Integrated M&A Transaction Management focuses on the target-orientated implementation of business objectives in a specific M&A event, combining best-practice project management methods with the specifics of M&A transactions. Through this combined approach, the speed, cost-efficiency and probability of implementation of M&A transactions can be sustainably optimised. With M&A 4.0, digitisation has also entered the various areas of transaction management. Integrated control tools, project management tools and market intelligence provide the technical foundation for integrated transaction management 4.0. Using trustworthy cloud solutions, the optimal cooperation of all project participants can be ensured - even beyond company borders.

The starting point of integrated M&A Transaction Management is the established M&A Maturity Model, which specifies the organisational framework and corresponding transaction phases. Within this framework, integrated transaction management is based on four pillars.

  Pillar 1 - M&A Governance Structure. This pillar establishes the basic rules and conditions for an M&A project, since it defines the organisation, the committees, processes and responsibilities in the respective transaction. Reporting, decision-making and escalation matrixes must be defined in order to enable quick and clear management of the transaction. It is important to clearly communicate this to the entire project team. Cloud-based solutions offer efficient ways of documenting and distributing this information. Equally important is M&A Knowledge Management, as it governs the reuse of know-how, templates and tools and thus contributes significantly to the cost-effectiveness of the transaction. Finally, M&A Performance Management provides feedback on the success of past transactions and identifies potential improvements for future transactions.

Pillar 2 - Scoping and Planning. In order to enable target-oriented control of transactions, it must be clearly defined at the outset which goals should be achieved by the respective transaction and in which framework conditions the transaction should be realised. The success of the transaction is dependent on the definition of a clear goal. This essential step should be given the highest attention from the initiation phase onwards. The SMART approach clarifies transaction objectives through its five criteria. In addition to the setting of the objectives, the timing of the transaction and the required resources must be determined. Starting with a general roadmap, a specification can be made by a detailed project plan in each phase of the project. In terms of integrated transaction management, all relevant teams (e.g. legal, tax) and stakeholders must be included in the planning in order to obtain a holistic view of the key topics and necessary tasks. Especially with mid-market and large-cap transactions, the corresponding ramp-up of the required team and infrastructure must also be precisely planned.

Pillar 3 – Communication and Reporting. In addition to the transaction having a clear objective, the creation of a project organisation with a transparent reporting and communication structure is important. With a top-down approach, forming an appropriate meeting structure enables overall transaction control and operative control of individual workstreams. However, the related reporting should report project progress bottom-up, aggregating a condensed view of overall project management. It is recommended that the M&A 4.0 reporting and communication structure is implemented by cloud-based standardised tools, enabling cost and time efficiencies. With (online) dashboards, the entire team has visibility over the overall project status and the progress of individual transaction phases. The use of dashboards also offers the advantage that reporting can be edited depending on the target user. The use of Harvey Balls as a dashboard communication tool prepares and exhibits statuses briefly and concisely. Thus, standardised and transparent summaries for C-level management are immediately available.

Pillar 4 - Task Management.  In addition to the reporting and communication structure, the clear allocation and management of activities is of crucial importance. In transaction phases in which several parties are involved (e.g. due diligence), the task of controlling progress management is of essential importance. Ideally, proven and reproducible M&A playbooks for each transaction can be used in the sense of M&A knowledge management. M&A 4.0 can be leveraged through the utilisation of modern project management tools such as kanban boards for traditional task control. A kanban board is an agile project management tool designed to help visualise work and maximise efficiency flows. Kanban boards use cards, columns, and continuous improvements to help transaction teams commit to and finalise their work. A kanban board helps ensure work visibility throughout the whole transaction team. Additionally, from a project management perspective, it is possible to trace which tasks are not yet assigned and which tasks are overdue.

In order to implement state-of-the-art integrated transaction management, only a few steps are necessary. In addition to the clear commitment of management to this approach, choosing the right tools and establishing the approach is crucial. Irrespective of individual implementation concerns, the following principles can contribute to successful project management:

1. Clearly define general and specific goals for the company and M&A project teams.
2. Placing the M&A project teams with a clear governance structure.
3. Providing sufficient resources to plan upcoming projects and to complete the ramp-up phase.
4. Staffing the project with experienced managers and utilising their experience and know-how.
5. Use of established, standardised tools and processes that function across the enterprise and are beta-tested.
6. Establish decision-making structures, reporting and efficient transparent communication mechanisms.
7. Including sponsors and experts to reach business decisions and overcome groupthink.
8. Efficient proactive risk management.
9. Ranked decision-making matrixes based on (ex-ante defined) information.
10. Use of proven (IT) tools for efficient project design.

Integrated Transaction Management 4.0 bundles all the necessary topics for a successful transaction and, with the associated M&A 4.0 solutions, provides the prerequisites for an efficient process. ARTEMIS Group supports the implementation of an integrated transaction management system tailored to its client’s needs. This trusted approach ensures the wise use of resources and high stakeholder awareness regarding project status.  ARTEMIS M&A 4.0 oriented platforms and tools increase process and cost-efficiency. Additionally, ARTEMIS Group provides operational support for the transaction manager as a central point of intersection between the company, external consultants and targets.

Contact details:

ARTEMIS Group, Maximiliansplatz 12, 80333 Munich, Germany

Email: tadam@artemis-group.com

Tel: +49 89 74 50 170

Web: www.artemis-group.com

IFC’s financing will help improve Argentina’s mobile and fixed broadband infrastructure through the installation of high-speed fiber optic and the upgrade of wireless transmission equipment by Telecom Argentina. This second financing follows an earlier one in 2016 and will help revert a decade-long trend of underfunding in Argentina’s telecommunications sector which has hampered coverage, quality of services and data transmission speeds, particularly outside the city of Buenos Aires.

Becker, Glynn, Muffly, Chassin & Hosinski LLP acted as international transaction counsel to IFC for this financing, having previously worked with IFC on a 2016 financing of a Telecom Argentina subsidiary.  The Becker Glynn team was led by Partner Peter Hosinski, with primary assistance from Associate Andres Sardi.  Partner Rachel Wasserman, Counsel Kenneth Stuart, and Foreign Associate Helena Romero also offered assistance to the team.

Fosun was founded in 1992 in Shanghai and is listed on the Main Board of the Hong Kong Stock Exchange. The company is a leading investment group with roots in China and a global foothold.

Founded in 1974 and headquartered in Fulda, Germany, FFT provides flexible automation turn-key solutions, customised engineering designs, and various smart factory solutions for renowned first-line original equipment makers (OEMs) in Germany, the USA, Japan, China and other countries. FFT also provides non-automotive solutions for clients in many countries including the USA, Sweden and Germany. FFT's solutions can enable full production and specific aspects of manufacturing. The group has the strong ability and potential to expand the use of its capabilities in numerous sectors outside of the automotive industry, as successfully proven during the business expansion into white goods in recent years. In 2017, FFT recorded revenues of over €850 million and employed over 2,600 people.

This acquisition of FFT supports Fosun's strategy of investing in companies which support "makers" and have strong market positions. Through this acquisition, Fosun significantly upgrades its capacity to offer new manufacturing solutions for its own portfolio companies such as Nanjing Nangang Iron & Steel United, Eurocrane and Zhejiang XCC Group.

“Banks have responded to this new paradigm, digitising their processes by leveraging and making decisions based on data and analytics, and shifting their focus on consumer experiences that go beyond mobile and online”, says Rosanna Woods, UK Managing Director at Drooms. “They have realised that to remain competitive and maintain market share they need to be more strategic and technologically adept, recognising the need to invest in automation, core modernisation and digitisation.” Below, Rosanna tells us why a collaborative approach is the way forward.

 The changing landscape of investment banking

2019 is proving to be a momentous year for the global investment banking industry as it returns to normalcy in terms of profitability and capital adequacy. Global M&A activities, mainly by large US banks, are creating opportunities to expand overseas and acquire FinTech startups.

Today, most investment banks are enthusiastic about digital transformation initiatives to reduce costs and improve customer experience. Although investments banks adhere to their conservative business model, digitisation has shifted power to investors, who favour partnering with banks that are digitally more advanced.

Opportunities amid regulatory challenges

In Europe, the introduction of wide-ranging regulations has also impacted the working environment for banks. For example, the Second Payment Services Directive (PSD2) has encouraged innovation and competition between incumbents and FinTechs, while implementation of the revised General Data Protection Regulation (GDPR) framework has given EU citizens comprehensive data protection, forcing banks to ensure the privacy of customers’ data.

While addressing the myriad requirements of these new and contradicting regulations makes data management more daunting for banks, the major challenge for most of them is that data is being managed in siloed and disparate systems, making it all the more difficult to understand clients’ needs and demands.

Today, most investment banks are enthusiastic about digital transformation initiatives to reduce costs and improve customer experience.

However, the good news is that more banks are recognising the capabilities of cognitive technologies in gathering intelligent insights on customers, compliance and operations making collaboration with FinTechs more attractive. Also, robotic process automation (RPA) is rapidly gaining popularity as it brings productivity benefits to the table.

Helpful technology

The advent of Artificial Intelligence (AI) has been particularly helpful for banks in processes including client servicing, trading, post-trade operations such as reconciliations, transactions reporting, tax operations and enterprise risk management.

While much of the media attention towards AI has focused on its potential capacity to replace humans, at present it is seeing much more practical use in terms of complementing human intelligence. ‘Augmented’ intelligence involves machines assisting humans in their decision-making processes.

A sub-field of AI – Natural Language Processing (NLP) is a good example of augmented intelligence in practice. NLP systems are designed to read and interpret human languages. A key application of this in relation to banking is the analysis of substantial amounts of ‘unstructured data’, which is data that as yet cannot be ‘read’ by machines, such as PDF files, images and audio materials.

Banking is a data-intensive sector and many key tasks demand correct interpretation of partly structured data. Therefore, NLP has the potential to make processes much more efficient with less effort required from humans. As such, FinTechs have been quick to apply this technology because of its value in improving customer interactions, making collaboration with them attractive for most banks.

The advent of Artificial Intelligence (AI) has been particularly helpful for banks in processes including client servicing, trading, post-trade operations such as reconciliations, transactions reporting, tax operations and enterprise risk management.

Role in M&A

Technologies such as virtual data rooms (VDRs) come into their own for banks when used in M&A deals, helping to address many of the challenges such pursuits face even at the best of times. There are several key causes of failure, including politics around the deal, culture clashes among the personnel involved and, in particular, parties being unprepared for the due diligence phase. In this latter regard, M&A deals rarely fail because of a lack of knowledge. Rather, it is about how that knowledge is handled. Over half of deals fail because those parties involved are reluctant to confront issues head-on.

Buyers often proceed with deals despite the challenges because they feel obligated by the amounts of time and money involved. They should, however, be prepared to cut their losses if the risks outweigh the benefits. For example, allocating inadequate resources during the review stage cost Bank of America $50 billion in legal fees post its acquisition of Countrywide Financial in 2008, let alone the reputational damage it suffered for inheriting the past mistakes of the mortgage lender.

A VDR enhances the M&A process by increasing the power to collect, process and distribute information to the right parties with much greater security and accuracy. It digitises relevant documents, automates tasks and streamlines workflows.

Authorised users, including those inside a company and their external stakeholders, are connected digitally and in a secure environment with real-time access to all relevant documentation, depending on users’ individual permission levels.

A VDR enhances the M&A process by increasing the power to collect, process and distribute information to the right parties with much greater security and accuracy. It digitises relevant documents, automates tasks and streamlines workflows.

Creating a database in which documents can be updated consistently gives asset owners full control and the ability to react to the latest market conditions, bringing assets to market quickly when the conditions are right, sometimes at short notice.

One of the strengths of the Drooms NXG VDR is its Findings Manager function. This improves the vendor due diligence both prior and during the sales process. It allows for the automatic pre-selection of documents and helps in the assessment of potential risks and opportunities within a transaction. This yields greater control, instils confidence in potential buyers and cuts disruption to existing business.

Blockchain first

Macro forces such as blockchain are also slowly revolutionising many areas of banking. For example, blockchain made it possible to automate approvals of contracts as well as protect the transfer of confidential data from hackers and fraudster whenever transactions are made. In 2018, Drooms became the first provider to move its VDR offering into the blockchain age, using this modern technology to enhance the security of transaction data archives. Up to that point, all data had been stored on physical data carriers following completion of a transaction. But now it can be stored on Drooms’ own servers with blockchain protection. As a result, the secured data cannot be lost, is non-manipulable and is accessible to all parties involved in a transaction at any time.

A new threat

As more financial institutions start to adopt technologies created by FinTechs, a likely threat is emerging. Tech giants such as the likes of Amazon, Alibaba, Apple and Google are attracting customers in the payments domain by offering alternative ways of managing finances. In the US, Amazon is already offering its customers the option to turn spare change into gift cards, and parents can also give children their allowances via a reloadable debit card for example. In India, customers pay delivery fees through a Cashload feature and store excess cash from previous purchases in their account, as well as deposit money for future orders.

With platform companies’ potential to exploit customer data and come up with innovative solutions to address customer pain points, there is a lingering risk of disintermediation for banks. Customers who feel that tech companies alone meet their banking needs may decide to switch to non-banking channels. And there is also the possibility that tech giants may provide banking services in the future, making services provided by banks non-exclusive. Although big techs pre-dominantly target the origination and payments domain of banking, a stronger foothold by platform companies could threaten the survival of many banks in the industry.

Towards modernisation

The various areas of the banking industry will undoubtedly continue to evolve at varying speeds. And as time progresses more banks will likely partner with innovative FinTechs to remain competitive and market relevant. Potential for creative and ground-breaking collaborations and advanced modernisation will also likely increase.

That said, as technology transforms the future of banking, so ought banks’ mindset towards cognitive technologies and collaboration with FinTechs. After all, technology is not a panacea and it is accompanied by many challenges as well as opportunities.

Together with its subsidiaries, Helbor Empreendimentos S.A. develops and sells residential and commercial real estate properties in Brazil.

Campos Mello (in cooperation with DLA Piper) advised Marriott International on the drafting, review and negotiation of all agreements. The team included Partner Rafael Jordão Bussière and Senior Associate Ana Beatriz Barbosa Ponte.

PMKA Advogados advised Helbor Empreendimentos S.A, with Sérgio Kawasaki, Rafael Gobbi and Igor Barros.

 With over 800,000 domains under management, Loopia is one of Sweden’s largest web hosting companies. The many awards it has won include “Sweden’s best web hosting”.

With support from Noerr´s team of advisers from the Bratislava and Budapest offices, Loopia acquired 100% of the shares in WebSupport s.r.o. from Trantor Ventures GmbH.

The acquisition of WebSupport s.r.o. is another step in Loopia’s expansion strategy for continually increasing its web hosting services in Central Europe.

The Slovak part transaction was headed by Noerr´s corporate/M&A expert, Martin Ťupek. Among his major deals, Mr Ťupek has been involved in projects as diverse as mergers in electronic manufacturing services, takeovers in the refrigeration compressor industry and air carrier services, and real estate joint ventures. Over the last five years, Mr Ťupek has supervised the Bratislava team and helped complete deals worth more than €800m.

Pavol Rak head of Noerr’s Bratislava office commented: “This was an important transaction where both sector knowledge and cross-border transaction experience played a part in making it a success. It is for us a significant step to moving closer to clients and the Digital Business market.

However, previous deals show that the process has hardly been plain sailing – 40% of those surveyed by Deloitte claim half of their deals over the past two years have failed to generate expected value or ROI. From eBay and Skype to Microsoft and Nokia, the past 20 years have been littered with multi-billion-dollar mistakes. Here, Mike Walton, CEO and Founder of Opsview, delves into the important role that IT operations have when it comes to planning your M&A strategy.

IT Operations fuels business success

An increasing number of business execs cite ‘gaps in integration execution’ as the reason behind M&A failures. The process of combining two businesses, its operations, staff and culture is extremely difficult in both principal and practice, and, whilst it is certainly not a silver bullet, the importance of involving IT as early as possible in M&A proceedings would certainly make integration a smoother process. At the end of the day, IT sits at the very centre of any organisation, supporting all aspects of day-to-day operations and innovation-driven services, fueled by digital transformation projects. That makes centralised IT operations’ management and monitoring critical to any M&A process and involvement needs to start at the discussion stage so that experts can provide visibility into core systems to support successful M&A planning and integration.

Acquiring firms, therefore, need clear visibility into their own and the target firm’s IT assets and initiatives to drive fast, effective integration at this level and to reduce time-to-innovation post-acquisition.

According to Ernst & Young, the role of IT fundamentally underpins the strategic objectives of M&A activity, whether that’s increasing market share, entering new markets, gaining new customers or consolidating product ranges. Acquiring firms, therefore, need clear visibility into their own and the target firm’s IT assets and initiatives to drive fast, effective integration at this level and to reduce time-to-innovation post-acquisition. If not, they risk eroding value and could create a situation where inaccurate timelines and cost estimates are produced.

Yet, given the importance of IT visibility to M&A success, it’s disappointing that just half of the respondents to the European E&Y report said they typically involve IT in the transaction process, compared to almost 80% for finance. Even fewer — 38% of corporate execs and 22% of PE — said they put ‘significant emphasis on IT’ in M&A. It’s perhaps no surprise that almost half (47%) said that in hindsight, more rigorous IT due diligence could have prevented value erosion.

Centralised monitoring minimises downtime

Currently, many financial organisations do not have a centralised view across its entire infrastructure that would deliver the required IT due diligence needed for a successful M&A deal, and this can only effectively be delivered through centralised IT monitoring. Research from analyst firm Enterprise Management Associates has indicated that a vast number of organisations have more than ten different monitoring tools and it can take organisations between three-six hours to find the source of an IT performance issue. This approach is clearly unsustainable, especially when companies have the added complication of merging two businesses. The true impacts of downtime during M&A can easily be seen by looking at the catastrophic IT outage suffered by UK bank TSB in 2018, where its migration from IT systems operated by its former owner to its new owners’ platform resulted in weeks of outage for millions of customers. At the other end of the scale is technology giant EMC, which proudly publicises its dedicated IT M&A integration team, which is brought in straight after a letter of intent is signed by potential acquisitions.

Post-deal, best practice IT operations can also help manage IT performance to ensure the customers of both companies involved suffer no adverse impact as a result of key staff being diverted to focus on the merger.

Visibility through a single pane of glass  

At its heart, effective IT monitoring is, therefore, a key component of IT operations which are designed to “manage the provisioning, capacity, performance and availability of the computing, networking and application environment” (Gartner). As such, they can be used to audit and analyse the critical IT assets of firms on both sides of the M&A deal. This data can then be employed to ensure the company is accurately valued, and integration roadmaps and timelines are realistic. Post-deal, best practice IT operations can also help manage IT performance to ensure the customers of both companies involved suffer no adverse impact as a result of key staff being diverted to focus on the merger. They play a central part in identifying under-utilised assets for optimisation, reconfiguring systems and stripping away duplicate technologies once a deal has completed.

However, it is important to remember that modern IT operations are becoming increasingly complex as they are now usually comprised of a mixture of dynamic, cloud and virtual-based systems, often operated by third-party providers. On top this, many organisations still operate legacy IT monitoring tools that are inadequately suited to provide visibility into these hybrid systems. As a consequence, tool sprawl is prolific among businesses who operate with this outdated, reactive and siloed approach to IT monitoring.

In order to combat this, financial organisations must centralise and consolidate these tools to rid themselves of data islands, improve decision-making, and proactively enhance IT performance and strategic advantage. From this single pane of glass, IT and operations managers can then accurately plan M&A due diligence and post-acquisition integration. However, it is critical that senior business leaders understand the strategic importance of bringing in IT into the M&A process as early on as possible.

Website: https://www.opsview.com/

Antelliq will be a wholly owned and separately operated subsidiary within the Merck Animal Health Division. Merck will make a cash payment of approximately €2.1 billion to acquire all outstanding shares of Antelliq and will assume Antelliq’s debt of €1.15 billion, which it intends to repay shortly after the closing of the acquisition.

Antelliq is a leader in digital animal identification, traceability and monitoring solutions, the fastest growing part of the animal health industry, with €360 million in sales in the 12-month period ending 30
September 2018. These solutions help veterinarians, farmers and pet owners gather critical data to improve management, health and wellbeing of livestock and pets. The increasing use of digital technology in animal agriculture is driven by the growing demand for protein, food traceability and food safety. Identification and monitoring technologies will help optimise disease prediction and treatment and this acquisition will provide Merck Animal Health with a large, established customer base in both areas.

The closing of the transaction is subject to clearance by antitrust and competition law authorities and other customary closing conditions and is expected to close in the second quarter of 2019. Merck was represented by Barclays and Centerview Partners and Antelliq was represented by Goldman Sachs International, BCG and Rothschild & Co.

Q&A - Jerome Herve, Boston Consulting Group

Please tell us about your involvement in the deal.

BCG did the VDD (Vendor Due Diligence) for BC Partners and Antelliq. We knew the asset from the previous transaction in 2013 and we were amazed by the digital transformation achieved in five years. The company went from a leader in traditional livestock identification tags (e.g. the plastic tags in cows’ ears), to a fully-fledged data management company. This was enabled by the acquisition of an Israeli startup, and the development deployment of a “big data” smart monitoring system. We, therefore, applied the traditional VDD framework (voice-of-the-market, competitive dynamics, etc) to confirm the strength of the historical business, and conducted a digital sprint with our Digital Ventures division to explore use cases which could demonstrate the monetisation potential of the unique data lake Antelliq has built by monitoring millions of cows. We proved that the company had created the condition for what we call “vertical growth”. This contributed to fierce competition between blue-chip buyers, organised by Rothschild and Goldman Sachs, which concluded with MSD acquiring the company for $3.8b.

How does this deal reflect the future of the M&A scope for 2019?

We believe that 90% of the portfolio companies of PE firms have huge digital potential. We anticipate two types of situations: deals sold at suboptimal multiples (or broken) because of lack of digital maturity, and deals reaching highly attractive valuation multiples like Antelliq, because they have successfully transformed and can demonstrate avenues to super high growth by exploiting their traditional assets (brands, products, customer base etc.) in a digital way.

What challenges arose? How did you navigate them?

The challenge is time: with more time Antelliq could have further developed more innovative use cases and maybe reached even higher valuation. $3.8b is already a great performance for the sellers, and it is wise to leave some nuggets for the buyer. MSD will provide a great platform for Antelliq to pursue this fantastic journey.

The acquisition combines Somos' deep experience as a trusted number administrator with a team of forward-thinking innovators to accelerate Somos' development of new products and services. By adding 10X People's experienced software development and consulting team, Somos will enhance its focus on providing advanced, customer-focused solutions to the industry. 10X People will continue offering numbering and inventory solutions to the telecommunications and fraud prevention industries.

"10X People has a strong reputation for innovation and high-quality development in the telecommunications industry", stated Gina Perini, President and Chief Executive Officer of Somos. "We have worked closely with 10X People for many years and are thrilled to add 10X People's software development and consulting staff to our growing team."

"10X People and Somos share a vision and culture that stands for excellence", commented Lisa Marie Maxson, Managing Partner of 10X People. "The acquisition is an amazing opportunity for members of our team to contribute to major initiatives that will help advance the telecommunications industry."

GTC Law Group PC represented Somos Inc., with Managing Shareholder Lisa Trainor and Associate Veronica Louie leading the transaction.

Founded in 1996, Rameder is today Europe’s leading distributor of towbars, bike carriers and roof racks. Based in the German town of Leutenberg and with offices in Ingolstadt (DE), Lille (FR) and Prague (CZ), the 200 employees at Rameder manage online shops in over ten countries (including kupplung.de in Germany), selling around 300,000 towbars each year throughout Europe.

After two decades of successfully investing in Scandinavia, in early 2018 FSN Capital Partners, acting as investment adviser to the FSN Capital Funds, opened an office in Munich and hired a team of professionals to advise the FSN Capital Funds on investments in the DACH region. The team, led by Partners Robin Mürer, Justin Kent and Patrice Jabet, focuses on growth-oriented, mid-sized companies that have a strong value proposition and a clear market-leading position, where the FSN Funds see a clear potential to support management teams to achieve their growth strategies by providing both capital and know-how. The FSN team will seek to support FSN Capital V and Rameder’s management to achieve its strategic goals to boost turnover further in the core markets of Germany and Austria, expand its assembly network, and foster greater international growth by way of acquisitions and strategic partnerships.

The team at FSN Capital Partners responsible for advising on the transaction is composed of Justin Kent, Eskil Koffeld and Clemens Plainer. FSN Capital V was also advised by Hengeler Mueller (legal), Bain (commercial), Alvarez & Marsal (financial), PwC (tax & ESG), eccelerate (e-commerce), JLT (insurance), capitalmind (debt advisory) and mcf (M&A).

Q&A – Bastian Latt, Associate Partner – eccelerate

Can you tell us about eccelerate’s involvement in the transaction?

The Munich team of FSN Capital tasked eccelerate with the digital due diligence, part of the commercial due diligence.

What was your specific role?

Our approach to digital due diligence focuses on the key operational performance metrics of companies with a digital business model – i.e. companies that sell their products or services via online distribution channels.

Similar to other digital DDs, for Rameder, we answered how well the company is operating along the sales-marketing funnel. Questions included:

• How effective is the target at getting traffic to its website? Where is traffic coming from?
• How successful is Rameder at converting prospects (i.e. traffic on the site) to buyers? Does the customer experience need improvement and what are the specific areas that need improving?
• How are customers engaged post-purchase? How does the company stay relevant and up- or cross-sell products? To what degree – if any – are interactions with customers personalised based on their past behaviour?
• What are the potentials across all of these dimensions and what prevents the target from tapping into these?

In this and other cases, we also look at back-end topics such as: What is the current IT setup? How reliable and scalable is the infrastructure? How is development organised?

Why is digital due diligence so important?

We think that when considering an acquisition of a digital target, it is fundamental to understand the core value generating elements of the firm. A classic commercial due diligence often does not go deep enough. This is often because consultancies do not have the required operational know-how on the advisory team to take a detailed look at for example a Google Ads account and determine how well the target is doing search engine advertising. However, for many digital companies, this is their fundamental growth and revenue driver and one needs to understand it properly to determine if and by how much a target can grow. Additionally, many targets we see are at a stage where they have had healthy growth to date, however, it quickly becomes obvious that to grow further and to scale to, let’s say additional geographies, a far greater digital or e-commerce professionalisation is necessary.

That’s why we recommend all investors to integrate digital due diligence as part of their commercial evaluation.

Based in Mariano Comense, Image S is the Italian leader and second biggest player in Europe in the distribution of machine vision and imaging products, with an extensive portfolio of technologies, products and customers. Image S’s customers are Italian leaders in their specific market segments, generally characterised by high share of export revenues. The company is run by an experienced management team led by the founders Milena Longoni, Marco Diani and Paolo Longoni, who will remain shareholders and managers following the acquisition by Ambienta. The team will be complemented by Fabrizio Ricchetti, who will become the CEO of Next Imaging and will focus on growing the business further, both organically and through acquisitions.

Machine vision systems are strong drivers of efficiency improvements within numerous vertical markets, thereby delivering substantial environmental benefits. These systems determine for a wide range of industrial applications increased production yields, reduced production scraps (waste) and, therefore, improved resource efficiency and reduction in pollution. The imaging market is rapidly growing, driven by the fundamental trends of Industry 4.0 and smart factories, and by the proliferation of specialty imaging applications in both industrial and non-industrial environments.

Ambienta has deep knowledge of the market thanks to Lakesight Technologies, a buy-and-build project aimed at consolidating producers of machine vision products. Lakesight started with a small Italian acquisition in 2012, which was followed by acquiring two German companies over the next 5 years. Ambienta sold Lakesight in 2018 to TKH Group with the company seeing a 4x increase in turnover, delivering a 10x return to Ambienta.

One sector at the forefront of this disruption is FinTech, in which firms enjoy cost bases lower than those of traditional banks and freedom from the restraints of branch networks and legacy IT systems. As such, they can provide faster services and more innovative products, thereby revolutionising systems and processes, says Rosanna Woods, Managing Director of Drooms UK.

Digitisation will be a priority for firms

FinTech trends have disrupted the industry for over a decade now, and I believe this is the year challenger banks will become prime targets for investors. Large FinTech firms – and traditional financial companies – will also be more likely to get involved in the M&A space as digitisation remains a major driver for deal-making.

In terms of funding, 2018 marked the best-performing year for UK FinTech M&A (US$457.8 billion), which shows that investors are still hunting for the next big FinTech investment. And although Brexit has brought a lot of uncertainty, it could also mean that investors have a lot of dry powder.

Prime examples of challenger banks gaining momentum include Monzo’s crowdfunding exercise and Revolut’s increasing user signups to its finance app that facilitates both worldwide currency and cryptocurrency.

In the digital payments space, we have already seen the roll-out of digital payment methods, particularly via mobile, allowing consumers to make payments at a single tap of a card or mobile device. As banks continue to seek technologies to speed up customer service, they will look to FinTech companies to integrate with their own systems and enhance customers’ experiences.

In terms of funding, 2018 marked the best-performing year for UK FinTech M&A (US$457.8 billion).

Core drivers for M&A

In many ways, growth in FinTech innovation and M&A transactions each contribute to their own success. Businesses and investors are both attracted to opportunities that technology could bring in the industry, and its potential to automate services. This leads to several M&A transactions taking place for geographical expansion and technological innovation.

But will Brexit impact or slow down the developments of financial technologies in the sector? In my opinion, only moderately, if at all. In fact, Blackstone’s acquisition of Thomson Reuters (US$17 billion) last year shows that transaction values increased due to businesses continuously embracing innovation in digital banking, payments, and financial data services.

Although Brexit may have some impact on investors’ confidence in the UK, it is possible that they are simply biding their time. It is common for investors to practice caution when investing in foreign markets. But despite the transactional and regulatory uncertainty we currently face in the UK, I suspect that investors will see the growth in the FinTech space as opportunities to invest in emerging technologies.

Technology’s broader influence

Technology is not just the focus for investment, it is also helping the investment process too. In particular, it has paved the way to making the due diligence process for M&A more efficient and secure. The creation and utilisation of virtual data rooms to help solve the problems faced by dealmakers and investors has been embraced by the industry as good investments.

From a technology provider point of view, artificial intelligence, machine learning, and analytics have digitised the screening process of deals and greatly reduced the time undertaken for due diligence, as well as improving workflow. This is also true for many other sectors such as real estate, legal, life sciences, and energy.

As such, it makes sense to predict more investment in technology that will help the digital transformation of businesses, as demonstrated by Siemens’ investment in software companies in 2007, which generated US$4.6 billion in 2016.

Although Brexit may have some impact on investors’ confidence in the UK, it is possible that they are simply biding their time.

The heightened desire of investors to acquire businesses for digital transformation remains – as previously mentioned - one of the core drivers for M&A. Although Brexit may eventually present unexpected challenges to the FinTech sector, it will continue to thrive. This belief is supported by a report by Reed Smith that stated 31% of financial organisations plan to invest over US$500 million in the FinTech sector this year.

Opportunities amid uncertainties

Taking stock of the aftermath left by the EU referendum, Brexit has undoubtedly created lingering uncertainties and ever-present threats to deal making. But the overall value of UK M&A activities between 2017 and 2018 shows that Brexit did not prevent UK M&A from performing. In fact, over 140 M&A transactions in Q1 2018 were FinTech deals.

This was due to many factors, such as the strong relationship between UK and US investors, as well as the pound’s devaluation after the EU referendum, which made cross-border deals more attractive for global investors and particularly those deals involving businesses specialising in RegTech and digital payments.

Although the on-going Brexit negotiations are not going well and that a no-deal Brexit, despite not being ideal, is still a real possibility, recent history suggests that the FinTech M&A sector will not be as heavily affected as it might seem. The signs indicate that investors will continue to pursue new technologies that can help make business operations more efficient.

Going forward

What concerns businesses and investors in the UK is the fear that London may lose its crown as a FinTech hub. They will be looking for a Brexit deal that replicates the passporting rights the City currently enjoys and would also allow the UK economy to grow by about 1.75% by 2023 (as firms continue to trade in the City).

Moving forward, the difficulties Brexit presents are not insurmountable for the FinTech sector. It will continue to grow and disrupt the industry – whether the UK leaves the EU with a deal or not – and although it is wise to make contingency plans, businesses should avoid making drastic decisions. The FinTech sector is here to stay and it is well-equipped to withstand the many challenges ahead.