Digitisation of M&A deal processes – the future or merely a temporary change?

With the Covid lockdowns that started abruptly in early 2020, that all had to change in a hurry, and it did. Meetings and due diligence were mostly conducted remotely and virtually through Zoom, Teams, Webex or similar platforms. Where onsite due diligence was previously required, drones and iPhones became the norm. All paperwork quickly became electronic with the execution of legal paperwork also being dealt with electronically through the programmes such as DocuSign. Responding to the suddenly changing needs of businesses as a result of the pandemic, VDR platforms quickly saw substantial improvements in functionality with not only Q&A but also AI starting to assist with the due diligence process by providing machine reading technology that enabled the quick analysis of bulk documentation or contracts. Sophisticated permission settings in VDRs brought further effciency and control into the due diligence process. Used properly, all these advances brought a new effciency to the deal-making process which substantially speeded up transaction timelines and saved costs both in legal and overhead spending, and also importantly saved executive time that was previously employed to travel to “in person” meetings and oversee the detailed project management of deals.

These advances have brought about a change in mindset on the part those involved in M&A deals; not only from a seller and buyer perspective, but also on the part of advisors and deal makers. Expectations in terms of what’s now possible have changed not only in terms of timelines, but also in terms of effciency of process, with far more control and management now being possible through the use of more sophisticated applications in VDRs. In terms of “legals”, advisor and client expectations regarding process and effciency have increased, and firms not willing to embrace digital and virtual advances run the risk of being left behind. Closings are now largely remote and virtual, with legal documents being signed electronically where legally effective to do so. The days of hard copy deal bibles are gone, with most paper documents just amounting to an aggregation of the electronically signed documents. Printing and scanning costs are substantially reduced as well as the amount of labour involved in managing these aspects of a project and its documentation.

Do we expect the impact of digitisation and AI to slow down in the aftermath of the Covid pandemic? Highly unlikely would be my prognosis – those involved in M&A have generally embraced the changes and have now adapted to this being the “new norm”. It’s inevitable that some level of personal, face-to-face interaction will return, particularly in key areas like negotiation, but the effciencies that digital and virtual advances have brought to bear in 2020 and 2021 are here to stay. Virtual meetings are the new normal with the inherent savings in travel time and organisational effort that come as a result.

On-site due diligence where required, such as in the industrial sector, will likely revert to in-person as that remains the most effcient way to handle this. AI within the due diligence process is still in its relative infancy but substantial investments are being made in this area, VDR platforms are constantly developing, and law firms are currently bombarded with choices in terms of advances in key document production and project management. People’s expectations have also changed in line with the advances that have been made. All of this suggests to me that there really is no going back with respect to recently introduced digital approaches in business – only forward.

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