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Big 4 survey hints at M&A strategy shifts

Big 4 survey hints at M&A strategy shifts

Australian and New Zealand firms are more likely to divest assets to achieve digital strategy than their global counterparts as digital M&A growth increases, a new survey has found.

M&A Jotham Lian 08 March 2018
— 1 minute read

EY’s Digital Deal Economy survey of more than 900 corporate executives across nine major industries in 26 countries found than over three in four Australian and New Zealand firms were planning to divest assets as part of their digital strategy, compared to only 68 per cent globally.

“The survey shows how digital disruption is at the core of today’s deal making. Digital assets are increasingly the core purpose behind constructing M&A deals,” said EY managing partner, David Larocca.

“Three in four Australian and New Zealand respondents said they intend to divest assets to drive digital strategy. This demonstrates the level of competition to get ahead digitally.”

Mr Larocca said one of the key findings of the survey was the extent to which digital priorities were driving the allocation of capital.

“It seems Australian and New Zealand respondents expect greater digital disruption in their industry, with 94 per cent considering digital priorities in capital allocation planning, compared to 90 per cent globally,” Mr Larocca said. 

According to Mr Larocca, successful digital transformations will be firm that strike the balance between between building digital capabilities in-house and buying innovation and technology to create change faster than organic growth can achieve.

On a global scale, 74 per cent of firms are looking outside their own company for digital growth with nearly a quarter choosing alliances as the primary tactic they will use to drive their digital strategy over the next 12 months.

“When it comes to the most important approach for driving digital strategy, 26 per cent of Australian and New Zealand respondents are turning to alliances, compared to 24 per cent globally taking the organic ‘build’ approach centred on R&D and recruitment,” Mr Larocca added.

However, despite the growing M&A market, the survey found that only 22 per cent of companies globally are currently undertaking cyber diligence.

At the same time, many organisations do not have all the key performance indicators (KPIs) in place to measure post-merger integration – just 34 per cent have processes to evaluate people/culture success such as levels of organisational engagement.

“Managing successful integrations is fundamental to ensuring the benefits of mergers are not lost. The joining of digital eco-systems is notoriously complex. Cyber security must become a core part of due diligence for successful deal-making,” Mr Larocca said.

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Big 4 survey hints at M&A strategy shifts
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