data room for m&a

Mergers and acquisitions (M&A) provide substantial opportunities to businesses looking for ways to grow. 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. M&A is a part of strategic management that assists companies in reinforcing their competitiveness and making business shifts with a 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 opportunities. 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, but concern different concepts.

A merger is a voluntary decision of two businesses to combine 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 and the Disney-Pixar deal.

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5 phases of an M&A transaction

m&a steps

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 M&A successful and keep operations sustainable. The communication between all the stakeholders should be transparent even when, 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 difficult and time-consuming. 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 M&A deals date back to the early 18th century. It wasn’t until the late 19th century that they boomed in the United States. From 1895 to 1905, dozens of mergers happened in the American manufacturing industry, which period was dubbed the Great Merger Movement. The most prominent M&A case was the merger of different companies to form Standard Oil Company, which became a monopolist in the global oil industry.

Historically, the key factor that made U.S. companies consider mergers was their desire to get a competitive edge. Small firms within an industry merged with bigger ones and thus 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.

Increasing of m&a deals

M&A data rooms for modern deals

Over the past 35 years, the dynamics of deals have gone up, with more than 300,000 M&A transactions taking place. Thousands of M&As occur annually. According to statistics, 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 within the US. There are M&A cases that are inbound/outbound deals too, such as:

  • From the U.S. to abroad, 2,962 M&As were closed in 2019. The  United Kingdom, Germany, Australia are target countries for outbound mergers and acquisitions.
  • In 2019, 2,997 inbound M&As were made. In terms of territories, the same states were involved.
M&A in the USA

Top 5 M&As in the United States (2020-2021)

All these M&As are significant in terms of transaction value and in their industries:

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 transactions are usually common in five major industries.

M&a industries diagram

Corporate

The commercial segment includes sell-side deals between cross-industrial companies. All the 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 modern online deal rooms.

Finance

Transparency and accuracy are crucial for deals in the financial services 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 information 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 should utilize M&A virtual data room.

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