Data plays a crucial role in M&A success – from an owner’s decision to sell their business to post-transaction integration with a buyer. Good data signals to buyers that a company is data-driven and organized and values operational excellence, which can lead to higher valuations. Poor data, on the other hand, suggests deficiencies and potential risks.
Businesses benefit significantly from strategic data utilization, which has the power to streamline operations, inform decision-making, and elevate valuation at every stage of the M&A journey.
How Data Impact M&A Outcomes
By leveraging the data businesses already collect, such as sales transaction data, customer demographic data, and employee performance data, companies can unlock tremendous potential for growth in buyer attraction and seller valuation.
The Power of Data in Valuation
One of the primary ways data impacts M&A outcomes is through its ability to elevate valuation. Using an RFM Analysis, which analyzes Recency, Frequency, and Monetary metrics, leverages sales transaction data to provide valuable insights into customer behavior, loyalty, and spread.
For example, understanding which customers are “potential loyalists” allows sales teams to focus on retaining and growing relationships with high-value accounts.
In practical terms, an RFM Analysis enables companies to strategically drive revenue growth, boosting their overall valuation during a sale. infoFluency uses data visualization dashboards to showcase RFM analyses, allowing our clients to visualize and segment their customer base and identify opportunities to enhance account-based marketing and sales strategies.
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Attracting Elevated Buyers with Data
Data not only enhances valuation but also helps attract and inform potential buyers. A company’s data can tell a compelling story, proactively answering buyer questions and building legitimacy. Well-organized and analyzed data presented in a visually captivating format during due diligence allows buyers to evaluate key metrics like customer concentration and diversity.
For example, buyers concerned that a target acquisition is overly dependent on a few clients can quickly see if the company’s customer base is diversified enough to mitigate risk.
In practical terms, by providing clear, concise data analytics, sellers can accelerate the due diligence process and build confidence in their buyers, making them more likely to move forward with an offer.
Measuring the Success of Data-Driven Deals
If you leveraged data analytics during your last merger or acquisition, how did you measure the success of your efforts? At infoFluency, we recommend analyzing the alignment, risks, and speed of the deal.
Alignment: Define success by the alignment between your company’s goals and the goals of your target acquisition – or your buyer. When a buyer and a seller can align their goals based on data, long-term success is the optimal outcome.
Risk Mitigation: Data identifies potential risks that may affect a deal so buyers and sellers can mitigate those risks before an exit. Plus, data-backed valuation strengthens positioning and prevents negative perceptions from derailing a deal.
Speed of the Deal: A quick transaction period indicates that the seller was well-prepared with the data needed to move efficiently through the exit process. Buyers with appropriate data can make informed decisions faster than those who need to extend their due diligence.
For M&A success, data is no longer just a byproduct of business operations. It is a necessary driving force. Companies that recognize and utilize data as a strategic asset stand to achieve stronger, more favorable outcomes during the M&A process, whether through attracting buyers, ensuring operational efficiencies, or elevating valuation.
