ShortCut: The art of digital M&A - Page 2


its value chain . Digital assets need to be valuated with a “ forward-looking ” approach focusing on growth , synergies and operational KPIs .

Essentially , the two following methods can help to evaluate the asset :
• Value contribution through top-line growth : Determine additional impact on the company ’ s top-line based on expected incremental sales and margin growth , e . g . through an extended product and service portfolio , new sales channels and customer access with a significant cross-selling potential .
• Value contribution through synergies and operational valueadd : Evaluate top-line and bottomline improvements for both the acquiring company and the digital asset , e . g . through shortened time to market processes , increased cost efficiencies or best practices in digitalized sales , such as improved conversion rates and marketing tools .
Integrate digital asset with tailored PMI approach
Given the nature of the targets , not only the valuation method but also the integration approach for digital assets
differs from traditional frameworks and concepts . We see five crucial elements to be considered :





Evaluation and leveraging of digital best practices
Integration execution during the first 100 days
Cultural integration and evolution


Instead of fully integrating and therefore dismantling the digital asset per default , the tailored PMI approach requires a thorough review of synergy potentials ( e . g . top-line measures , process optimization ) and a well-targeted execution . By doing so , companies ensure sustained digital value creation overtime , andavoid anyincreaseof organizational andoperational complexity ( e . g . parallelprocesses , legacysystems andtools ).
Define PMI strategy and outline the future operating model and technology landscape of target . Decide on optimal degree of integration ( i . e . arm ’ s length vs . full integration ) toensureimpactandsynergyrealization from digitalassetfrom dayone .

0 Thorough integration planning Develop customized PMI roadmap . Enable effective PMI interfaces for both , buyer

2 and target . Assign an experienced integration lead with the “ right ” profile ( e . g . decisionmaking authority , digital transaction experiences , digital mind- and skill-set ) and add furtherspecialists toPMI work packages .



Use the momentum and execute the developed PMI roadmap carefully . Implement checkpoints to enable an iterative and agile PMI journey . Ensure that the appointed integration lead serves as gatekeeper channeling requests from the parent company , and facilitates support needs from the asset at the same time . Review the integration progress regularly and gradually leverage digital capabilities , know-how and benefits across theorganization .
Create a sustained impact from digital asset by gradually developing and shaping a new organizational culture ( i . e . digital mindset , openness to technologies and innovation ). The cultural and organizational empowerment is crucial to enable digital value creation .



Dedicated communication strategy
Open and transparent communication with employees and customers throughout the PMI process is essential to avoid potential scepticism . Internal communication should facilitate integration and value capture while strengthening the knowledge transfer .
Current economic developments have once again exposed the lack of digital maturity in companies . As a key driver , digital M & A facilitates the required digital transformation activities for these companies . Due to limited insights from traditional
approaches , adjusted valuation concepts must be applied to identify and analyze promising assets and their value-add . A clear integration strategy and concept with dedicated digital capabilities and competencies is required to
ensure a sustained synergy impact . This is the only way companies will benefit from digital deals in order to accelerate the company ’ s overall digital maturity and to improve its future viability .
© goetzpartners , 2021