The study comes from the company Noerr together with the Technical University of Munich, and it looks at the cultural changes as well as the technological adaptations that come with the acquisition of new companies and the process of merging two companies together. Primarily this focus is with ‘acquisition motivation’ and the creative energy that this unleashes as companies gain access to new business models and the resultant digitalisation strategy that emerges as the old ways of working are torn up and companies start with a blank slate. While based on German businesses, the general trends are of global relevance.
The research is based on recent studies of German businesses and the adaptive responses to mergers and acquisitions, which are often driven by scale and the need to formulate a digital business strategy. The research study is titled “A blueprint for digitalisation: How M&A and clear strategic planning can help German companies build a digital future.”
Although mergers and acquisitions are invariably tied to the same motivational factors, they are legally distinct. A merger refers to the consolidation of two entities into one entity. In contrast, an acquisition occurs when one entity takes ownership of another entity’s stock, equity interests or assets.
Why firms need a digital strategy
The researchers polled 150 business professionals based in Germany. The central research question was the extent to which businesses were undergoing digital transformation and the influence that mergers and / or acquisitions played in the shaping of digital strategy.
The findings are of relevance to firms, especially those which have not taken the importance of a digital strategy to the executive level, according to Isabell Welpe of TU Munich. She states: “Companies that have an underdeveloped digital strategy or none at all face greater challenges in the digital transformation of their business models.”
M&A driven by acquiring digital know-how
The reason for looking into this was a reflection of a tend within the German enterprise system where the number of merger and acquisition transaction that were motivated by a need to digitalize services rose from 6 to 25 percent over the period 2013 to 2017. The 25 percent of companies which declared digitalization as a driver for merging or acquiring new companies indicated that a motivator was the opportunity to transform their enterprises into new business models, with digital strategy at the heart.
While some companies can evolve a digital strategy organically, by acquiring the assets of another company, this was called out by many companies to be the best means to acquire the digital ‘know-how’ necessary to achieve digitalization goals. In addition to technical expertise and the employees themselves, companies obtain organisational structures, culture and management information systems. This suggests an importer driver for mergers and acquisitions was with one business realizing that it lacks one or more factors necessary for achieving digital transformation success.
Digital focus needs to be with decision making
The survey also looked at the extent that companies are embarking on digital transformation and where the focus was now and needed to be in the future. The first finding was that the split between companies that have a defined digital strategy and those which do not was split almost 50:50.
As to where digital technology is being orientated, with the majority of companies this was being applied mostly towards front-end customer-facing or operational functions like purchasing, production and distribution. Where digital transformation efforts appear to be lacking within German firms was with the digital tools that can help with decision making – big data and artificial intelligence. The researchers viewed this underdeveloped area of digital decision making as needing the greatest attention if businesses are to harness the full potential of digital transformation.
