On the basis of our research, we identify three levels of digital M&A maturity:
A small and elite group of companies (14%) that have undertaken a significant transformation of their M&A strategy and approach. These are experienced digital deal-makers who have been prepared to question and update their M&A approaches for the digital economy, across strategy, capital, diligence and valuation, and post-merger integration.
As a result, they are building a clear digital advantage. Well over half of Leaders say that digital advances have improved their revenue, share price and market share over the past two years.
Another group of companies (29%) that understand their own weaknesses. They are beginning to update their approaches to cater for the unique challenges of digital M&A and are building the infrastructure and skills required to fully succeed.
For example, while they continue to rely heavily on corporate M&A departments to identify digital ecosystem partners and targets, they are also increasingly turning to additional innovative vehicles.
They also understand the need for new forms of due diligence and integration KPIs but have not yet acquired the full toolkit.
The majority of companies (57%) are finding key aspects of digital M&A challenging. They are struggling to build effective ecosystems, adapt due diligence to digital dealmaking and integrate their investments without destroying value in acquisitions.
They may be beginning to accept that digital M&A is different from traditional M&A but have not yet modernized their approaches.
One of the risks they face is overpaying for digital assets, making a bet on future growth but facing significant uncertainty about whether the investment will pay off.