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Top 10 M&A Tools You Should (Not) Be Using in 2024

Kison Patel
Kison Patel

Kison Patel is the Founder and CEO of DealRoom, a Chicago-based diligence management software that uses Agile principles to innovate and modernize the finance industry. As a former M&A advisor with over a decade of experience, Kison developed DealRoom after seeing first hand a number of deep-seated, industry-wide structural issues and inefficiencies.

CEO and Founder of M&A Science and FirmRoom

Technology is nothing new in M&A: The first dealmaking platforms, among them the world’s largest - BizBuySell - arrived at the birth of the commercial internet in the mid-1990s.

What has changed since then is that technology is no longer a feature of M&A - now, it defines it. In this article, we look at the top X M&A tools you should (not) be using.

The M&A Process and Tools: A Stage-By-Stage Analysis

There is a tool for every stage of the M&A process - ample evidence of the role that technology plays.

BizBuySell, which was mentioned in the first section and the myriad other platforms like it (think Smergers, MergerMarket, Aurigin, and others), are primarily used at the pre-deal phase.

But every phase has its own requirements.

Below, we look at some of these requirements in detail as well as the tools being used to deliver them.

Pre-Deal Phase

The pre-deal phase involves setting the scene for a transaction: evaluating the potential benefits, risks, and feasibility of a deal. In a typical sequence, it involves internal discussions about why the company should consider a merger or acquisition, market research into the potential options, development of a short list of potential targets, target screening, and initial contact made with the target company management.

This phase has typically been dominated by databases like those mentioned, wherein the user searches by keywords, industry specialization, company location, company revenue, and other filters.

Other tools which have typified this phase include spreadsheets and perhaps even basic CRM packages.

All these tools are fine, and have contributed to M&A reaching its current scale, but like most software from the 1990s, they’re lacking something: Practitioners now look for something more collaborative, more data friendly, and ultimately, more efficient.

Due Diligence Stage

If the initial contact with the target company is received favorably, the next step is information exchange, and due diligence. If information is exchanged correctly (i.e., transparently and fully), there will be bigger levels of information than most laypeople are comfortable with reading, let alone digesting.

When an Excel file for a single departmental function can have upward of a dozen tabs, it’ s not difficult to see how things can become unwieldy very quickly.

Receiving the information, therefore, is not enough. The information has to be assimilated and interpreted for managers to make more informed decisions. That means it can’t sit in an email folder, and  Early VDRs were one-dimensional memory drives, which did what they said they’d do, which wasn’t very much.

M&A practitioners have demanded more, leading to a large array of VDR solutions, which offer far more than just storage.

This race to the top has been a boon for M&A practitioners. Virtual data room providers like DealRoom are now seen as necessities in the field for conducting due diligence.

By continuing to add to these platforms, they also increase the reliance of investment bankers and others on technology to drive the process. This can be seen in how DealRoom charts the progress of each task, enables participants to collaborate within the platform, and even user hierarchies.

Deal Execution Stage

To those on the outside, the deal execution phase may seem like little more than an exercise of crossing i’s and dotting t’s.

Just bring the contract, and make sure everybody shows up on time.

But at this phase too, the impact of technology is highly visible. It’s now not uncommon for deals to close without anybody ever meeting around a table. In fact, the proportion of deals that close without a physical meeting is growing much faster than the alternative.

If this seems impersonal, that isn’t the intention: Deal participants will still meet via teleconference. It’s just another way of increasing efficiency.

Contracts can be created in traditional word format, with both sides making comments on tracts of the text that could be edited or removed. Everybody that needs to read the contracts gains full visibility over anything which needs to be brought to their attention.

In the case where contracts run into dozens of pages, NLP algorithms can be used to extract key data from the contracts for decision makers and in-house legal counsels.

Legal compliance software can also ensure that the contract details don’t present any risks for those signing. When everything has passed muster, the contracts can even be signed via electronic signature technology (just in case anybody forgot their Parker pen).

Post-Merger Integration Stage

By this stage, you’ll already have guessed that the post-merger integration (PMI) stage is also characterized by the use of technology.

What’s particularly interesting about the PMI stage is that it wasn’t too long ago that companies involved in transactions paid very little heed to its importance.

Now, perhaps only due diligence can match the PMI stage for the importance of the use of technology, and the number of options available to practitioners.

As a crude rule, the more complex the transaction, the more value that can be created or destroyed at the PMI stage.

This makes the use of project management and communications tools inadmissible.

The emphasis moves from document sharing to fulfilling tasks - communicating changes to employees, ensuring cultural issues are addressed, and merging the companies’ various systems.

Tools Overview: The Fragmentation Problem

Technology can become a victim of its own success.

If a practitioner uses too many tools, the ultimate aims of them - increasing efficiency and deal oversight - can be lost in the constant switching between platforms, and moving documents from one platform to another.

A common example of this can be seen every time you try to use a new online meetings platform and spend the first ten minutes of the call resolving technical issues.

This is called the fragmentation problem.

By delegated (or ‘fragmenting’) the necessary tasks to too many platforms, efficiency gains are lost. Instead, M&A practitioners should seek to maximize their technology usage but minimize the number of platforms.

This ultimately means they choose a project management platform such as DealRoom: Almost everything in one solution, for all the deal’s stakeholders, for the duration of the transaction.

How are Virtual Data Rooms used in M&A? A Deep Dive

Virtual data rooms are now a ubiquitous part of every serious M&A transaction.

They offer M&A practitioners a secure online repository where they can store and share confidential documents from the due diligence process right through to the PMI stage.

They also provide controlled access to authorized parties, facilitate document control, and streamline the exchange of information between all deal stakeholders.

How are Virtual Data Rooms used in M&A?

This growing range of capabilities means has led PMI to become project management tools in and of themselves.

Experienced M&A practitioners, including blue chip investment bankers,  now depend on them for guiding them through the process. This could be for continuous collaboration with other stakeholders, providing intelligent checklists and workflows, and even unprompted reminders about their own tasks to be fulfilled.

Unsurprisingly, given the scale of the global M&A industry, a plethora of these tools has arisen over the past decade, creating the ‘race to the top’ that was spoken of in the section on the different M&A phases.

The following VDR comparison provides a useful overview of what we regard as the best of these tools.

The Need for Project Management in M&A: A Look at Traditional Tools

Many of the technology-based project management tools that are used in M&A have their origins in the traditional tools, which were widely in use until not so long ago.

These include Gantt charts (usually spread over the surface of an investment banker’s wall), work breakdown structures (WBS), network diagrams, physical Kanban boards, and inevitably, reams and reams of project progress documentation.

DealRoom vs traditional M&A tools

1. Virtual Data Rooms

Virtual Data Rooms (VDRs) marked a significant leap forward from physical data rooms, offering a secure digital space for storing and sharing sensitive documents.

While they have their advantages, in comparison to a full-fledged M&A management platform like DealRoom, they fall short on several fronts:

  • Sufficient for Simplistic Deals: Virtual Data Rooms can be sufficient in some situations, such as for relatively straightforward or small-scale deals where the focus is on securely sharing a limited number of documents and there is little need for extensive collaboration or project management. For example, in a straightforward asset purchase where the buyer and seller are familiar with each other's operations, a VDR might suffice.
  • Limited Scope: VDRs are primarily designed for secure document storage and sharing. However, most M&A transactions require much more than just document management. They lack advanced features like integrated project management, communication, and workflow automation that platforms like DealRoom provide.
  • Fragmented Processes: While VDRs offer a degree of security and ease in document sharing, they are not equipped to manage the whole M&A lifecycle. This means that deal teams still have to juggle multiple tools alongside the VDR for different stages of the deal, leading to fragmented and inefficient processes.
  • Standalone Diligence Management: Most VDRs offer only standalone diligence management. In contrast, DealRoom's diligence management is fully integrated with the project management features, providing a single source of truth and significantly reducing the risk of errors and oversights.
  • Static Due Diligence Lists: VDRs usually offer static due diligence lists, which can be restrictive and inflexible. DealRoom, however, allows dynamic diligence list creation that can evolve with the deal's needs, promoting agility and adaptability.

2. Spreadsheets

From due diligence checklists to financial analysis, spreadsheets have served as the trusty steed for many M&A professionals. But they carry their fair share of burdens. Human error in data entry, difficulties in version control, and issues with secure data sharing are but a few of the pitfalls that plague spreadsheet use in M&A.

  • Inefficiency in Data Management: Spreadsheets, while versatile, aren't equipped to handle the real-time, multi-user access needs of modern M&A. For instance, updates made by one team member may not be immediately visible to another, leading to confusion and duplicative work.
  • Error Prone: In an M&A context, even a single misentry or accidental deletion in a spreadsheet could potentially lead to misvaluations and flawed decision-making.
  • Lack of Security: Sensitive information like financial data, strategic plans, and intellectual property details are often shared via spreadsheets. These files can be easily forwarded, leading to potential data breaches.
  • Inability to Handle Complexity: In complex, multi-stage M&A deals with hundreds or even thousands of data points and interdependencies, attempting to manage this in spreadsheets quickly becomes overwhelming and error-prone.

3. Emails

Despite being a primary communication tool, emails can create a labyrinth of threads that bury critical deal information. How often has an essential piece of intel been lost in the email abyss or an important attachment overlooked?

  • Security Concerns: Email platforms do not provide the high level of data encryption required to safeguard sensitive M&A information, exposing parties to potential data breaches.
  • Lack of Organization: The back-and-forth nature of emails makes tracking progress, decisions, and actions challenging. Vital information can be buried deep in email threads, making it hard to find when needed.
  • Inefficiency: Important decisions can be delayed due to the inherent lag time in email communication, especially when multiple parties across different time zones are involved.

4. Shared Drives

While shared drives offer some relief in document storage and accessibility, they fall short in providing the rigorous security and audit trails that M&A transactions demand. Who accessed which document and when? The lack of clear answers could spell trouble.

  • Limited Accessibility: Accessibility can be a problem with shared drives, particularly for external stakeholders. Firewall settings and other security measures can prevent smooth access, leading to delays and frustration.
  • Version Control Issues: Without robust version control features, shared drives can lead to "document chaos" with multiple versions of the same file floating around, creating confusion and errors.
  • Security Concerns: Unless properly managed, shared drives can expose sensitive documents to unauthorized users. Plus, once a document is downloaded, there's no control over who it is shared with.

Pitfalls of Traditional Tools

The traditional tools use for project management in M&A were useful: Excellent deals did happen. It’s just that the best deals happened in spite of the technology that existed, not because of it.

Typical issues that dogged M&A processes because of inadequate technology included:

  • Issues with collaboration: Most participants worked in silos, which led to teams moving in different directions and at different speeds. The result was often a kind of vaguely controlled chaos.
  • Difficulty tracking project progress: Closely related to the above was the difficulty in tracking project management. Physical Kanban setups are fine to track progress inside an office but are no substitute for the live update provided by software.
  • Lack of security: Because so many pieces of information were being copied, collated, and shared in a range of different directions (sometimes using cross-city couriers with highly confidential information), security was inevitably continuously compromised.
  • Human error: Even with the best of intentions and good project management practices in place, the traditional project management methods were subject to the pitfalls of human error.
DealRoom vs Excel, Email, Shared Drivers

The Pivot to Project Management in M&A

Mergers and acquisitions is a particularly complicated process because of all the moving parts. If we compare the merger of two companies with a traditional project management process - say, that for a large construction development - M&A has far more requirements in terms of coordination, management of resources, and maintaining timeliness and organization.

This goes for even relatively straightforward M&A transactions.

Consider the effect of omitting an important piece of due diligence in M&A. It could cost a company millions. Numerous cases have shown that it does. In extreme cases, it can lead to the deal being written off entirely.

There is scarcely an equivalent in construction development - the building’s construction may be dogged by issues, delays, and setbacks. But it will inevitably be built, and won’t be written off in the same way as a troublesome M&A transaction.

This is why project management is so crucial.

For a deal to be successful, each one of those moving parts has to be taken under control of the deal’s participants. Whether it’s ensuring that the company’s accounting and control systems are being merged properly, keeping tabs on which roles are being filled and by whom, managing overlapping supply chains, or even rejigging board rooms, project management software ensures all parties are on the same page.

Statistics generated by feedback provided by DealRoom’s users quantify the impact of this pivot. Highlights include:

  • 90% of DealRoom users are switching from Excel
  • An average of these users shows savings of:
  • 5+ hours per week
  • 200+ email threads
  • 20-25% on legal fees
  • 6+ months on integration

The Need for a Paradigm Shift: From Traditional to Modern Tools

This article should convince anybody of the necessity of moving from traditional tools (by which we mean Excel, Email, and CRM) to a more sophisticated way of getting M&A transactions done (project management and other collaboration tools).

Too often the expression ‘paradigm shift’ is used, but in this case, it’s applicable: Moving from these tools is like moving from a symbian phone to a smartphone.

And nobody wants a situation where their company is using a symbian phone, while their rivals for deals are using smartphones.

Frequently Asked Questions (FAQs)

Key takeaways

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