When it comes to enhancing digital capabilities, the majority of corporates (67%) see M&A as the most efficient way to get there, according to EY’s Digital Deal Economy Study, which surveyed more than 600 chief executives at non-technology companies from around the world.
However, cybersecurity and reputational risks are weighing down dealmakers seeking to buy into the digital revolution — indeed, 86% said they needed to be more prepared when it came to cybersecurity.
“Cybersecurity and the associated risks are some of the biggest problems facing businesses today,” says Rob Genieser, a managing partner at private equity (PE) firm ETF Partners, which focuses on investments in tech-enabled businesses and includes MWR InfoSecurity, a provider of cybersecurity for smart grids.
“When it comes to technology, there are now two parts to any deal,” he says. “First, you need to find the great entrepreneurs who have developed great technologies in their businesses. Then you need to make sure that the business is able to protect its technology and its data.”
David Walters, digital and data director at PE firm NorthEdge, says any investor buying into a technology or technology-enabled business needs to be aware of the potential risks, which range from the how data is sourced and secured to whether core technology is indeed proprietary and not copied or reverse engineered.
“For many companies the way that technology enables their businesses has become as important as the core business proposition. When you are buying into this tech enablement, you need to ensure that the IP you are backing is truly innovative and properly owned and that any data and customer information is secure,” Walters says.