This article was contributed by Nikhil Surve, Associate Director at R3.
The Covid-19 pandemic is taking an unprecedented toll on global financial markets, and the future is looking increasingly uncertain for business owners. Government-enforced lockdowns have forced companies in virtually every sector and every country to press pause on their operations, or radically change their way of working.
As a result, financial markets are spiraling, and the outlook for the economy is bleak. Against this backdrop, it is highly likely some sectors will see a spike in M&A activity in the coming months as firms look for any alternative to ceasing operations and laying off staff. After all, a classic by-product of tough times is consolidation in markets.
It goes without saying that a firm that finds itself seeking to be acquired or merge with another company will typically be strapped for resources and will be looking to complete the M&A process as quickly, cost-effectively and efficiently as possible.
Unfortunately, to say mergers and acquisitions are difficult and costly is a huge understatement. One of the reasons for this difficulty is the complex combination of legacy technology systems used throughout the process.
Out with the old…
The sheer level of paperwork required to complete an M&A deal is breathtaking. Until the transaction is truly complete, there is a phase where the two companies need to consolidate data across multiple financial and non-financial statements such as balance sheets, P&L statements, asset registers, shareholding patterns, inventory details and more. This leads to a lot of discrepancies and reconciliations, holding up the process and requiring a vast amount of internal and external resources, which all come with a price tag.
The lifecycle of an M&A deal usually involves multiple parties such as lawyers, external M&A advisors, auditors and tax consultants, each with their own disparate manual processes. Companies are…