important decisions such as deliberating on product development and aligning on agendas so that you’re ready to hit the ground running when the deal closes.

And time is more precious than ever. Given the premiums paid for target companies nowadays. There’s increasing pressure for partners to create as much value as possible from deals to deliver on targets set, and meet commitments made to the board and investors.

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