Technological progress is altering the way we live, think, and do business. Our physical world is increasingly intertwining with the virtual world. We are becoming not just physical but digital beings that live and work alongside artificial intelligence and the Internet of Things. As such, traditional businesses must also master the oscillation between the “in real life” and virtual modes of doing business. Digital deal-making is the first step into this new era.
What are Digital Deals?
A digital deal may sound like a traditional deal, like alliances and acquisitions, just conducted virtually. And, it’s true, that is a sort of “digital deal-making,” but that isn’t what we mean when we’re talking about digital deals.
Digital deals are, instead, business deals like mergers and acquisitions, but a company is explicitly acquiring technology. Transactions in the digital space — tech, analytics, software — are a growing feature of business in the information age.
Digital Mergers and Acquisitions
No industry can escape the digital touch. From AI to help us make decisions to full automation, new technologies are rapidly consuming the landscape of every sector and driving our economy forward.
In response to digital disruption, rather than building their own technologies, businesses are acquiring valuable technologies to improve their products and services for the specific demands cultivated in consumers by those very same technologies. This is the essence of digital mergers and acquisitions (M&A).
A Digital M&A can be:
- Buying software and investing in analytical tools to create a better product.
- Integrating the Internet of Things into products and services to improve their usability and longevity.
- Adapting online business models to a traditional business to remain competitive.
An example of a digital M&A is Thales, a French multinational aerospace company, purchasing the cybersecurity company Vormetric in 2016. This allowed Thales unprecedented protection and control of their data, increasing their overall valuation above the industry average.
Specific Challenges of Digital Mergers and Acquisitions
Ultimately, a digital M&A is still M&A, and most of the traditional procedures apply. For traditional companies, however, it poses unique challenges. Before venturing into the acquisition of digital assets, business owners should have a clear strategy of evolving their business structure to implement new technologies properly.
Some of these challenges include:
- Understanding the technology and how it can help your business.
- Obtaining an accurate valuation of digital assets due to:
- valuation preceding monetization and relying on abstract figures.
- Relying on qualities such as social media presence.
- Proper integration of technology within your business while retaining your talent.
From start to finish, business owners should look to an expert for guidance during sale or merger transactions. Richards Rodriguez & Skeith can help your business move toward your economic goals and ensure you understand every step of the process. Contact us today to discuss digital M&A.