Understanding the potential of blockchain in M&A.

The process of an M&A transaction involves many different parties, like investors, lawyers, and auditors. In this process, trust and security are of utmost important aspects of successful M&A. Leveraging blockchain substantially alleviates the fences of trust, cost and security, and improves confidence and faith between parties. In this ongoing crisis induced by COVID-19, mergers and acquisitions became a crucial phenomenon as enterprises of all sizes and types seek to keep doing business as usual to drive innovation and growth. However, there are mixed business reactions over M&A deals, as most companies in the current business environment either postponed or canceled their deals.

The M&A Leadership Council surveyed 50 C-level executives and senior corporate development leaders on M&A during the pandemic. The survey found that almost 51 percent of respondents have temporarily paused the current deal activity to allow time to assess the potential market recovery timeline or to delay anticipated deals still at an early deal phase such as a letter of intent or in preliminary due diligence. However, nearly 12 percent of respondents said they were expediting late-stage deals to a quick transaction closing, while another 12 percent reported they fully intended to proceed to deal closing pursuant to successful renegotiation of valuation or terms, the survey revealed.

Blockchain in Mergers & Acquisitions

Over the decades, M&A transactions have been grown both in number and value and will continue to grow owing to the need of enhanced delivery of product innovations to customers. As the pace of technological development continues to accelerate, mergers & acquisitions will remain an indispensable strategic approach for corporations.

Blockchain has made its way into the broader technology space as its potential and business opportunities outweigh its cost and risk. As a tamper-proof distributed ledger technology, it can automatically record and validate transactions, and could significantly change how investors value, negotiate and execute deals. Blockchain has the potential to improve the M&Z industry by removing the number of intermediates. So, as fewer parties will be involved in an M&A transaction, the deal will be cheaper. This means investors will have more capital to execute other deals which might augment the number of overall deals.

The participants in the system maintain blockchain's decentralized and irrefutable ledger of transactions that help establish trust and share information effectively and securely. The technology enables an effective and tamper-proof way of data sharing between parties. It eliminates the need to provision additional infrastructure for data migration. It also facilitates real-time reconciliation of transactions between the two systems and supports real-time audit/ compliance checks that are essential in M&As.

Blockchain can be used across the whole spectrum of the M&A process, from identifying apt targets, through all stages of the due diligence into post-merger integration. It is able to minimize costs and simplify and expedite the M&A process.