We’re a data firm, so why do we focus so heavily on M&A? We have found that our clients are often in some phase of the M&A journey – whether they’re trying to grow through acquisition, preparing to sell, or already looking at a deal. The effective use of business data improves outcomes for companies as they navigate the buying and selling of their businesses.
Data can accelerate, optimize, and streamline the M&A process in three ways – from initial consideration of selling your company to closing the deal and managing post-transaction integration.
Here’s how data is shaping the future of M&A.
In Exit Prep
Exit advisors and planners work with owners for multiple years to help the company realize value creation before they’re ready to sell. We’ve seen that when data is brought to the forefront of exit planning and preparation, it creates the foundation for realizing value.
Data-driven financial improvements, KPI monitoring, and pinpointing areas primed for revenue growth directly impact valuation down the road.
Recency, Frequency, and Monetary Value Analysis
One pre-exit analysis we recommend for companies looking to sell is the Recency, Frequency, and Monetary (RFM) Value Analysis, which considers three factors:
- The recency of purchases
- The frequency of purchases
- The monetary value of purchases
Designed to segment the customer base, this analysis identifies loyal customers (i.e., the biggest and most frequent spenders) to other less recent, less frequent, and less value-creating customers. This analysis also identifies risk factors like customer concentration, where a single customer could outsize all the others – a loss that could significantly impact the company’s revenue… and valuation.
Market Data Enhancement
To further pre-exit value creation, we recommend combining the company’s first-party customer data with third-party market research to be leveraged for pipeline growth.
Consider a roofing company that handles large-scale commercial building and roof replacements. To grow their pipeline, they enhanced their existing customer database with third-party market data that allowed them to identify buildings in a specific area with roofs of a certain age due for replacement. The additional data allowed this company to identify several million dollars in pipeline value the sales team could pursue.
Smart companies invest in data long before they begin their exit prep.
In Due Diligence
Ensuring data is aggregated, viewable, and usable during the due diligence process has a direct impact on the valuation of a company looking to sell and on the decision-making of one looking to acquire.
Due Diligence Reporting
Our due diligence reporting begins with a one-page snapshot of key business metrics, including:
- Account/customer concentration
- Customer lifetime value
- Geographic concentration
- Revenue and profit trends
- Top-selling products/services
This overview helps us show that revenue is diverse and strong – not just supported by a few large clients. It also helps identify any areas that need attention, allowing the company to strategize solutions, such as expansion plans to increase geographic range, before sharing with potential buyers.
Investment bankers and sell-side advisors can use this data to help market the company and present it to buyers. When data is presented in a way that showcases growth potential, it strengthens the company’s overall position during the sale.
In Post-Transaction Integration
Data plays a critical role in post-transaction integration, which often involves combining multiple entities and technologies.
Buyers want to see progress from day one. They come in with goals set and a trajectory in mind, and they want to track that progress immediately. Buyers are also highly motivated to implement changes needed to increase valuation beyond what they’ve paid – to grow their investment.
On the technical side, integration requires different data streams from various platforms to be consolidated into something usable.
Consider a private equity firm that has just purchased five related companies to combine them into a single entity. Regardless of the tech stack in place, leadership must be able to see what’s happening in each company during integration to make effective decisions about retention, hiring, and organizational structure.
In summary, data adds the most value in these three areas of the M&A process:
- Exit Prep – Increasing valuation to optimize the business before going to market
- Due Diligence – Presenting challenges and opportunities to buyers in an attractive way.
- Integration – Resulting in a data asset and tech stack that works best for you.
infoFluency approaches each of these stages of the M&A process with a data-first mindset. We collect all of a company’s data, structure it in a usable way, and then present it in visually appealing data dashboards designed to showcase key metrics, trends, and progress toward goals.
Interested in learning more?
