Whether M&A is part of an organisations growth strategy or is taking place as a one-off transaction, the pressure to be efficient in deal-making is forcing companies to look for new ways to manage the due diligence process. Many are using technology and new project management techniques to manage the due diligence process in an organised, smart way so that they can focus on what really matters — running their business.
Due diligence has evolved and improved thanks in large part to the advance of technology and digitisation. But if today due diligence is more advanced and efficient than in the past, how much more advanced and efficient could the process be in the future?
The need for speed
A survey of EMEA-focused M&A participants recently conducted by Merrill Corporation, found that most EMEA executives are expecting the due diligence process to be faster, more simple and secure whilst providing greater capability for data analytics over the next four years. 78% of respondents said that due diligence – from sourcing a deal to deal completion – will take less than three months on average in 2022, up from 64% in 2018.
So, what are some of the #DD2018problems that need to be overcome to help M&A practitioners realise their #DD2022goals?
Well, it was revealed that the single biggest challenge in due diligence, which respondents believe technology could provide a solution for, is being able to review and analyse hundreds and thousands of pages of contract text accurately and swiftly. When asked what factor slows the due diligence process down the most, the standout response among respondents across EMEA was accessing, gathering, verifying and reviewing all the documents, information and data related to a transaction. No big surprise there really for anyone who has ever had to go through this process!
But what is interesting is the reason behind this #DD2018problem…
Big data: a likely culprit
Over the past two decades the scope of due diligence has widened considerably. Where once a check of the financial and legal documentation was considered a thorough job, diligence today routinely covers human resources, information technology, environmental impacts, regulatory and compliance, commercial (or market), tax, insurance, property, intellectual property, customer and operations.
The information explosion has created its own challenges and creates more potential hurdles for speedy due diligence. At Merrill, our data shows that the average number of pages uploaded has grown by 40% between 2017 and 2018. Who knows what other areas will fall under due diligence over the coming years and how that will further add to the sheer volume of documentation that needs to be reviewed and intelligently analysed?
Can technology and digitisation potentially transform due diligence?
This labour-intensive process – one of the most time-intensive in due diligence – is one for which artificial intelligence (AI), specifically machine learning, is already being successfully applied in some quarters, enhancing the accuracy and speed of the review process and the expectation is that this kind of technology will help to solve, and potentially transform, the operation entirely.
It is these technologies, individually and collectively, that can empower and better equip practitioners, ultimately enabling far greater analytical capability, speed, accuracy, security and simplicity in due diligence.
To see the full results of the survey and to find out more about the current M&A due diligence challenges and changes on the horizon, click here to read the DueDiligence2022 Report on M&A in the digital age.