data room for m&a

Mergers and acquisitions (M&A) provide a substantial opportunity to businesses looking for ways of development. Usually, companies use M&As to achieve economies of scale and improve efficiency. Yet, during the last decade businesses are also trying to achieve transformation and efficiently compete with new market entrants, business models, and general industry convergence via M&As.

This article explains the role of M&As in the business, their key stages, and how a secure digital-first approach can help make this type of corporate deals more effective.

What is merger and acquisition (M&A)?

In essence, a merger and acquisition deal is the process of financial transaction between businesses or their assets. Being a part of strategic management, M&As assist companies in reinforcing their competitiveness and making business shifts with one-time investment.

The common M&A transactions include but are not limited to:

– mergers;

– acquisitions;

– units purchase;

– management acquirements;

– consolidations;

Every M&A can be divided into sell- and buy-side deals. A sell-side transaction happens when institutions (companies, investment and commercial banks, brokers, or liquidity providers) search for trade securities. In a buy-side deal, hedge funds, investors, and asset managers search for purchasing opportunities.

Merger vs. Acquisition

The terms ‘merger’ and ‘acquisition’ are used interchangeably, while reflecting different concepts.

A merger is a voluntary decision of two businesses to combine powers and shape an enterprise with new ownership and management. Usually, both parties resemble in terms of operating power and size. The famous examples of mergers are Exxon with Mobil or H. J. Heinz with Kraft Foods.

An acquisition, on the contrary, refers to a practice when a large business takes control of a target firm. A purchaser takes over all the operational management of the latter which ceases to exist eventually. The world-known acquisitions are Google purchasing Android or Disney-Pixar deal.

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5 phases of an M&A transaction

5 steps of m&a diagram

Due diligence

Due diligence is the most critical phase of any M&A. At this stage, stakeholders share all the strategic corporate records and evaluate the deal potential. The amounts of data, which are mostly confidential and classified documents, can be massive. To categorize all the files, facilitate and make negotiations secure, companies may use a virtual data room (VDR). 

Integration strategy

To begin the synergy, organizations initiate integration planning. Integration and development teams create a detailed roadmap to make the merger/acquisition successful and keep operations sustainable. The communication between all the stakeholders should be transparent even despite the fact that in many cases they operate from different locations. Thus, to ensure transparency and speed of communication, as well as to minimize human errors, the teams can use virtual deal rooms.

Strategy execution

When the plan is approved, integration teams start a step-by-step merger. This stage is the most time-consuming and difficult. The main task for integration teams is to make the process as well-organized as possible and minimize detrimental effects on business. The merger requires regular exchange and discussions of sensitive data, which can be conducted in M&A data room.

Project management

In M&As, project managers participate in every stage and assist in gathering and presenting critical data, collaborating with external advisors, as well as assessing risks. For these purposes, a Project Management Officer (PMO) often uses VDRs. This solution keeps all the records safe in one place during negotiations, which comes in particularly handy when it comes to entering talks with outsiders.

Change management

The closing phase involves human resources. A new enterprise should set a new corporate culture vision and values. Change management helps specialists to learn about employees’ attitudes and come up with a plan to overcome potential barriers. At this stage, the use of VDRs simplifies storing and sharing personal employee data with special access regulations.

Specifics of U.S. M&A deals

The history of M&A deals

The first deals date back to the early 18th century. It wasn’t until the late 19th century that they boomed in the United States. During 1895-1905, dozens of mergers happened in the American manufacturing industry, which was dubbed the Great Merger Movement. The most prominent case is the emergency of the Standard Oil Company that became a monopolist in the global oil industry. 

Historically, the key factor that made U.S. companies consider mergers was the desire to get a competitive edge. Small firms within an industry merged into bigger ones and were able to grab a bigger market share. As time went by, American companies wanted to grow operationally and started to acquire businesses from other industries. 

Developing of M&a deals in the USA

M&A data rooms for modern deals

Over the past 35 years, the dynamic of deals has gone up, with more than 300.000 merger and acquisition transactions having taken place. Thousands of M&As have been occurring annually. According to stats, more than 13.000 deals with a total value of $1.9 billion were closed in 2019. Since November 2019, almost 4,000 of transactions have already been initiated. 

Remarkably, U.S. mergers and acquisitions are not restricted to the US; there are cases of inbound/outbound deals, too: 

  • From the U.S. to abroad, 2962 M&As were closed last year; the United Kingdom, Germany, Australia are target countries for outbound mergers and acquisitions. 
  • In 2019, 2997 inbound M&As were made. In terms of territories, the same states were involved.
m&a deals statistics

Top 5 M&As in the United States (2019-2020)

All these M&As are significant for their industries and state: 

Organizations
United Technologies Corporation (UTC) finalized the merger with Raytheon Company in April 2020. Eventually, Raytheon Technologies, a multinational conglomerate, emerged as the result of the deal. This is one of the biggest deals in the industry ever.
Transaction Value
$120 billion(the approximate value of two companies)
Industry
Technology (information security, defense electronics, aerospace)
Organizations
Bristol-Myers Squibb completed the transaction of Celgene in November 2019.
Transaction Value
$74 billion
Industry
Pharmaceuticals (biopharma, advanced technologies)
Organizations
Branch Banking and Trust Company (BB&T) merged with SunTrust Banks in December 2019. Truist Financial Corporation, the sixth-largest U.S. bank, emerged as the outcome of the dea;. It is the biggest merger in the U.S. banking industry since 2008.
Transaction Value
$66 billion (the approximate value of two companies)
Industry
Finance (banking)
Organizations
Fidelity National Information Services (FIS) acquired Wordplay in March 2019. This is a key M&A in the payment segment of the decade.
Transaction Value
$35 billion
Industry
Finance(payment, financial outsourcing)
Organizations
Salesforce, a CRM giant, purchased a data visualization company Tableau Software in August 2019.
Transaction Value
$15 billion
Industry
Technology(cloud computing, software)

TOP-5 M&As industries in the U.S.

M&A procedures are usually common for five major industries.

top m&a industries in the U.S.

Corporate

The commercial segment includes sell-side deals between cross-industrial companies. All the mentioned above M&A phases are crucial for this segment. Therefore, companies utilize VDRs to accelerate due diligence and protect classified file sharing with teams and external experts.

Technology

In the IT area, the integration process is critical. CIOs and integration teams need a trusted channel of communication to discuss and review an integration plan. Also, the transmission of intellectual property is a regular procedure. Increasing IP management efficacy is possible thanks to the power of modern online deal rooms. 

Finance

Transparency and accuracy are crucial for the deals in the financial sector. Banks and other financial institutions should prepare a well-developed deal portfolio and assure effective Q&A sessions, which can be done with the help of a VDR.

Procurement

In a supply chain and procurement M&A process, short-term operations and rapidness are the cornerstones of success. Just like in other industries, the transaction requires the disclosure of confidential materials. Hence, by using deal rooms, parties may speed up the process and track access to corporate records.

Marketing

The deals in marketing and sales are based on strong communication and constant tracking of integration results. To ensure secure and convenient proprietary information transfer, specialists of different levels participate in the process. They can streamline and present all the collected data in data room m&a.

Final Words

Mergers and acquisitions are common in modern business. Thousands of M&A transactions occur every year in the U.S. Essentially, an M&A deal is a step-by-step action with many specialists, including external actors, involved. Now is the time to reshape the way M&A deals are made: companies share a lot of confidential data during multiple negotiation rounds which needs to be secured, yet shared rapidly and properly. To organize, accelerate, and protect all the classified information sharing, businesses utilize m&a virtual data room.

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