Why pursue M&A?
The right merger or acquisition can benefit both organizations by increasing market share, lowering costs, improving efficiencies, and diversifying the business. Walt Disney’s 2007 acquisition of Pixar Entertainment for $7.4B is a great example of this; Disney gained access to Pixar’s animation technology while Pixar accelerated their production process to make more blockbuster hits than was previously possible. Each organization profited from the strengths of the other, and the merger is widely considered one of the most lucrative in history.
For traditional consumer goods brands, right now is the perfect time to consider post-pandemic M&A activity. McKinsey reports that changes in the consumer goods landscape that were brought on by the COVID-19 pandemic—like the acceleration of health and wellness trends and customers’ return to larger and more trusted brands— have positioned larger organizations well for acquiring smaller brands on the forefront of emerging trends.
The pandemic also brought about a consumer shift to more value-oriented and private-label products; these brands are now attractive M&A targets for larger brands. Compared to time-consuming and expensive product development, it’s usually faster, easier, and more financially beneficial to acquire brands that are already trusted by consumers, have effective marketing, direct-to-consumer infrastructures in place and are growing their market share.
What are M&A data analytics?
Data analytics platforms collect, connect, and contextualize an enormous number of data sources in order to deliver actionable insights for leading companies and consumer brands. Many of those insights are crucial for day-to-day business success, such as developing products that meet consumer needs and determining truly resonant marketing claims.
But there’s another powerful way brands can harness the power of our data to drive future success: by using our tools to identify and evaluate merger and acquisition (M&A) targets.
How to use M&A data analytics in your next deal
The first step towards a great merger or acquisition is identifying the right targets. Done manually, this is a lengthy process prone to plenty of human error and bias. Now more than ever, there’s a real risk of missing a key opportunity as there are so many smaller, niche DTC players that it’s impossible to find and assess them all without multiple connected data sets that report on key business activities. If another organization acquires a target before you complete your due diligence, it can result in a lot of frustration and wasted efforts as well.
Skai expedites the early identification of relevant players, provides evidence-based validation of traditionally selected targets, and ranks targets according to your organization’s unique strategy and needs with a data-driven model based on qualitative assessments, predicted growth drivers, and other unique indicators.
This kind of analysis is only possible through multiple connected, contextualized data sets. And we don’t just identify up and coming brands; emerging trends, promising new regions, and other predictions all factor into our analysis. For those organizations that want to monitor the potential M&A landscape long-term, we’ll create a dashboard that will constantly monitor competitors and peers against predetermined parameters and alert you when a new threshold is reached. That way, you can stay effortlessly informed about any relevant changes in the market ecosystem and never miss an opportunity.
Target identification and ranking in action
A large baby care brand approached Skai for help identifying acquisition opportunities in the pregnancy and baby care fields. They were particularly interested in highlighting and screening for new and emerging technology solutions.
We started the process by identifying all of the new technologies in the field and collecting information/data points on each. These technologies were ranked based on a proprietary model that was developed to assess the strength of the opportunity. This ranking allowed us to provide the client with an objective view into the top opportunities.
How to accelerate M&A data analytics
Once M&A targets are identified, it’s critical to examine all aspects of the business to find a truly perfect fit for the acquirer’s portfolio. Skai™ can add a deeper, more objective layer of intelligence to an M&A decision by examining the target’s consumers, market, and products.
Questions such as “Is there a product feature associated with this target that we’d like to penetrate?” and “How does the target’s product meet consumer demands?” were previously impossible to answer impartially. Today, predictive models make it possible to get nuanced, data-centric answers to these questions.
For the baby care brand mentioned above, Skai’s™ solution ultimately identified 16 of the most promising solutions for a deeper dive into their most important parameters: the need addressed by the solution, the team behind the project, the solution’s competitive edge, the fit for the acquiring brand, user opinions, and openness to partnership. Ultimately, 11 solutions were determined to have the strongest potential alignment with the brand’s long-term strategy.
An M&A Data Case Study
A leading pet food brand wanted to identify small M&A targets with $100k+ in annual sales growth and assess each against a variety of benchmarks. After discussing requirements and aligning on strategy, Skai developed predictive models that ultimately identified five strong growth indicators. One of these indicators for example was: High Review Growth: A growing number of reviews correlates with a growing business.
Further modeling identified the driver combinations that are most likely to predict future success. After sharing the strongest M&A targets and the methodology behind their selection, Skai invited the pet food brand to select as many as they’d like for a deeper, more specific data dive as part of the brand’s due diligence.
Our process has been validated by the market; of the five most promising emerging brands that we identified in April 2020, four have since been acquired or received significant investment.
Ambitious organizations can get a leg up on the competition by harnessing the power of objective data to make faster, better M&A decisions.
To learn more about how Skai can unearth the insights your organization needs to succeed, schedule a demo.
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