The better the question. The better the answer. The better the world works. У вас есть вопрос? У нас есть ответ. Решая сложные задачи бизнеса, мы улучшаем мир. У вас є запитання? У нас є відповідь. Вирішуючи складні завдання бізнесу, ми змінюємо світ на краще. Meilleure la question, meilleure la réponse. Pour un monde meilleur. 問題越好。答案越好。商業世界越美好。 问题越好。答案越好。商业世界越美好。

How can you aspire to lead in the digital economy?

Know what start-ups want, and innovate through digital M&A.

Our second Digital Deal Economy Study, a survey of more than 900 executives, finds companies increasingly embracing the digital imperative. No surprise there, given digital technologies and applications are continuously reinventing and reshaping industry landscapes and business models.

Forging a successful digital future will likely mean buying as well as building capabilities in-house. Today, investors are prepared to reward companies that make bold technology and transformational acquisitions. Digital M&A is defined by the key processes and new ways in which digital capabilities are built through M&A. In the future, only those who can execute digital M&A over a sustained period will be equipped to prosper.

In our survey, 90% of companies are elevating digital priorities in their strategic planning over the next two years. But many are challenged to build an effective approach to fully realize their digital potential. We see clear differences between companies in their ability to transform strategic thinking into digital M&A capabilities and outcomes.

We also looked at digital M&A from the other side of the table, surveying 200 start-up executives globally to understand their preferred sources of funding and what they look for in partners. Many start-ups are looking for investors who can align with their values and offer speed, flexibility and the ability to improve their products and access to markets. While these are areas that corporates traditionally excel in, start-ups rank them lower than other funding sources. Are corporates missing an opportunity to capture innovation?

Digital disruption requires asking hard questions about what your organization is today and what it needs to be tomorrow. Becoming a leader in the transformational age requires a digital-centric approach to capital strategy, dealmaking and process. It’s now time to embrace the digital M&A mindset.

What start-ups really want – funding that preserves independence and philosophy

Private equity is the funding option of choice for digital start-ups, proving to be a much more attractive proposition than corporate venture capital.

Almost a quarter (24%) of start-ups ranked private equity as the preferred funding partner ahead of bank lending (19%), angel investors (15%) and venture capital (13%) according to the EY Digital Deal Economy survey of more than 200 start-up executives globally. Just a small percentage favored corporate venture capital (6%), which ranked just above crowdfunding (5%).

Most favorable sources of financing to drive the business forward

Most favorable sources of financing to drive the business forward

The survey finds that start-ups’ priority when it comes to looking for funding is to maintain their identity and independence – while also staying agile. The biggest two biggest challenges start-ups say they face in finding funding is securing an investor who shares their ambition and philosophy (43%), and can “move quickly” (20%). Most (60%) are also looking for partnerships.

Says Steve Krouskos, EY Global Vice Chair Transaction Advisory Services:

“Start-ups are being highly selective and are looking for alignment around philosophy and outlook. With liquidity in plentiful supply, investors need to sell themselves as much as the start-ups do – especially when the start-ups are in premium technologies and demand is high.”

Getting the right fit

Start-ups are looking for investors that not only align with their values, but also offer efficiency and access. The key drivers of sale listed by start-ups underline these needs and concerns. Beyond financial considerations, most are looking for improved access to customers (25%), access to intellectual property (21%) and a high degree of autonomy (20%).

Drivers behind choice of investor

Drivers behind choice of investor

The ability to retain top talent as well as cultural fit are also seen as the main drivers of successful integration. These are the two elements that corporates repeatedly find to be the most challenging aspect of acquisitions.

Says Krouskos: “Most start-ups aren’t looking to be swallowed up and their investors clearly don’t want to destroy the innovative spirit that makes up a significant proportion of their value. There is no silver bullet – success takes strategic planning upfront and considerable effort from both sides.”

Corporates not seen as funding partners but they lead buyer preference rankings

The survey shows that, while not preferred as partners, corporates are the most favored buyers with almost a third (30%) saying they’d prefer to sell to large corporates, ahead of venture capital (22%) and private equity (19%). However, more than a quarter of start-ups (27%) don’t want to sell at all and the most popular time to exit is at the more mature expansion phase (25%).

Investors who would be of most interest among those considering a sale

Investors who would be of most interest among those considering a sale

Says Steve Krouskos, EY Global Vice Chair Transaction Advisory Services:

“These findings suggest that corporates could struggle to ‘get in at the ground’, with implications for company’s ability to connect with the most promising start-ups – and for valuations. And yet, if we look more closely at what start-ups want across their life cycle, highest ranked are scalability, acquiring customers and entering new markets – all of which other investors can offer, but at which corporates should really excel.”

Digital Deal Economy Key findings

Strategy and ecosystem

Understanding the evolving external environment and aligning strategic digital goals is the primary component for success. Acquisitions are clearly an important part of the mix, and we see 74% of our respondents looking outside their own companies for digital growth. Organizations are still placing significant reliance on corporate M&A departments, which often specialize in identifying and pursuing traditional targets in the company’s “home” sector. But finding targets for digital M&A requires a different approach. Building new digital ecosystems is critical to enable companies to identify new partners and targets.

0% of companies are making significant investments in building a digital ecosystem.
0% of respondents are considering digital in their capital allocation planning over the next two years.

Capital and portfolio review

Our survey respondents clearly understand there is a cost associated with digital transformation. However, many are challenged to get their capital allocation balance right. When asked if they have a coherent and aligned “buy” and “build” approach to digital, only 48% agreed. While organizations may be trying to respond to fast-changing technological landscape, it is important not to make hasty decisions or prematurely react to short-term forces. Continuously reviewing the business portfolio to sustain ambitious acquisition and investment goals is key to future-proofing the business.

Deal process

Our findings suggest an overall level of confidence around the processes companies are using to evaluate targets. However, looking at the deeper analysis of the new types of diligence, it is apparent that few are actually employing innovative methods. For example, only 38% are applying intellectual property analysis and just 22% are undertaking cyber diligence. Rebooting M&A capabilities and processes to meet the specific deal demands of the digital environment is key to success.

0% of executives say their M&A due dilligence processes are not "highly effective" for digital acquisitions.
Only 0% of companies are highly confident about their ability to retain talent following an acquisition.


Many organizations continue to use the approaches they employ for post-merger integration of brick-and-mortar assets for digital transactions. But, digital M&A requires a much more nuanced approach. Companies may also be targeting a number of digital assets at the same time, so the ability to integrate multiple digital assets simultaneously will be key to delivering potential. Realizing maximum value requires strategic integration approaches tailored to digital transactions.

Maturity index

On the basis of our research, we identify three levels of digital M&A maturity:


A small and elite group of companies (14%) who 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.


A smaller group of companies (29%) who 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.


They represent the majority of companies (57%) who 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 are yet to modernize their approaches.

One of the risks they face is overpaying for digital assets, but they also face significant uncertainty about whether the investment will pay off.

Three levels of digital M&A maturity





Strategy and ecosystem

EY - Strategy and ecosystem Level 1


EY - Strategy and ecosystem Level 2


EY - Strategy and ecosystem Level 3


Have a coherent and aligned ‘buy and ‘build’ approach

Capital and portfolio

EY - Capital and portfolio Level 1


EY - Capital and portfolio Level 2


EY - Capital and portfolio Level 3


Budgeted acquisition capital allocated to digital

Deal process

EY - Deal process Level 1


EY - Deal process Level 2


EY - Deal process Level 3


Apply data analytics and/or social media analytics as part of due diligence


EY - Integration Level 1


EY - Integration Level 2


EY - Integration Level 3


Are confident in ability to scale up intellectual property and technology

What CEOs and boards need to ask themselves to build a better digital future in the transformational age

Buy versus build: future proofing the business
Are you building a holistic digital strategy?

Digital capital strategy: establishing a capital strategy to invest in digital
Are you explicitly considering digital priorities in your capital allocation planning for the next two years?

Strategic portfolio review: deciding when to divest to invest in digital
Do you have a clear long-term divestment strategy as part of your transition to a digital model?

Origination: building a digital ecosystem
Are you making significant and sustained investments in building a digital ecosystem?

Digital valuation: valuing a digital business
Are your valuation approaches for acquiring digital assets up-to-date and effective?

Digital diligence: protecting acquisitions from digital disruption
Do you carry out intellectual property, cybersecurity and technology due diligence?

Strategic operating model: maximizing return through smarter integration
Are you integrating acquired digital assets to help maximize value creation, including managing change in the parent company to embrace all opportunities?

EY - What CEOs and Boards need to ask themselves

Connected Capital Solutions

Capital and transaction strategy through to execution to enable fast-track value creation for inclusive growth.

EY - Strategy

Enabling fast-track growth and portfolio strategies that help you realize your full potential for a better future

EY - Corporate finance

Supporting better decisions around financing and funding capital expansion, and optimizing capital efficiency

EY - Buy and integrate

Enabling strategic growth through better-integrated and operationalized acquisitions, JVs and alliances

EY - Sell and separate

Enabling strategic portfolio management and better divestments that help you improve value from a sale and from stand-alone businesses

EY - Reshaping results

Helping you transform or restructure your organization for a better future by enabling business critical and capital investment decisions

Contact us


Steve Krouskos
EY Global Vice Chair
Transaction Advisory Services
+44 20 7980 0346
Follow me on Twitter

Julie Hood
EY Deputy Global Vice Chair
Transaction Advisory Services
+44 20 7980 0327
Follow me on Twitter

Tony Qui
EY Global Chief Digital Officer
Transaction Advisory Services
+44 20 7951 5820

Paul Macaluso
EY innovation Leader
Transaction Advisory Services
+1 213 240 7040

Giles Morgan
EY Digital Director
Transaction Advisory Services
+44 20 7951 5820


William Casey
EY Americas Leader
Transaction Advisory Services
+1 212 773 0058


Harsha Basnayake
EY Asia-Pacific Leader
Transaction Advisory Services
+65 6309 6741


Andrea Guerzoni
Transaction Advisory Services
+39 028 066 93707


Vince Smith
EY Japan Leader
Transaction Advisory Services
+81 3 4582 6523