According to various studies, the long-term failure rate for mergers & acquisitions deals stands somewhere between 70 and 90 percent. Given this figure, companies have to be extraordinarily confident in their ability to beat this trend.
Of course, not all M&A deals are created equal, and not all have the same probability of success. In particular, businesses that use cloud computing technologies like Amazon Web Services and Microsoft Azure are more likely to have a successful merger. This article will go over 4 reasons why the cloud and M&A should go hand-in-hand.
1. Easier integration
Merging your IT environments and infrastructure can be a serious challenge during an M&A deal, and it’s one of the key factors in the transaction’s success. 71 percent of U.S. companies agree that technology integration determines the outcome of an M&A deal.
The good news is that IT integration is much simpler when you’re already in the cloud. For example, virtual private networks (VPNs) can be merged by integration into one account, peering existing cloud networks, or combining into a tiered parent company and child company account.
Meanwhile, Azure Blob storage and AWS Simple Storage Service (S3) are public cloud offerings that enable users to transfer files and database snapshots between companies hosting different cloud services. What’s more, the acquired company’s central repositories or data warehouses can be easily backed up and restored to on-premises environments for exploration and integration planning.
In addition, there are often tough decisions to make about storage and analytics platforms when planning large-scale IT mergers. With the cloud, you can expand your data lakes once an M&A deal is complete, and then decide which storage and analytics platforms are best for the company moving forward.
Thanks to cloud computing, implementation teams are no longer geographically constrained to certain locations when integrating different companies’ systems during an M&A deal.
2. Simpler collaboration
When two companies become one, it’s imperative to get them both on the same page as fast as possible. However, aligning your goals and workforces is much easier said than done.
One of the greatest benefits of cloud computing is the ability to access resources from anywhere, at any time with just an Internet connection. During an M&A deal, prospective partners can use the cloud to start sharing and collaborating as soon as possible. Access to VPNs, datasets, and analytics and reporting systems can be instantaneous, providing companies valuable research and insights even before the papers are inked.
3. Faster completion
The average M&A deal can take multiple years to complete – understandable when merging two highly complex entities into a single organization. For the best chance at success, you need to go through all the standard processes: deciding on a growth strategy, performing due diligence on both parties’ financial situations, planning the integration, getting approval, and finally executing it.
However, the longer the deal takes to complete, the riskier it becomes and the greater the chance that it will be called off. What’s more, deals that haven’t yet been completed aren’t delivering value to the companies or their stakeholders.
Fortunately, cloud computing can help significantly reduce the time of an M&A deal from negotiation to execution. The cloud’s benefits such as transferability, transparency, and accessibility of critical path assets between companies all help M&A partners move faster and make fewer mistakes along the way.
4. Higher probability of acquisition
The cloud can also be a vital part of the M&A negotiations process, helping potential buyers separate the wheat from the chaff. For example, startups can use the cloud to show exactly how their products and services will add value, giving demonstrations and proofs of concept.
In general, your company is more appealing to acquire if your data and analytics are hosted in the cloud. This is largely because the business trend lines are clearly moving in that direction. According to IT research and analysis firm Gartner, by 2020 more than half of new business intelligence and analytics software licenses will be for products in the cloud.
Being in the cloud before an M&A deal doesn’t just give startups the benefits listed above, it also saves the M&A partner from having to worry about a time-consuming cloud migration project.
Cloud computing clears away many of the typical IT roadblocks for successful mergers and acquisitions. Moving from on-premises to a cloud-based solution before or during the merger will greatly increase the chances of success in an M&A landscape that’s already challenging to navigate.
Need advice on how the cloud should play a role in your next M&A deal? Datavail’s team of highly skilled cloud computing experts can give advice on your business needs and objectives. Get in touch with us today to learn how we can help with your cloud strategy.
This blog post discusses the release of Oracle Analytics Cloud, a service that includes Essbase Cloud, Business Intelligence Cloud and Data Visualization Cloud.