April 13, 2021
Mergers and acquisitions (M&A) are a common part of the modern business landscape. Integrating two or more organizations can be a considerable challenge; blending culture, staff, and IT systems is never easy. And permeating every stage of the M&A process are documents. The careful and controlled management of these information assets is an often overlooked aspect of an M&A project. Still, all organizations that do mergers and acquisitions well have one thing in common - they all use document management systems.
Documents for Due Diligence
According to leading consulting firm KPMG, “due diligence is of utmost importance in an M&A transaction.” Due diligence itself is the thorough examination of every aspect of the target company’s operations (the company being purchased) for both parties’ long-term benefit. This phase sees the sharing of vast amounts of information and documents, including financial, commercial, operational, tax, human resource, IT, anti-bribery/corruption, integrity, environmental, social, health and safety, governance, and regulatory documents. With this significant array of content needing to be securely shared, tracked, and interrogated using a document management system (DMS) makes perfect sense. Three key areas specifically benefit from a DMS.
Permissions can be applied across the various documents - ensuring access only to approved viewers. Read-only access should be applied to all of the content subject to due diligence - a simple task in a DMS.
M&A teams often are not based in the same place as the target company. In days gone by, teams of auditors would descend on the target company, or copies of paper documents would be sent to the M&A team’s offices. Thankfully document management means those days are gone - teams can share digital versions of documents across the world for instant access. Using DM technologies such as manage in place, the information doesn’t even need to be moved from its native system to be shared.
Every organization has multiple information systems - AIIM research suggests that 52% of businesses have at least three content systems - making it difficult and cumbersome to provide simple access to M&A teams. Unless you are using a document management system with federated or unified access. This capability provides a single view for searching and management across multiple systems, removing the need for multiple logins, training in various systems, and countless duplicate files.
Post Deal Integration
The involvement with DM systems doesn’t stop when the acquisition or merger deal is complete. Indeed, for staff in both purchasing and purchased businesses, this is when the hard work begins. Earlier in the blog, we discussed the importance of providing a unified view of content to help the due diligence process. Post-deal, this steps up a notch as IT systems from across both organizations need to come together as quickly and painlessly as possible.
Federation is again the critical tool to enable this. Combining information from across the diverse and numerous corporate systems, from both acquiring and acquired organizations, saves significant time and money in the early days of the consolidated enterprise.
Running multiple systems from two organizations, often with significant overlap in terms of capabilities, is not an ideal scenario. The cost of doing this is prohibitive, but the IT management time and effort are equally high - and ultimately wasted effort. The migration of content from these duplicate or redundant systems to the organization’s core systems can be performed using dedicated migration tools - but when it makes the most sense for the new enterprise. Having the ability to get up and running is the primary short-term concern in this scenario - optimization and consolidation of systems comes a distant second.
Organizations continuously strive to outperform each other - this is the DNA of the commercial world. Mergers and acquisitions are a perfect example of this within the enterprise - organizations identify target companies that have the most potential to help them better achieve their goals. Typically the identification process has relied on a combination of human intuition (gut feel if you like) and financial data, and in recent years big data and analytics have become an integral part of the decision-making process.
Target identification is typically a numerical exercise, but with 80% of the world’s information due to be stored in unstructured data (or documents to the rest of us) by 2025 according to IDC, ignoring this source of information seems foolhardy. The challenge is that financial models and gut-feel don’t work well with documents. A new approach is needed, and artificial intelligence (AI) is satisfying that need.
Soon, AI will be used to find patterns in documentation (stored within document management tools) from previous M&A deals to highlight the best candidates for future transactions. Utilizing AI tools that interrogate documents and derive patterns and trends from them will deliver enhanced intelligence and an added competitive edge to those M&A firms employing it. And it will only be available to those using document management systems to feed the AI tools.
The world of mergers and acquisitions may feel like a million miles away from the taxonomies, metadata, and workflows of a document management system. But peer inside the workings of a well-oiled M&A operation, and you will find a lot of similarities. Optimized processes, a need for structure, clarity, and governance, and a lot of documents. Any M&A team hoping to manage their business activities effectively without digital technology is severely misguided, and the toolset at the heart of that technology stack - is document management.