Disseminating marketing and due diligence materials via secure, virtual data rooms has been the common practice for years and today continues to be an important part of the deal making process. What's new in the last few years is the much-publicized Big Data mining of unstructured information from social media posts which may ultimately be extremely useful in drawing coherent conclusions used to measure and predict trends in consumer awareness and public opinion about a wide variety of topics.
What is commonly used today and is proving to be impactful is the usage of blogs, social media (Twitter, Facebook) and other review oriented websites (YouTube, TripAdvisor and Yelp) to gather real-time, independent third-party views on technology, products and services. For example, both Yelp and TripAdvisor provide ostensibly unbiased views and opinions from customers about a subject entity, offering relevant insight into that company's competitive positioning, go-to-market strategy, and ability to maintain or grow business. In addition, Twitter and LinkedIn are proving helpful to dealmakers in order to contact relevant industry participants and facilitate productive dialogues that result in a quicker understanding of the competitive landscape without necessarily commissioning expensive industry studies. Even tools such as Google Maps often allows investors and financiers the ability to virtually tour a specific area without having to necessarily go there in person to get a broad sense for the aesthetic attributes.
Technology and Platforms Make Data Mining Easily Accessible
There are a variety of data analytic businesses available with the capability to mine social media including HP, Oracle, Tableau Software and Qlik Technologies. According to recent press accounts, hedge funds such as Point72 Asset Management and Bridgewater Associates appear to be joining those already using Big Data technology to assist in trading strategies. In fact, it was recently reported by the WSJ and CNBC that an unnamed trader (likely a computer driven application and not a person) executed a bullish trade in Altera call options (making $2.5 million in the process) seconds after a rumor of its soon-to-be-announced acquisition by Intel appeared on the Twitter feed of a Wall Street Journal M&A reporter. This technology obviously adds value when trading debt and equity of well-known companies but it can also create deal value for buyers and sellers in the middle market. In this context, the technology simply allows users to gather information more quickly and inexpensively.
Further, a tool less widely used, but incredibly valuable for data mining and primary research is a search engine's syntax rules (or "Boolean Searching") that allows users to customize search results to exclude certain words, explicitly include only a string of words, or search specific websites or file-types. In a world of uncategorized and mostly anonymous data scattered across the Internet, using Boolean Searching allows analysts and researchers to target those areas of the Internet where the most valuable data likely lies.
There are, however, areas in which technology is limited in its use in the deal making process. Hands-on due diligence and interfacing with management teams directly is the most time-consuming and least likely to change significantly. For example, reviewing an electronically distributed offering memo and listening to an early stage management presentation conference call is a fairly common way for parties to determine if there is interest at an early stage. Although this could be done via video conferencing, it seems unlikely that investors will ever be fully satisfied without the face-to-face dialogue that is so critical when millions or billions of dollars are at stake.
Excluding the use of technology from the deal process isn't a topic for discussion these days as it seems everyone is using it. The only question left remaining is whether some firms have a leg up on their competition by being more facile, aware or open to emerging due diligence and unstructured data mining technologies.
Kevin Cullen is a Managing Director of CIT Commercial Finance, covering the Communications, Information Services & Technology as well as the Entertainment, Gaming, Sports & Media groups, overseeing the teams' underwriting efforts for new business transactions. Cullen has more than 20 years of experience in the finance sector. He received his BBA in business from St. Bonaventure University and his MBA in Finance from West Virginia University.
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