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THE IMPORTANCE OF THE TECH TRANSITION IN RE-SHAPING M&A DUE DILIGENCE

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By Merlin Piscitelli, Datasite’s Chief Revenue Officer for EMEA

 

Global mergers and acquisition (M&A) activity re-bounded to reach a new high in the first six months of 2021, with deal activity hitting $2.6 trillion. In fact, a recent report shows, EMEA markets were driving both outbound and inbound transactions, recording deals worth €578 billion in the first half of the year – a 15 percent rise on H2 2020.

Whilst this momentum reflects the digitisation of the M&A industry and bodes well for a period of continued market recovery, the priority must be on making the management of M&A as secure as possible. Otherwise, dealmakers risk financial fines and possible reductions in target companies’ value, due to insecure data transfer practices. This challenge will only become more pressing as M&A deal activity increasingly depends on collaborative tools and continues to adjust to the new Covid-era hybrid working models.

Moreover, deal makers are often required to manage the entire M&A lifecycle, from preparing an asset and conducting an efficient asset marketing process to launching a secure due diligence phase. As a result, communication has become an additional challenge, even more so when managing a hybrid deal team and ensuring an effective and secure workflow.

M&A due diligence is not just a labour-intensive process but one of the most time-intensive parts of the M&A lifecycle. With regulatory scrutiny growing day-by-day, bespoke and secure technologies such as Virtual Data Rooms (VDRs) enabled with AI and machine learning, have become essential to enabling dealmakers to do more with less whilst reducing risk and privacy breaches.

 

Merlin Piscitelli

Virtual data rooms and advanced analytic capabilities

The due diligence landscape has transformed at pace and the sheer volume of data that is now assessed has created substantial challenges. However, in recent years, virtual data rooms (VDRs) have improved the speed and security of transactions by providing dealmakers with direct access to the information needed to conclusively determine whether they should pursue a deal.

Now, equipped with advanced analytic capabilities, VDRs are once again transforming M&A activity by supporting several workflows that make the due diligence process far more efficient. VDRs enable dealmakers to exchange confidential information in a structured way, offering advanced access control to redacting or blacklining, and improving process efficiencies and operational flow. Additional applications, including two-factor authentication, further enhance VDRs and minimise security breaches throughout the due diligence process.

 

Artificial intelligence and machine learning

Whilst due diligence is one of the most important elements in the M&A lifecycle, it’s also one of the most time consuming. For example, a recent survey found that reviewing all the documents related to a transaction was the primary cause for delays. However, there is often limited time to complete due diligence activities during a high-value deal process.

Today, Artificial Intelligence (AI) and machine learning capabilities within the VDR significantly speed up the process by automating repetitive and time-consuming tasks, such as multilingual search capabilities, risk and compliance reviews, and contract analysis, so that dealmakers can focus on executing deals, rather than being caught up in endless streams of data. The accuracy of workflows is improved, while the organisational challenges which often hinder the due diligence process are solved. Moreover, by automatically sorting, assessing, and classifying thousands of documents in minutes, AI technologies are transforming the due diligence process into a more proactive and data driven operation. This not only extends dealmakers’ bandwidth by allowing them to move away from the more administrative and time-consuming tasks, but also helps ensure regulatory compliance despite being busier than ever.

For example, The European Union’s General Data Privacy Regulation (GDPR), introduced in 2018, requires businesses to strengthen their data protection processes. Failure to comply to the extensive policies can result in fines of up to 4 percent of global annual revenue, or €20 million. When it comes to M&A, the added complexity has been particularly apparent, especially as it has slowed due diligence and even caused some deals to falter.

Whilst this evolving regulatory landscape will continue to complicate some stages of the M&A lifecycle, AI and machine learning programmes will help dealmakers navigate the challenges within the due diligence process. In fact, with 69 percent of EMEA practitioners expecting data privacy regulations, like GDPR, to be a key consideration on M&A due diligence in five years’ time, the ability to search and bulk redact sensitive information within seconds will only become more pivotal to improving deal efficiency.

 

Cybersecurity considerations

Following a rise in data breaches over the past few years, cyber risk has become a prevalent threat for businesses and it has started to take a central role in M&A activity. In fact, data shows that 55 percent of M&A dealmakers across the EMEA region have worked on M&A deals that failed to progress due to concerns around a target company’s data protection policies and adherence to privacy regulations.

As a result, cybersecurity audits are now a vital component of the M&A due diligence process, and today’s technologies offer a far more efficient approach. From categorising contracts and indexing their content for searching, to dynamic reporting on the security protocols of a business, machine learning and data analytics provide vital insights during the research stage of due diligence.

By delivering an in-depth assessment, these advanced technologies offer dealmakers crucial business intelligence and a comprehensive assessment of a business’s security policies. Ultimately, this analysis will better equip leaders to make proactive decisions and speed up the timely due diligence process.

 

Looking ahead

The Covid-19 pandemic triggered a period of unprecedented economic upheaval, however, with M&A deal activity accelerating, we should expect to see a competitive bidding landscape emerge with new market players pushing valuations higher.

Amid this backdrop, the tech transition is changing the dynamics of M&A deal activity and, once considered a differentiating advantage, digitisation is now paramount to the M&A lifecycle, ensuring greater speed, accuracy, and security across the due diligence process. Therefore, companies must ramp up their digital capabilities or run the risk of a deal unravelling and them being cast aside in favour of a more tech savvy market competitor.

 

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TINTRA PLC FINALISES JOINT VENTURE WITH ARTIFICIAL INTELLIGENCE PARTNER TO BUILD INDUSTRY CHANGING REGULATORY TECHNOLOGY

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TINTRA PLC FINALISES JOINT VENTURE WITH ARTIFICIAL INTELLIGENCE PARTNER

Innovative fintech company, Tintra PLC(https://tintra.com/), has formed a joint venture with award-winning Artificial Intelligence and Machine Learning business, TMC2, via its subsidiary Finsensr.

The Joint Venture will utilise or create advanced, end-to-end AI tech – some already patented – to revolutionise how compliance between developed and emerging market economies works. This exciting tech stack includes the utilisation of lightning-fast large scale predictive modelling and semantic embeddings of financial data; together with the development of scalable efficient solutions based on customised shallow classifiers, deep learning, and Bayesian inference for robust and explainable predictive modelling.

Tintra is focused on enabling financial institutions, EMI’s, multi-nationals, and large corporates in the emerging world to gain access to banking systems that understand their geographic need. Using pioneering payments technology and compliance infrastructure will evolve the global banking industry. Where other fintech’s iterate, Tintra will innovate across the space.

In forming a joint venture with TMC2 – the team behind Mashtraxx, the AI engine being used to power a multi-billion dollar US based social media platform – Tintra aims to eliminate or radically improve the well documented emerging market issues of KYC & AML. The mission is to utilise these solutions to democratise financial regulation and level the playing field for all markets and make access to the global market place as seamless in Africa or Asia as it is in Europe or the United States.

 

Gary Wright, lead for TMC2 in the transaction stated, said “We are extremely excited to enter into this long-term partnership with Tintra to support the expansion of its business through the use of our leading-edge artificial intelligence. 

Our in-house team includes PHDs in Artificial Intelligence & Machine Learning. A Senior Executive Team with experience in the financial sector across financial services, Technology, Corporate banking, Investment management, Fund Management, and transaction services. With our key personnel gaining experience in institutions including Sungard, Mann Group, Royal Bank of Scotland, M&G, Prudential, Simplex Technology amongst a host of others

We are setting out to create the next generation of intelligent automated AI RegTech that we are confident will help power another billion-dollar unicorn, like Mashtraxx before it. We hope that this will revolutionise how the financial services industry fulfils the complex demands of KYC and AML compliance and regulatory legislation”

Tintra PLC is publicly listed on the AIM market of the London Stock Exchange and also available on the OTCQB Venture Market in New York.

In early November 2021, the PLC unveiled plans to raise additional capital to accelerate its growth strategy.

 

For more about Finance Derivative.

 

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CELLPOINT DIGITAL PARTNERS WITH VYNE TO ENABLE INSTANT OPEN BANKING PAYMENTS FOR MERCHANTS

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CELLPOINT DIGITAL PARTNERS WITH VYNE TO ENABLE INSTANT OPEN BANKING PAYMENTS FOR MERCHANTS

The partnership will allow CellPoint Digital customers to incorporate Vyne into its payment ecosystem and access instant payments without a need for direct integration.

 

Payment orchestration leader CellPoint Digital today announces a partnership with full stack account-to-account (A2A) payments specialist, Vyne. This partnership allows the Vyne platform to offer instant payments to CellPoint Digital’s merchant customers, allowing users to check-out faster than ever before and reducing merchant transaction costs.

Through CellPoint Digital’s Velocity Payment Orchestration Platform, merchants can easily incorporate Vyne into their payment ecosystem, providing all the speed and convenience of instant payments without the need for a direct integration with an open banking provider. With transactions intelligently routed and monitored in real-time, merchants can analyse performance and use data to cut costs, boost acceptance rates, and simplify operations via automated reconciliation.

By partnering with Vyne, CellPoint Digital’s merchants can now access improved payment experiences too. Harnessing open banking technology, the Vyne solution allows online shoppers to check out in as few as three clicks and offers settlements within seconds.

 

CellPoint Digital CEO, Kristian Gjerding, said: “The partnership with Vyne represents a significant addition to CellPoint’s payments offering. Merchants currently using our Velocity Payment Orchestration Platform can utilise all the benefits of the Vyne platform within their payments ecosystem and this will provide merchants with a greater opportunity to grow their business.

“At CellPoint, we put much stock into our partnerships. To us, they are more than simply functional and with Vyne being fellow innovators in the payments space with a track-record of supplying top tier merchants, we look forward to developing a long-lasting, collaborative relationship.”

The Vyne solution functions by using a customer’s existing online banking app to initiate and authenticate a transfer. As a result, the customer does not need to enter their account information online and sensitive financial details are never held by the merchant, resulting in a more secure process for both parties. By enabling a payment method that can be completed in just three clicks, the platform provides a simple and seamless experience that can help to reduce cart abandonment.

 

Vyne CEO, Karl MacGregor, said: “Existing payments and banking solutions are broken, and stacked against the merchants and consumers that use them. Payment methods come with a variety of settlement formats and can take anything from days to weeks to complete with customer conversions impacted by manual card data entry.

Vyne provides a new, alternative payment method for merchants and their customers and we’re delighted that more people will benefit from it through this partnership. CellPoint merchants will now experience instant fund settlement and their customers will be able to complete payments through their own banking apps in just a few taps with no card details needed. Merchants can also engage customers at the right time, through the right channels, using pay by link or QR codes, which can be sent via email, SMS, in app or used for in person sales.

“We look forward to working closely with CellPoint and empowering merchants with a level of payments functionality that can drive real, measurable growth.”

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