How technology has changed the metals M&A process

Tony Barnes
| 7/28/2023
How technology has changed the metals M&A process

Metals leaders considering merger and acquisition (M&A) investment deals in 2023 face new challenges as they navigate the process.

After an influx of activity during the COVID-19 pandemic, M&A deals remain stable in 2023, despite the strengthening of the U.S. dollar and rising interest rates. Metals companies in particular have strategically invested downstream in the supply chain to increase margin and in nearshoring and reshoring opportunities to reduce supply chain disruption and minimize transportation delays.

As metals leaders turn to M&A deals to achieve their business goals, it’s critical that they execute proper due diligence, especially in the face of economic headwinds. But it’s no longer enough to simply evaluate a company’s financials, location, customer reach, and other basic metrics to gauge the health of a business.

In an era of digital disruption, metals leaders must take technology implications into account.

While the M&A process might seem daunting with new aspects to consider, metals executives can move forward more confidently with their investments by asking the right questions. Following are four must-ask technology questions that can lower the risk of a failed deal.

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4 questions metals leaders should consider in an M&A deal

1. What technological advantages does the target company have?

The 2022 Crowe technology in metals survey revealed that technology investments have been consistently increasing year over year. As metals businesses continue to implement new technologies, metals leaders considering M&A opportunities need to evaluate whether the technological state of the target company accelerates or hinders progress toward business goals.

Questions to consider:
  • Does the target company have technology or efficient processes for technology that will provide an advantage over competitors?
  • Is the target company behind in its digital transformation journey? What will it take to bring it up to speed?
  • If the target company opens new channels and markets, is the existing technology ready to support it?

Acquiring a business for the technological advantages it offers might be part of the business strategy. But even if it’s not, technology cannot be considered an afterthought in the M&A process.

2. How receptive to digital transformation is the target company’s culture?

Change management is a critical part of the integration process for any merger or acquisition. According to Forbes, the high M&A fail rate is often caused by key employees leaving, teams not getting along, or low motivation in the company being acquired. Technology adds a new layer of complexity to integrating company cultures.

Questions to consider:
  • What is the expectation for employees regarding technology adoption? How does the culture at the target company compare with the current culture of the acquiring company?
  • What is the skill level of employees at both companies? How willing are they to adapt to new technology?
  • If duplicative applications or roles exist, how might consolidation affect the culture?

If the culture regarding technology at the target company doesn’t support or align with how technology can help reach business goals for the acquiring company, a successful acquisition might be at risk. It’s important for metals leaders to closely evaluate the cultural ramifications of an M&A deal.

3. What will it take to integrate large-scale systems?

Enterprise resource planning (ERP) and customer relationship management (CRM) systems help manage every area of a business. Metals companies that want to acquire a new business need to consider what the process of integrating large-scale systems might entail and how much technical debt could be accumulated.

Questions to consider:
  • What ERP or CRM system does the target company have? How recently was it implemented?
  • How accurately and consistently have workers been entering data?
  • What will be required to merge systems? How long will it take?

When these considerations are overlooked, companies risk investing in technology programs that exceed their budgets and schedules. Acquiring companies need to think strategically about having the right integration process and technology consultant in place to achieve success.

4. How much will it cost?

The cost of an M&A investment can be much higher than the price of the acquired company, especially when technology is a factor. Technology itself includes licenses, subscriptions, and maintenance costs – not to mention the cost of labor, additional resources, and technical debt.

Questions to consider:
  • How much will it cost to integrate, make changes to, and maintain technology?
  • Will employees need training or additional resources?
  • Will more talent need to be hired?

It’s critical for metals executives to have a complete understanding of the financial aspect of an M&A deal, including the variety of additional costs associated with the use of technology.

Step into your next M&A deal with confidence

If your metals company is considering an M&A investment or has recently acquired another business, it’s critical to consider the technologies and their subsequent integrations as part of any due diligence process. Our team at Crowe has worked alongside many metals companies in their journey through digital transformation.

With our deep industry experience and specialized knowledge in technology implementation and change management, we can help you find the right solutions to keep your metals business thriving into the future. Contact us today.

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Tony Barnes
Tony Barnes
Principal, Microsoft Cloud Solutions Leader