Recent developments have accelerated changes in our consumer behaviours and intensified our need to have everything at our fingertips from banking to health insurance filings and travel planning. We buy more and more products online, pay without cash at the local supermarket and video-call our doctor to get a prescription.
Companies that were in the process of digitizing are now in overdrive. Those companies that were resisting the trend will miss out if they do not use this opportunity to embrace digital solutions to improve productivity and provide greater value to customers, whether direct to consumers or business-to-business.
Building your own digital capabilities requires either in-house expertise to develop digital solutions or at least in-house expertise to coordinate service providers or contractors to do so. Often enough at the beginning of the process, businesses do not know what solutions or add-ons are possible which makes the articulation of a precise scope of work and budgeting with the provider or new in-house team more than difficult. In practice, solutions are developed over time with a considerable amount of ideas, brainstorming, trial and error resulting in a lot of back and forth communication between the "old business" experts and the third-party provider.
Digital M&A can be one way to adapt valuable business models to the new normal in a rapid pace to remain competitive in a changing world. The acquisition of a mature digital platform avoids lengthy in-house development while significantly mitigating the risk of failure by choosing a product which either has already proven success in the market or is close to market entry. Even if it may have to be adjusted to the traditional business model the acquisition considerably reduces time to develop and market which brings about competitive advantage in the short term and cost saving in the long term.
Besides providing this "quick route" to business model transformation, digital M&A provides additional benefits:
Realizing the full value of digital M&A requires an understanding of the ways in which digital M&A is different to traditional M&A:
This article was produced as a collaboration between Bird & Bird and OXYGY.