The information produced by companies is greater than ever, and
increasing. "Many estimate that the volume of data has doubled
in the last two years, and it is forecast to double again in the
next two," says Iain Macmillan, global head of M&A
services at Deloitte.
"A few years back our diligence reporting would often be
relatively standard in scope, culminating with a big presentation
and our interface with the client might not be that regular,"
adds Macmillan. "But now technology is changing that.
Transactions work is more of an interactive and immersive
experience, in which we work more closely with clients through the
transaction collaborating on their most important issues."
Matt Henderson, Deloitte transaction services partner, says the
advances in data analytics means a full review of traditional
approaches to due diligence: "Historically, we have looked at
the last three years of a target's performance, and forecast
for the next three years. Why? Because the last three are a good
indicator of the next three? No. Because of the constraints of
time, money, and information, we landed at that. We can now start
to look at the target business across the cycle.
"We can look at much more data going backwards –
which is something that our clients are more interested in doing,
particularly for cyclical or regulated businesses. And we can look
forward further as well. We can benchmark against some of its
peers. Why are its margins better or worse? Can that be sustained
or improved? We can perform some simulationanalysis and scenario
modelling. This all brings more confidence to deals getting
Henderson says there will not be a new normto diligence
approach, but rather a toolbox, which advisers can access to
provide the detailed insight clients will now require.
"Many clients are used to using tech and expect us to be
able to do similar things, and provide information," says Mark
Steele, head of tech M&A at Deloitte. "We are on a
constant learning curve, both in analytics, and how we communicate
these answers to more complicated questions to clients."
Macmillan says there is likely to be some rethinking on fees:
"It is evolving. If you look across the M&A services
spectrum, elements of what we do have always been less about hours,
and more about value, and facets of that have become increasingly
so over the years. Due diligence and transaction services are often
based on hours. Technology will drive efficiency in terms of hours,
but get to that, you must invest and develop a tech platform. It
would be folly to think it will not have an impact."
There is also competition from pure data crunchers, rather than
advisers providing understanding and interpretation of the data.
"That is where we currently hold the trump card, but we have
got to maintain that position and cannot rest on our laurels,"
says Deloitte's Steele. "With big data it makes even more
sense for clients to use one organisation, and not drop the ball
between financial and commercial, or financial and operational
diligence. Big data is not the only driver, but causes clients to
challenge whether it makes more sense, to use one provider across
these range of issues, rather than control different advisers
looking at different, (or even the same), datasets, and looking at
them different ways."
Deloitte have been deploying data analytics techniques in due
diligence engagements for the last couple of years. One example was
the recent acquisition of a portfolio of around 170 retail
The acquiring client wanted detailed insight into the relative
financial and operational performance of the outlets across the
portfolio, the key performance drivers, and a comparison between
target and client performance. They also needed
'geospatial' analysis to identify sites at risk of
Competitions and Markets Authority investigation
Three years of weekly sales data, (over 25,000 lines), was overlaid
with site data and site locations with open socio‑economic,
non‑financial data, such as local population size, nearby
amenities, social rating, senses data and other applicable open
data. This created a comprehensive picture for each client and
Within days, this data had been developed into a set of interactive
dashboards, in tableau, which included:
Financial snapshots of outlets with dynamic scatter plot, and
data tables with key metrics.
Interactive dashboards by outlet, with details of P&L,
weekly sales peaks and troughs and financial metrics as a % of
Target versus client financials, with a scatter plot.
Analysis to outlets, which may be at risk of competition
investigation, compared to client and other third party competitor
"The use of analytics in this assignment has undoubtedly
allowed the diligence team to provide more insights to help the
client's decision making process and is part of our desire to
change the client experience," said Iain Macmillan.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
An assignment of rights under a contract is normally restricted to the benefit of the contract. Where a party wishes to transfer both the benefit and burden of the contract this generally needs to be done by way of a novation.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).