DealMakers - Q1 2021 (May 2021)
Technology-enabled M&A transactions – the material benefits
by Charles Smith, Dirk Wessels, Cathy Truter, Craig Robinson and Noxolo Tshabalala
The advent of remote working has driven the adoption of new technologies across the board, and M&A transactions are no exception. There are numerous technology solutions to assist dealmakers on the path to completing a transaction. The most valuable M&A-enabling technology is outlined below. Key learnings in the successful adoption of such technology are also highlighted.
Types of M&A-enabling technology
While new types of technology are continuously emerging and being trialled, the broad categories below are now firmly established and should be seriously considered:
Data storage, collaboration and exchange sites: virtual data rooms have been essential for uploading and accessing due diligence documents for some time. Data rooms can be accessed from anywhere in the world, at any time. Benefits include: managing privacy through redactions and clean team rooms; managing information requests; enabling teams to complete their reviews faster and at reduced costs; and providing a definitive record for disclosure purposes. In addition to data rooms, there is an increased use of collaboration sites to share documents securely. Such sites facilitate collaboration among closed groups, for example, to comment on draft agreements or share executed copies pending their wider release, thereby reducing risks associated with version control and increasing efficiencies in deal flow.
Data review tools: artificial intelligence software that uses machine-learning technology is particularly well-suited to due diligences, which often entail reviewing hundreds, if not thousands, of documents. By automating the extraction and analysis of key provisions in legal documents, the review process can be undertaken with increased accuracy and focus, and could potentially be completed in 20% to 40% less time.
Transaction management platforms and eSignature: these platforms transform conventional transaction/closing checklists into smart portals that allow deals to be run efficiently and transparently. Parties and their advisors can access the portal to monitor and comment on different items in real time. The deal is progressed through the uploading of documents and commenting on tasks, streamlining the virtual signing process by making execution versions directly available to the targeted signatories for signing by eSignature, and creating transaction bibles at the click of a button. These platforms materially reduce the time invested in, and risks associated with, closing calls/meetings and manual version collation, making virtual signings and closings the new normal.
Document automation: these tools speed up the drafting process and reduce time, risk and legal costs. Such tools are effectively used to prepare non-bespoke ancillary or closing documents, or to establish baseline precedents, enabling lawyers to focus their time and energy on layering those precedents with client-centric, sophisticated and contextual transaction mechanics.
Remote meeting technology: while video conferencing platforms such as Teams and Zoom can substitute face-to-face negotiation and signing meetings, a deal that requires shareholder approval (particularly where shares are widely held, such as those of a listed company) needs more thought before holding a virtual shareholder meeting. Service providers, such as The Meeting Specialists, Computershare and Ince offer virtual meeting platforms that cater for this requirement and facilitate electronically-held meetings.
We have seen the greatest success in instances where the parties have taken the time, up front, to think about deal-enabling technologies. This has, in our view, become an important step in the strategic planning for any M&A deal.
The parties’ objectives and needs should be the guiding principle when selecting the appropriate M&A legal technology tool: No two transactions are identical, and parties and their advisors need to consider the specific nature of a transaction, as well as data protection and security considerations, against some of the intrinsic limitations of automated systems. By keeping these in mind, the best-suited tool can be selected.
Integrate different, but complementary, tools to create the most efficient suite of technology for the deal: For example, for a remote signing, the eSignature tool and the transaction management tool should work well together. Similarly, the artificial intelligence review tool must be compatible with the virtual data room tool.
Onboard legal technology at the earliest possible point in the deal: This can make for seamless adoption by the full deal team and avoid duplication and parallel work streams (freeing up the management team to focus on critical aspects of the deal). In addition, the sooner that technology can be used to help identify risks, the greater the benefit, in terms of getting the deal done.
Onboard the deal team to be fully proficient when using legal technology: This is critical to capitalising on the technology’s benefits. There is a tendency for teams to do what they did before, a little faster, rather than doing something completely differently, which is where the real magic lies.
There are material benefits to getting an M&A deal done using technology as a key facilitator. In the present environment of social distancing, some technologies, such as those enabling virtual shareholder meetings and certain remote signing and closing meetings, are essential to concluding deals.
Smith and Wessels are Partners, Truter is Head of Knowledge, Robinson is a Senior Associate and Tshabalala an Associate | Bowmans South Africa.