What makes an investment bank go from good to great?
Great investment banks
- Follow a project management methodology
- Leverage data to understand buyer behavior
- Understand post-close merger integration (PMI)
This perspective is based on personal opinions as a technology vendor that has worked with over 40 investment banks and 300+ M&A transactions over the past 5 years. Whether it be their methodology, process, or software choices, an investment bank that isn't "up to date" can't stay competitive.
From an investment bank's perspective
Do you have lots of emails, massive Excel lists, expensive data rooms to run an M&A process? This is probably an indicator that your methodology to manage a deal is outdated. 20 years ago we ran M&A deals off a flip phone, fax machine, spreadsheet and a bleeding edge if you were using a virtual data room.
Today, data counts and your process determines if your team is wasting time on redundant tasks or staying focused on value add activity. Today, every business is digitalized, except investment banks in M&A...they got truly left behind.
Is you process outdated?
Deal teams are usually made up of a managing director, director, VP and a number of associates and analysts. The top team members hunt, pitch and deal with issues throughout the M&A process.
That really hasn’t changed much over the years. If you have good boardroom game you will win mandates. Commonly, during a deal, the process management responsibility is passed down to the junior level bankers. They often have very little to no project management experience, and lack a formal process. While plenty of modeling training is provided, there is typically no set project management training.
However, we can learn from veteran strategics in the tech industry like Cisco. They lead when it comes to using various PM methodologies in M&A, and other corporations can learn from them. This will also create a better process for buyers and other parties involved, which allows a deal to close quicker.
Is your technology outdated?
Investment banks are very outdated when it comes to technology and its a big set-back.
Failure to use today's data science to understand buyer behavior and just pulling information from a previous deal is not innovative, or smart. Often, investment banks have a very manual approach to identifying potential buyers. Commonly, it starts with the list from a previous, similar deal then perhaps a search in a paid market database.
Take a look at the big 3; Amazon, Google, and Microsoft as an example of how to improve. They have commoditized data science and AI tools. This has made it easy to combine multiple datasets, company news, social sentiments to build real-time insights in understanding the buyer universe. This can also help banks identify companies likely to sell and craft strategies that will win them a seat in front of the board.
Another issue is that investment banks don't leverage analytics to understand buyer behavior, which is where bottlenecks are. This prevents them from identifying buyer concerns early. Instead they look at download activity which is often misleading. Updated project management software captures the data to understand buyer behavior, where as old school investment banks miss this on Excel. Integrating this data into software like Salesforce can bring a full scope of analytics throughout the lifecycle of M&A transactions.
Is there post-close accountability?
The perspective of sellers is changing and there is greater consideration on what happens after the transaction. It’s not just about the dollar figure anymore, it’s about people, vision and mission.
Will it grow and prosper or die off?
Create a process that enables buyers to start building post-close success from the time they start diligence. An Agile M&A process allows buyers to plan post-merger integration early, identify future challenges, and enable them to keep an aligned focus on the deal's value drivers. A better understanding on change management can help bankers better advise clients and gain a broader perspective of the transaction beyond the financial sense.
If an investment bank has an updated process, uses innovative technology, and understands post-merger integration, then they are not just good, but striving to be the best.
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