An increasing number of M&A transactions may be stalling because of concerns over GDPR compliance, according to a survey of EMEA M&A professionals conducted by Merrill Corporation.
Overall, the survey highlights the significant role due diligence plays in determining M&A success, while providing insight into the challenges faced by M&A professionals today. The implementation of the GDPR stood out as a major hurdle for mergers and acquisitions, with more than half of respondents (55 percent) citing the compliance and data protection employed by the target company as a primary reason a transaction did not progress.
Additionally, 66 percent of those surveyed believe that GDPR will increase acquirers’ scrutiny of the data protection policies and processes of target companies, further complicating the deal-making process.
Technology’s role in due diligence
When it came to technology, respondents identified artificial intelligence and machine learning (46 percent) and predictive analytics (37 percent) as the technologies that will have the most long-term transformative impact on M&A due diligence. Notably, however, blockchain technology was not identified as a technology with a transformative role.
More than any other factor, 32 percent of those surveyed said that being able to harness the information with data analytics technologies would most help in accelerating the due diligence process.
Over the next five years, EMEA M&A professionals expect technology to change the due diligence process by providing greater security (63 percent), supporting deeper analytical capabilities (61 percent), and simplifying the entire process (45 percent).
“The EMEA M&A environment faces a unique set of challenges as it looks to comply with new regulations and privacy requirements,” said Hilary London, General Manager, EMEA at Merrill Corporation. “As we track transactions, it will be very telling how these challenges will impact organizations’ due diligence processes. Streamlining transactions via increased accessibility of transaction data will support greater transparency and enhance compliance, strengthening M&A activity in this market.”
Success factors in M&A
Effectively executing within the M&A landscape can be a tumultuous process, but according to respondents, the key to successfully managing the M&A process is conducting thorough due diligence (65 percent), planning and executing the integration process (49 percent), identifying/screening/prioritising targets (35 percent) and understanding and addressing cultural issues (32 percent).
Conversely, while these factors would help practitioners successfully navigate this landscape, there are still many challenges. Those surveyed believe that technology could bring simplified and coherent solutions to reviewing and analyzing contract text (70 percent), running multiple scenario analyses and financial modelling (52 percent), and visualizing financial performance data (41 percent).