With integration challenges often causing many M&A deals to fail, the importance of getting this process right is essential as wealth management consolidation and transactions take place. Daata is a critical area to get right, as the author of this article explains.

Christian Davis, associate partner at UK-based commercial data solutions provider JMAN Group, explains why businesses that invest in their data infrastructure could broaden their appeal to “buy and build” investors. The editors are pleased to share this commentary; the usual disclaimers apply to views of guest writers. Email tom.burroughes@wealthbriefing.com and amanda.cheesley@clearviewpublishing.com

The growth in popularity of buy and build strategies is a reflection of the capacity of these deals to deliver greater returns than the more traditional growth and venture models. However, a buy-and-build strategy often takes a lot longer to deliver value. Often a major reason for the delay to value is the challenges companies face when trying to integrate multiple acquisitions. 

According to research by Harvard Business Review, between 70 per cent and 90 per cent of mergers and acquisitions fail. One of the reasons are challenges around integration. EY recently reported that only 32 per cent of chief information officers say that they are “significantly” meeting deal objectives such as technology synergies.

Indeed, integration has become much harder over the past decade due to the increased diversity and demands put upon technology platforms. Two similarly sized businesses, operating in the same industry with the same product or service, may have radically different tech stacks. Added to this mix is data. How companies collect, manage, analyse and apply data throughout their organisations can take a huge multitude of forms.

Often companies lack a coherent long-term data strategy. Many, especially high-growth startups, tend to favour a “make do” approach - developing their data resources in a haphazard way to meet short-term needs. 

This presents an opportunity for businesses seeking to broaden their appeal to private equity firms engaging in a buy-and-build or roll-up strategy. A company can go to the top of an acquisition or investment list if they can showcase, not only the value they bring and their potential, but also how their business operations have the flexibility to work with a disparate set of systems across multiple entities. 

Then there are businesses that decide they need to sort out their data and go for the seemingly safe fix of employing a large monolithic system-based solution. In many cases this software, although doing some things very well, doesn’t service all an organisation's requirements. They are generally inflexible, lock businesses into long-term contracts, and do not work well with other systems. That is not to say that if a company has gone down this road it is going to be inherently unappealing to investors. Rather, it is to illustrate that too often businesses perceive these systems as an efficient way to solve their data needs - for example, spending 12+ months on a ERP systems migration to consolidate all acquisitions onto the same ERP - without fully appreciating that, with more thorough research and a longer-term outlook, there may be more effective and appropriate solutions - such as a centralised data platform. 

A centralised data platform ensures that data remains the single source of truth across the organisation. By doing so, it not only streamlines operations but also enables informed, evidence-based decisions that can be scaled as the company grows. This capability is a critical factor for investors, who rely on robust data to understand a company's performance and future potential.

Having the right technology in place is only one piece of the puzzle. When we talk about how well a company could integrate future acquisitions on a buy-and-build strategy we don’t just mean technological compatibility - we really mean how all the information within the business and its processes could seamlessly merge with another company. Technology can facilitate this, but any platform is only as good as the data that is collected and inputted, how it is analysed and how these insights are applied. This is where the concept of data as the foundation of strategic alignment becomes essential. Businesses need to trust that their data is accurate and complete, creating a shared understanding across teams and stakeholders. Only then can they confidently align their operations and investments with long-term goals.

A company needs to know that what they see is the complete data picture, that its workers are enabled by the right procedures and training to obtain and leverage these insights, and that the right questions are being asked about their data. This can only be achieved by placing data strategy at the heart of your business. 

When a private equity firm is assessing both the potential of a business and its compatibility - they too want the complete data picture. They may also want very different insights about a company than it uses in its regular operations. Economic pressures and increased datafication of private equity mean that investors seek much deeper analysis of a company’s performance and potential. 

It is critical for management teams to place greater emphasis on data and analytics to support their “equity story”. Investors are even more concerned with evidencing the “how and why” when it comes to performance and trends; just saying that we have grown profitably by X per cent year on year is now not enough - it needs to be evidenced by granular data and solid analytics. 

By presenting a clear, evidence-based narrative backed by data, businesses can strengthen their equity story and provide the clarity investors need to make decisions. This not only highlights past performance but also lays out a roadmap for future growth, ensuring alignment with investor expectations.

This also allows management to showcase opportunities for further future growth, with investors being able to leverage these data “assets” to underpin their investment cases. Management teams are expected to be using these assets to run the operation, and the platforms must be able to scale with future growth - especially if M&A is a strategy that an investor would like to pursue. An eye-popping number of investments have fallen over at the 11th hour because management teams were not able to provide sufficient quality of data to satisfy the potential investors.

The reality is that if your business has a sound, well-thought-out data strategy and associated infrastructure, it will be generally more attractive to investors than a business, which although on paper has greater value and potential, has an incoherent or incomplete data strategy. Consequently, one of the most important decisions a business can make in terms of increasing its long-term value, is how it invests in, and approaches, its data management.