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2018 Is The Year Technology Will Transform M&A As We Know It

It’s virtually impossible to identify a business today that in some way hasn’t been impacted by technology. Whether it’s an assembly line in Detroit or a retailer in Arkansas or a call center in Orlando, firms use technology to simplify and streamline processes. In the end, it makes things more cost effective and with more predictable outcomes. But in the high-touch, relationship-driven world of investment banking, technology hasn’t really made its presence felt. According to some experts and industry leaders, this is starting to change.

At its 2017 Investor Day presentation just last month, Credit Suisse CEO Tidjane Thiam explained that technology is very much a part of the firm’s strategy going forward as they look to keep costs in check and increase efficiency. In a press release, Thiam said, “we aim to implement more robots and to increase the share of operating systems on the cloud by 2020.” Credit Suisse is far from the only investment bank looking toward technology to transform their business.

Deutsche Bank, which employs some 97,000 people worldwide, could see a lot more of its work handled by machines if CEO John Cryan holds true to his vision. Cryan told the Financial Times that the firm’s ratio of sales/trading staff to back office was “out of kilter” and that the bank’s processes were prone to error. The publication reports him as saying, “In our banks we have people behaving like robots doing mechanical things, tomorrow we’re going to have robots behaving like people.” Such a transition wouldn’t be out of the ordinary. In fact, according to a 2017 survey conducted by Greenwich Associates, upwards of 15 percent of investment banking jobs could potentially be cut due to technological advancements and implementation of artificial intelligence.

These transformations will likely be across the board too, not just in back office positions. In a December 2017 story, Quartz reports “finance companies are looking to automate front-office workers.” The Greenwich study puts the primary areas for such automation as research (36 percent), support (25 percent) and trading (20 percent). But all areas of banks are looking to improve their businesses with technology, which even includes mergers and acquisitions.

Reuters reported in February 2017 that the venerable Goldman Sachs is looking to embrace technology within its M&A function. The publication noted at the time that the firm was employing some 75 programmers to develop technology “to make Goldman’s elite dealmakers more productive.” The story went on to add that the team has doubled in size since 2014, handling things like equity underwriting, leveraged buyouts and deals in a number of sectors. They are also looking at client data to help in advising on potential deal targets and other types of banking activities.

Another aspect of investment banking that’s seeing the significant impact of technology is the due diligence process. During the high-pressure and high-stakes world of M&A due diligence, using the best technology is of paramount importance because information leaks can compromise or even kill a deal. Historically, the due diligence process was managed through cumbersome email chains, version updates and FTP file shares. These practices were prime for redundancy, errors or data breaches (or all of them). But in recent years, virtual data rooms (also known as VDRs) have begun to emerge as transformative tools that facilitate optimized deal flow in a secure environment. Virtual data rooms like SmartRoom uses multi-layered security that received an A+ rating in “Global Security” from noted experts Netragard.

Platforms like SmartRoom have evolved into more than just a "data room" or secure file-sharing solution for due diligence. It offers real-time content management, workflow resources, and integration with leading software programs to accelerate and streamline the business of business. For these reasons, many companies are expanding the technology of virtual data rooms into other departments like compliance and legal that need to quickly and easily share and collaborate on highly-sensitive information with multiple stakeholders. Virtual data rooms have also been adopted in Private Equity and the Asset Backed Security Market because they are equipped to handle massive amounts of complex data sets and can help streamline investor reporting.

2018 will be a big year for the adoption of technology in the Investment Banking Industry. Whether we like it or not, technology is transforming the way we do business. While it may seem like these early adopters that are investing in new technologies and processes have the higher risk, in the end, they will see the greatest return.

 

 

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