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Research and development consumes considerable time and resources and can have a high rate of failure, while the OECD has confirmed smaller firms particularly struggle to get the funding, talent pool and technology needed to drive internal innovation.
A pioneer in its field through its flagship catch.com.au venture, Catch had been forecast for gross transactions of a little more than $410 million in 2018-19. It also had advanced e-commerce and digital marketing capabilities, which is why Australian giant Wesfarmers swooped in June with a $230 million takeover deal before an IPO could materialise.
Soft skills still in demand as matchmaking goes digital
Don’t underestimate the human nuances of deal-making – that’s the advice from Baker Tilly’s Xavier Mercade as the merger and acquisition market increasingly takes on a technological bent.
Mercade, CEO in Baker Tilly’s Spanish office, said technology continued to grow in influence in the M&A space, with the potential for automation and machine learning around due diligence to make deals more efficient and easier to navigate.
But he warned that abandoning the ‘human touch’ would leave deals in danger of failing to be completed.
“During the scouting phase, more accurate targeting can be achieved through data analysis by narrowing the attributes of the candidates and comparing them to previous transactions, as well as by qualified matching based on key words in social media and the internet,” Mercade explained.
“As the impact of technology and complexity has an increased role in each sector, the understanding of the technical part on both sides will have a more important role.
“This will increase the number of professionals with a technical background on the advisors’ teams. But still, at a certain point the deals need to be closed and the soft skills of a dealmaker will be needed.
“I see more teamwork coming in the deal advisory practices.”
Mercade said there was a need for speed in many deals but also a requirement for matchmakers to be willing to consider alternative transactions that might be a better fit.
According to the Harvard Business Review, somewhere between 70 and 90 per cent of all mergers end up being classified as failures.
“Speed in execution is getting critical,” Mercade said.
“Fast, qualified matching is needed to maintain momentum throughout the process. It’s fundamental to understand very quickly who has engaged you from a professional, cultural and psychological point-of-view.
“In advising small to medium enterprises, the role is getting more strategic as clients value sector and technical knowledge. In general terms having the appropriate persons on both sides of a deal is still vital.
“A key element is understanding the reasons behind the decision to buy or sell. In our team we also try to proactively propose alternatives [to deals being considered].”
As in romance, opposites can sometimes attract in the world of corporate deals – the rider being that there has to be an end goal in sight.
A union in the US between retail pharmacy and pharmacy benefit manager CVS Health and health insurer Aetna has widely been seen as an attempt to counter Amazon’s move into the health sector.
A little more than two years ago, Amazon itself bought Whole Foods – the kind of bricks-and-mortar operation it seemed so intent on disrupting but also one in possession of prime real estate that could aid Amazon’s last mile strategy.
“A big traditional pharma corporation can acquire a very small therapeutical cannabis biotech – even though they have very different geographies, size, cultures and management,” Mercade reflected.
“The important factor is understanding what the acquirer can achieve with that investment long term.”