Digital transformation means different things to different businesses.  For some, it means taking an offline business and dragging it into the digital world, for others it can represent certain business processes from offline to digital.  Digital transformation covers the whole shebang.  For the historians out there, digital transformation (DX) truly took hold in 2014 and there has been no looking back (full history lesson can be found here).

Since the COVID-19 pandemic swept through the world, no industry has been left untouched by the accelerated use of tech.  If digitisation was not top of the priority list in 2019, by early 2020 external circumstances will have forced every hand.  To survive, businesses have had to digitise. This means that, more than ever, when looking at a potential merger or acquisition, you can no longer ignore the digital side of business.  

A recent survey from McKinsey finds that responses to COVID-19 have sped the adoption of digital technologies by several years—and that many of these changes could be here for the long haul. Digital adoption has taken a quantum leap at both the organizational and industry levels.  Across sectors, the results suggest that rates for developing digital products during the pandemic differ. Given the time frames for making manufacturing changes, the differences, not surprisingly, are more apparent between sectors with and without physical products than between B2B and B2C companies. 

 

Due diligence is undergoing its own digital transformation 

 

Thanks to this accelerated adoption of digital transformation,  there is no shortage of data to analyse in today’s digital ecosystem.   This means that digital market analysis is finally coming into its own as a crucial element of the due diligence (DD) mix. Relevant for B2C and B2B alike, today, digital due diligence has earned its place as one of the powerful suite of DD tools increasingly used pre and post deals.

F&G’s Digital Due Diligence offer helps investors and business owners discover real behavioural evidence to inform and ground investment decisions, discover go-to-market opportunities, check out the competition and see where they sit in the market.  

We are experiencing a new level of digital transformation maturity

This is all very timely because the financial markets are in state of hype (some would say).  According to Pitchbook’s 2021 Q1 European Private Equity (PE) Breakdown, many of the pandemic induced changes in consumer and business behaviour will likely be permanent, not temporary shifts, pushing sponsors to position portfolios to take advantage of the digitization megatrend. The VC market is set for great things this year.  Q1 2021 has sustained 2020’s record-breaking momentum by notching a new VC deal value quarterly high of €17.6 billion. Capital poured into a range of European startups. Given the strong pace set in Q1 and now Q2, annual records will likely be surpassed again as the year progresses.  There has never been more need for tools that can cut through the hype.

In short, while digital transformation has accelerated across the board, the speed to transformation has been guided more by whether a business offers digital or physical  products and services – rather than whether it is B2C or B2B. This means that B2Bs are leaving digital ‘vapour trails’ like never before. Trails that we can analyse to assess their performance and potential. But of course you need to know where to look and which tools to use. Which is why we’ve developed D3 – to complement traditional commercial due diligence and to future proof investment decisions.

Contact one of the team to find out more about our digital due diligence services.