An M&A perspective on digital transformation trends post-COVID-19

16 November 2020

Andrew McFarlane, Partner, Advisory, Corporate Finance, Mergers and Acquisitions |

“In the past, ‘digital’ used to be a strategy, but today digital is the business that people are in.” 

Kamal Prasad, BDO Technology Advisory Partner

In our latest Technology Advisory webinar on Digital PMO to increase workflow efficiency, we heard from BDO experts on how COVID-19 is accelerating the digital transformation of industries and driving businesses to undertake new technology projects.

In this webinar, Andrew McFarlane, BDO M&A Partner in the Sydney Corporate Finance team shared some interesting insights into what digital transformation can mean for both business and industry from an M&A perspective. To find out more, we sat down with Andrew and asked him some of your top questions about digital transformation and the key things leaders and managers need to think about when using M&A to assist in the digital transformation journey.

What are the key digital transformation trends we’re seeing today?

In the past five to six months, Andrew McFarlane says he’s seen a rapid acceleration of digital transformation initiatives being undertaken by businesses as well as greater clarity on what digital transformation really means.

“The term ‘digital transformation’ tends to be bandied around quite freely without much thought as to what this ‘transformation’ actually constitutes and means for the business. However, in the past few months, I’m seeing more senior leaders and executives defining what ‘digital’ is and what that will mean for their company or organisation. This means that while businesses today are accelerating their digital initiatives, they are also refining their strategy or approach to better utilise their resources in this cost-sensitive and uncertain environment,” Andrew says.

In the first phase following the outbreak, many businesses had to adopt a strong cost-minimisation focus to reduce “cash burn”. These businesses, therefore, started looking at technology as a driver of cost-efficiency – i.e. ‘how can we use tech to reduce our costs while still delivering the same or a higher level of quality to our customers?’ 

Yet as businesses have begun to stabilise, Andrew says the focus for many has now shifted to understanding how the crisis has and is affecting business models and if there opportunities that can position the business strongly in the post-pandemic period.

“In certain industries, we are seeing once ‘tried and true’ models which thrived before the COVID-19 crisis, now struggling to achieve the same level of success or even survive in this new environment”, he says.

In particular, industries such as tourism, leisure and hospitality, retail and education have suffered as previous ways of engaging with their customer base and providing services have been impacted.

More recently, Andrew is seeing a growing trend where disrupted businesses are turning to M&A in order to acquire more digitally focused business models or digital expertise that can increase the organisation’s resilience or provide diversification of revenue streams into the future.

“Many companies today are now looking at the acquisition or merger integration process as an opportunity to re-imagine their existing business and what the now merged businesses could look like and achieve in the future,” Andrew says.

Andrew explains that the businesses best positioned to thrive in the future tend to have a long-term, forward-looking focus and are strategically looking at how they can use technology (often aided by M&A) to improve the adaptability of their business model. As a result, many of these businesses are likely to benefit by riding the coat-tails of disruption rather than being hampered by it.

What are some things business leaders undertaking digital initiatives could do?

To assist businesses undergoing or looking to undergo digital transformation, Andrew says one of the best things businesses can do is to take a holistic and cross-functional approach.

“For businesses, one of the greatest value enhancements can be found in understanding how the different parts of the business work together and how they can be transformed as a whole. Whether the digital transformation focus is on marketing, supply chain, customer service or finance, understanding how that single initiative may impact other areas of the business and the flow-on effects from that is vital,” he says.

Andrew says it’s important that leaders and managers don’t get caught up in the ‘process’ of transformation and recommends regularly asking:

  • Will this initiative ultimately bring benefits to the end customer? (E.g. improving customer experiences or product/service value).
  • How will this initiative benefit the business? (e.g. protecting or growing market share, opening the doors to new revenue opportunities)

To learn more about delivering successful digital transformation projects, make sure to read our article, How to deliver a successful digital transformation project in an uncertain world.

What should boards and executive teams keep in mind when considering a new digital transformation initiative?

One of the biggest challenges for boards and executives is determining whether a certain digital program or initiative is right or their organisation or business. BDO M&A partner, Andrew McFarlane shares his top tips for boards and executive teams.


How can we help?

If you are looking to acquire digital expertise or future proof your business in these uncertain times through M&A, BDO can assist in sourcing the right acquisition opportunities and ensure each deal aligns with your broader strategic goals.

If you are undertaking or looking to undertake a digital transformation project, BDO can support with developing your business or organisation’s digital strategy to helping you execute your project with digital PMO.

To find out more see our Corporate Finance and Technology Advisory services or contact your local office.