Todd Albright, Chief Revenue Officer of Merrill Corporation; Fabian Wasmus, Partner at Vitruvian Partners; Carsten Burger, Managing Director of DC Advisory; together with panel head Frank Steinherr, Partner at McDermott Will & Emery discussed digitalization and artificial intelligence as a driver of M&A.
The panel began by noting that there is more computing power in the smartphones that are used today than in the computers used by NASA during the Apollo 11 lunar mission that put the first man on the moon just 50 years ago. As technology advances, so too does the rate of our technological advancements.
Digitalization – that is the system of converting text, pictures, sound and other analog information into a digital machine readable form capable of being processed by computers - has dramatically changed, and continues to change, the way of business.
The panel discussed the many wholly new businesses, industries and technologies that have emerged as a result of digitalization and advances in computing power and noted how many traditional businesses are embracing advances in digitalization to optimize their businesses. But there are limits to the powers of digitalization and digitalization itself is quite useless. Each company and industry has to find out how to convert the vast amounts of available data that can be created or mined into new opportunities and how these new opportunities can be used best.
The companies’ attitude towards digitalization and artificial intelligence differs from sector to sector. But it is shown that even traditional sectors are dealing with this topic. Moreover, digitalization can also be seen as a cross-functional expertise. There are business models that were just not possible 10 years ago because the databases and the analytic capability weren’t there. Artificial intelligence, which is born out of advances in digitalization and computing power presents both challenges and opportunities.
Convincing people of the variety of new opportunities is one of the biggest challenges in this field. Especially in Europe, people are very skeptical regarding Big Data and data security. Because of this, lots of data can’t be used, although it is already available. Broader use of the full potential of digitalization will only be achieved by increasing levels of trust of data skeptic and the creation of government controls and industry standards to keep data protected and anonymous and, in some instances, demonstrating a clear benefit that may result from the exchange of certain degrees of privacy or other rights in favor of the advances that digitalization of such information might provide; the benefits of a better health care system or better clinical outcomes, for example.
Digitalization also affects M&A transactions. Todd Albright explained how advances that his company, Merrill Corporation, has made in digitalization have lead to reduced transaction time-lines, more in-depth diligence and reduced costs in the M&A process. Just a few years ago, for example, data rooms would be filled with physical documents whereas now it is completely digital. This brings up many advantages, such as an easier survey of the documents and a more convenient searching. The next step in the evolution is advances in artificial intelligence and machine learning software that will assist in the processing of large volumes of information.
All in all, we will see more technology transactions than ever before and rising cash flows in the technology industry, especially in the artificial intelligence sector. German investors are also looking for such opportunities.
McDermott Will & Emery