Mergers, Acquisitions and Divestitures Proliferate as Companies Seek Digital Capabilities and Innovation

Against a backdrop of global political turmoil and continued economic uncertainty, predictions for merger, acquisition and divestiture activity are buoyant. Many boards will face the challenge of managing separation and mergers in the near future as market intelligence points to both a rebound in M&A activity and bigger deals in 2017. Nigel Lapthorne, EMEA Consulting and Engagement Global MA&D Practice Lead, explains in this interview how CxOs can stay on the front foot and ensure deal value is realized.

With $2 trillion of transactions completed in the year ending 2016 and $500 billion of those taking place in EMEA, the pace of M&A activity will only intensify. A major driver for frenetic activity is technology acquisition as businesses seek to access innovation by purchasing tech capability and talent. “Traditional companies are buying technology companies to access the consumer market and innovation,” explains Nigel, and alongside these industry cross-plays are a raft of divestitures as tech firms spin off niche capabilities.

His remarks are supported by the Deloitte M&A Trends, which reports that acquiring technology assets has surged to tie for the number two spot as the main strategic driver for M&A. Furthermore, technology is seen as the sector most likely to converge with others (26 percent) at about twice the rate of convergences expected in financial services, construction, energy, telecommunications and professional services, respectively.

As well as digital transformation and technology fuelling takeovers, political change is expected to be a fillip for dealmaking: 53 percent of Deloitte respondents expect an increase in deal activity post US election, and this market optimism is mirrored in Europe after a UK Brexit vote. While Britain’s exit from the European Union remains unresolved, both corporate and private equity survey respondents anticipated more deals both in the UK and EU.

In this heady landscape of ramped-up activity, being in a position to manage the separation and/or integration of IT and digital estates – where deal value chiefly resides – has never been more important.  “IT is too often seen as a back office capability. Either the CIO or a direct report really needs to engage with the M&A team in order to mitigate risk. The more time that can be spent, planning the separation, (apps dispositioning, cloning or taking data out of centres) or end-state blue printing in the context of an integration, the less risk you put on the transaction. Any compressed timeline can increase the costs and risk,” warns Nigel.

This danger is very real for the majority of large corporates embarking on an M&A or divestiture, because they are encumbered by legacy systems and/or data centres without the flexibility and agility of the cloud. Alongside the technology challenge is the criticality of maintaining the security of two legal entities. The complexity of these twin challenges makes a trusted and experienced partner highly desirable, and in this video Nigel outlines what Enterprise Services can offer customers in this arena.

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Helen Beckett

Author: Helen Beckett

Helen Beckett is the Community Manager of the Business Value Exchange. She has been a writer and editor for over 20 years and takes a particular interest in the challenges facing the CIO in today’s business climate.