The merger and acquisition process can be long, challenging, and disruptive for every organization involved. Failed mergers often fell apart because of poor planning and even poorer execution. While it's no substitute for a diligent and thoughtful planning process, M&A process management software can go a long way in supporting and facilitating a successful deal.
To better understand how software can help, it's important to first know how the M&A process works. Then, we'll cover the capabilities of M&A process management software and provide an overview of some of the main players in the industry.
While the M&A process takes a slightly different form depending on the parties involved, it usually boils down to 5 steps:
The first step of the M&A process is always determining what a good investment opportunity looks like and then finding it. For many firms, this means building an acquisition strategy and investment thesis, where you consider the current market, your financial positions, and future portfolio projections.
M&A pipeline management software can help you develop a strategy and a sequence of goals. You can use it to create profiles for the ideal candidate that include company size, financials, products or services offered, customer base, culture, and more. It's important to set general criteria at the outset so you don't waste time on candidates who don't meet your thesis.
Once you determine this strategy, it's time to use your deal sourcing software to identify the most relevant investment opportunities.
Next, it's time to contact the investment opportunities that your firm deems worthwhile. At this stage, M&A process management software that is integrated with a CRM or has data warehousing capabilities and services is a must: sensitive and often confidential data will be circulated and needs to be protected but accessible to relevant parties. This data also needs to be organized in a useful way, which your tech stack can help with.
At this point, your firm should build valuation models to create the initial deal. There will be a period of negotiations between the buy-side and sell-side, after which the deal moves into due diligence. At this stage, you'll need a virtual data room (VDR) that keeps your sensitive information secure while it's being passed back and forth between the two sides of the transaction.
Due diligence is where both sides of the deal ensure everything is in order before finalizing the transaction. It includes diving deeply into the organization being acquired to determine everything is as it should be, from processes and finances to employee information and more.
The due diligence process is often long and complex but an incredibly important step of the M&A process. Any issues or challenges not found here may turn a potential golden investment opportunity into something your firm wishes it never touched. You'll want your M&A process management software to help you organize and act on all the data from this step.
Once due diligence is complete, the final purchase and sale contracts are written and signed, and the deal is considered closed. M&A software with a VDR and diligence management features will be essential for this process.
All the background information your M&A process management software has collected up through now will be crucial to making the notoriously difficult integration step a little easier. Integrating the two organizations is a years-long process that often takes longer than the previous four steps combined.
M&A process management software is designed to easily manage the difficulties of organizing and executing M&A processes and workflows. Usually, these tools include features for managing the various parts of a deal's lifecycle, including pipeline, diligence, and integration management.
When evaluating different M&A tools, each one should have these foundational features, regardless of its specific role in the M&A process:
The M&A process has many different components, and each step often has several possible solutions that can help. Here are a few different types of tools to consider adding to your stack:
In the section below, we'll outline various software types that meet these parameters, as well as give some examples of M&A software companies.
Deal sourcing platforms are often the first stop for private equity firms, investment banks, and other financial institutions looking for an investment opportunity. Firms will often use a combination of different deal sourcing platforms to find all the information they can about potential investments, as each usually brings something different to the table.
However, the most valuable deal sourcing platforms are those that offer dealmakers insight into private markets, since data about private companies is notoriously scattered, scarce, and difficult to manually piece together. Here are a few examples of deal sourcing platforms:
In combination with deal sourcing platforms, research tools can help map out markets and industries and focus more on the macro trends that affect deals. While you can find information on specific companies with research tools, they are generally better suited to learning about global or societal trends and changes. Here are two examples of M&A software companies that specialize in research:
Investment bankers and private equity firms often use M&A pipeline management software to build target lists, track the market and M&A trends, and monitor multiple deals in various stages. Corporate development teams usually manage multiple M&A deals concurrently while seeking new opportunities, and pipeline management software helps these teams manage and organize both ongoing and potential deals.
Customer Relationship Management Systems (CRM)
One of the key pieces of software in the modern dealmaker's tech stack, a CRM is usually where firms keep all information about target and portfolio companies. While there are many different CRMs available, including those purpose-built for the M&A industry, the goal is to ensure target investments are properly handled and engaged with throughout the deal flow process.
Due diligence management software aims to effectively organize the entire due diligence process while also allowing for easy, secure document sharing and storage. Many of these platforms will also offer a virtual data room and allow files to be attached to specific diligence requests, roles to be assigned, due dates set, etc.
VDRs are designed to securely store documents and data within the cloud, enabling easy sharing between stakeholders, especially in the early stages of a deal.
Post-merger integration (PMI) software aids in integrating two companies post-transaction. The software can be specifically designed for integrating two companies or firms, or it can be designed to help with communication or project management in general.
General M&A Integration Software
Project Management Software
While much of the M&A industry does not yet use project management software, it can be invaluable for managing many parts of the M&A process and pipeline. Often, these tools have robust feature sets, extensive customizability, and workflow automation to help firms better manage their processes at any point in the deal. That said, project management software may be best suited to post-merger integration as their main focus is to make work happen more efficiently and collaboratively.
A good collaboration and communication tool is essential for any organization's success and, in a remote working world, one of the most important pieces of software for many companies.
The current software market is overflowing with vendors, which can make selecting the right M&A process management software overwhelming. Once you match your firm's requirements to each tool's feature set, though, you can determine what's right for you. To help, we've laid out a few key things to check for in your selection process.
Each stage of M&A involves highly confidential documents, so security must be a priority. Look for platforms that offer two-factor authentication, digital watermarking, and robust encryption methods. Certain certifications and compliance measures, such as ISO 27001, SOX, and SOC 2, can help you determine which software puts your data in safe hands.
Most software providers provide potential buyers with a free trial, which is the best way to see if the product is intuitive and has the features to fit your firm's specific needs. Making sure that the software you select is capable of meeting the demands of daily use is essential, and a trial is a great way to do that.
Reviews allow your team to see what other users say about and have experienced with the software. Check out sites like G2, Capterra, and other review aggregators to get an idea of the pros and cons of the platform. Other sites, such as Reddit and Quora, may offer some assistance and are less likely to have paid reviews that may skew ratings as the communities are firmly against self-promotion.
Your chosen M&A process management software must be considered a partner in your firm's day-to-day activities. So, evaluate it as such. Search the web for the most popular support issues and complaints users have had to see if it's something that will matter to your firm. Also, check for feature requests to see if something may be missing from the platform that you would consider a dealbreaker.
Surprise costs can spring up when trying to get a good deal on a new software package. Make sure to get quotes for competitors' versions of the software and make comparisons based on all that's included. Support hours and costs, implementation fees, integration prices, and more can add to the bottom line of deploying a new piece of software. Additionally, look beyond just the sticker price and consider the length of time it will take you to successfully implement that software into your firm.
There are many M&A tools and software from which firms can choose to build the perfect tech stack for their needs. Technologically- and data-driven firms have been shown to get higher returns and make more deals than firms that do not take advantage of these types of software. The key is to choose the components that make the most sense for your firm's goals and processes.
For more information on what the modern dealmaker's tech stack entails, check out our guide to the three core components every firm should have (plus one to launch yours ahead of your competition).