According to most studies, 70% to 90% of mergers & acquisitions (M&A) deals fail.
Why?
HBR writes that in most deals, “companies too often pay the wrong price and integrate the acquisition in the wrong way”. In other words, overestimating what the company is worth or underestimating how difficult the integration will be.
That’s where having a strong records and information management (RIM) program in place can be vital.
During the first of this three-part series, we’ll talk about the link between RIM and M&A as well as explore the different ways that RIM can help benefit M&A processes.
1. Maximize Deal Value
An accurate understanding of where your records and information are located instills confidence in any potential partners. This can translate into more value that can be negotiated because of a concrete understanding of what information you have and what it’s worth.
Therein lies the problem, however.
Whether it’s a hard drive or a box of physical records, until you know exactly what’s inside, it’s valueless. It’s critical before any due diligence activities take place that you have a handle on what is stored where, how it’s stored, and what its potential value is.
That said, it’s about more than just putting a value on the information itself. From inventory and customer records to billing and employee records, when the data requested during due diligence is provided not only quickly, but accurately, it instills confidence with a potential Buyer. This in turn can add additional value or assurance that the deal will proceed successfully.
2. Minimize Roadblocks
Due diligence is a part of any M&A process and is always the most time-consuming. Any additional time added to this stage of the M&A process can rack up legal and internal expenses quickly.
Fast and efficient sharing of information during this stage is crucial. Moreover, you’ll want to be sure that it’s accurate and up to date.
This is where having your information management team or external professionals involved as early as possible in the process is beneficial. Not only are they likely to have the most complete knowledge about what information is stored where but their specialized knowledge can accelerate the process – a huge advantage.
Due diligence can take hundreds of billable hours from attorneys and employees, and months’ worth of time to complete. It takes more than just a rockstar team of RIM professionals to have a solid information management program. This comes down to managing information across its lifecycle in an integrated fashion.
Check out our integrated information management roadmap to dive a bit deeper into that topic.
Survey Report: What the Pandemic Taught Us About RIM and Managed Services
Since the start of the pandemic, companies have quickly pivoted to meet evolving client needs and have shifted employees to hybrid and remote work models. As a result, digitization has become a key business priority to enable convenient information access…
3. Mitigate Risk
With privacy law enforcement on the rise, cybersecurity and data breaches are becoming a top risk factor both before and during M&A processes. Data reported by Forbes found that an astounding 40% of M&A deals involved one party uncovering a previously undisclosed cybersecurity leak.
To mitigate these risks, both parties should first establish a way of sharing information such as a data room or secure document management system.
There should also be a complete assessment early in the process to determine:
- How and when will information sharing occur?
- What are the requirements of the M&A agreement?
- How will chain of custody be managed?
- Will there be auditability of information access?
- Which documents are critical to due diligence?
- What are compliance and privacy considerations?
4. Streamline Integration
Whether it’s a merger, acquisition, or divestiture, at the conclusion of the deal, information will have to move from one system to another or be separated entirely.
This makes integration another potential barrier to deal success. Reasons for this can range from incompatible technology and outdated paper files to non-compliant records, or differing processes.
Relying on internal expertise may not be enough. The solution is to seek expert advice, possibly from a third party with experience in post-acquisition integration, to streamline data transfer and keep business running as usual.
Conclusion
Obviously, an organized and optimized RIM program isn’t just helpful for M&A processes but for day-to-day operations in general.
Having key business documents digitized and in a securely sharable format can make your everyday business processes run smoother, prevent unauthorized access or release of information, and can give you a better understanding of what records should be retained or destroyed.
It’s never been more important to ensure that your corporate information is ready to withstand the rigors of information-sharing requirements. Get all the details you need to be successful by reading our new M&A Playbook, Managing Information Through Transition – The Mergers & Acquisitions Playbook.
