Digital technology is changing how the world conducts business. It is also changing how businesses see the world. Technology allows businesses to create new products and services, to operate more efficiently and to build deep and personal relationships with customers across the global marketplace.
At the same time, however, technology is overturning long-cherished business models, giving way to agile new competitors, and equipping existing competitors with potent new tools. In short, it is forcing businesses to reinvent themselves at a speed they have never had to handle before.
Acquiring digital capabilities
With businesses under pressure to both seize growth opportunities and futureproof themselves at a rapid rate, they are increasingly turning to acquisitions to secure the vital digital capabilities that they need to innovate and grow.
Our most recent Global Capital Confidence Barometer found that 52% of global executives plan to acquire in the next 12 months. This is undoubtedly linked to the fact that portfolio transformation is top of their agenda – they are identifying the strategic gaps in their portfolios and then looking to buy in or build the emerging technologies that will enable them to boost earnings and productivity.
For example, in the past 12 months alone, non-tech companies have acquired US$189b worth of technology firms – including many household names – through more than 2,500 deals, according to the latest Dealogic data. If you add in deals involving the acquisition of technology intellectual property (IP) but not directly involving technology companies, this number more than doubles.
So businesses are out shopping for the most exciting start-ups in their sector and possibly in sectors that they may not have previously operated in before. The digital revolution has already provided many examples of how technology can enable businesses to transcend sectors. Industries have seen fluidity across everything from ride sharing, electric car making and mobile handset manufacturing, to energy storage and more. Digital mergers and acquisitions (M&A) are largely driven by the desire to acquire tech capabilities – and also by the urge to ward off threats. Strategically speaking, there is something to be said for acquiring tomorrow’s competition today.
Yet, digital M&A is not only about acquiring digital capabilities; it goes deeper than that. Digital M&A is also about drawing on digital capabilities during the course of the actual acquisition process. Some leading companies are applying technology to dealmaking to make sure that they are buying or selling the right business, with the right expertise, for the right price.
Analytics, artificial intelligence, data visualization, robotic process automation and scenario planning can all form part of the deal-vetting process, as can cyber and social media due diligence. Companies that are not already using these technologies to more fully inform their dealmaking processes run the risk of losing out to rivals who are.
The future is digital
With the future approaching faster than most of us anticipated, more and more dealmakers are focusing on technology to stay competitive.