M&A and Digital Transformation
by William C. Vinck, Managing Director, Chapman Associates
The argument is simple; the data is strong:
- Digital transformation is a key to long term business success
- The rate of organic revenue growth for firms competing in new digital ways is greater than that of traditional firms.
- The rate of EBIT growth for firms competing in new digital ways is greater than that of traditional firms.
- Added to organic growth, a well planned and executed acquisition plan can also prove attractive.
- For the firm that is aggressive and creative in designing and implementing digital transformation, a basis exists to develop new and lasting relationships with clients, customers and employees.
- This type of firm sees crises such as Covid-19 as an opportunity to gain a permanent advantage over competitors and new relationships with customers, clients and employees and uses their digital base as the foundation.
How to grow?
- There are numerous ways including establishing new sales channels, new modes of client contact that replace in some cases permanently physical modes to name a few.
- M&A is an area of interesting and significant opportunity.
- Crises can impact firms quickly in that client or customer behavior is altered significantly.
- Altered client/customer behavior can have a large and immediate impact on the firm’s valuation.
- Strategically minded leaders and owners must focus not only on maintaining value but also on identifying options to enhance valuations.
- M&A activities provide a key valuation enhancement tool.
Valuation enhancement through M&A
- Growth by acquisition takes on a new attraction as, for example, digitally transformative technologies may be acquired by buying the supplier rather than the technology.
- Not all firms respond effectively to crises resulting in staff down-sizing and employee furloughs which in turn enhance the talent pool available to a better positioned company.
- A strategically minded firm might engage an M&A firm to target specific portfolio assets which, if successful, leave the acquiring firm stronger post-crisis than before.
What to do next?
- Talk to Chapman Associates to confidentially discuss your M&A objectives.
- We’re a 65 year-old M&A firm and we’ve done thousands of transactions in a variety of industries.
- McKinsey has published a review of their recent work in this area. Please see: Digital strategy in a time of crisis
Since 1954, Chapman Associates® has been one of the most trusted and respected middle market mergers and acquisitions firms in the country. With a focus on Information Technology, among other verticals, Chapman has successfully completed more 2,300 transactions.
Contact us if you would like to discuss the current M&A market, the value of your business, or how to prepare for a future M&A event.