Hottest Topics in M&A

Everything you need to know to buy or sell a business in Canada.

The Role of Technology in Mergers and Acquisitions: Trends and Insights

As with most professional services, as new technologies emerge, the industry must adapt to keep up with competitors in terms of efficiency and protection of confidentiality for clients. In the M&A market, this is seen through new methods to share confidential information with fewer opportunities for security breaches, but it also seen in the technologies that allow transactions to occur with shorter timelines. Deal fatigue is when the buyer, seller, or both begins to feel frustrated, irritated, or upset by the pace of the transaction and is a leading cause for deals to fall apart. Technological development has been extremely effective in minimizing deal fatigue among firms who adopt the right software.

Virtual Data Rooms

Virtual Data Rooms are secure online systems to store confidential information about a business for sale. They are typically used to facilitate due diligence between a buyer and seller and often contain sensitive information such as multiple years of internal financial statements that detail the way the operation does business. If not protected properly, such information can create opportunities for untrustworthy buyers to gain unfair advantages in negotiations or could jeopardize the seller’s business if the data is used in an inappropriate way. Before virtual data rooms, most of due diligence involved secure physical storage of data (such as USBs or hard drives) or even sharing of physical documentation like printed financial statements. Past methods were sufficient until more sophisticated technology was developed but can now be compared to virtual data rooms which are significantly more secure and aren’t prone to inconveniences like having to deliver information to a buyer in another city.

E-Signature Technology

E-Signature Technologies (like DocuSign) allow people to securely sign legal documents remotely and provide additional security features like date and time stamping the signature. With particularly secure systems, signatures are even linked to the IP addresses from which they were signed, allowing for more security than even physical signatures can. M&A transactions involve many legal documents such as non-disclosure agreements (NDAs), memorandums of understanding (MOUs), and purchase and sale agreements (PSAs). E-Signature Technologies allow M&A professionals to process deals faster with higher levels of security by avoiding unnecessary in-person meetings and maintaining additional information about the date/time of signing.

Online Marketplaces for Selling Businesses

Online marketplaces for selling businesses have drastically increased the number of potential buyers who see each listing of a company interested in selling. The marketplaces have also created an opportunity for businesses too small to justify having a broker handle the transaction. Sellers can list their businesses with asking prices that they feel would be sufficient for their efforts for a much lower monthly fee than a broker would charge. They are likely accepting much less than what a formal valuation would have suggested but the costs of sale would be lower, and the business still ends up in the hands of a new owner. With consideration for the much higher number of potential buyers due to the larger deals also posted on the marketplaces, smaller businesses even have the chance to find a strategic buyer that pays a fair price for the company and the previous owner’s experience.

Online Accounting Platforms

Two crucial components of M&A are the valuation of a company for sale and the facilitation of the due diligence process. Both of which can be eased by the development of user-friendly and reliable online account platforms. Gone are the days of business owners or their bookkeepers needing to produce every report that a valuation analyst may want to determine a value. Now, firms like Robbinex can be given direct access to the accounting system or a backup copy can be produced for the analyst to manipulate. The valuation is more accurate because the analyst can access every piece of data they need, and the process is faster because fewer parties need to be involved with report generation. The same access can also significantly reduce deal time as your broker’s support team can handle data requests from the buyer while you’re busy running the business.

Author: Jacqueline McGee

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