Real value creation lies in balancing tech innovation with human insight

By Sarah Moore, People in Deals Lead, PwC UK

For dealmakers, acquiring a fresh, exciting tech start-up isn’t just a feather in your cap.

In today’s digitally disrupted commercial environment, harnessing exciting new technologies and scaling them across a business is crucial to maintaining a competitive edge; if you don’t adopt the latest tech, your competitors will.

That said, the conventional thinking when it comes to technology mergers or acquisitions (M&A) is that once you successfully overcome the tech hurdle, you're on the fast-track to realising value; then the hard part's over.

But while it’s true that acquiring disruptive, transformational technology is a potential game-changer for value planning, those looking to create long-term value shouldn’t be focussed on the technology elements alone.

Fuelled by technology, driven by people

Let’s not forget, the technology being acquired as part of M&A is only as valuable as the people who go with it. These are the people who understand the technology, the people who created it; the people who live and breathe it.

Tech talent has never been more in demand. According to PwC’s 22nd Annual Global CEO Survey, 67% of UK Technology, Media & Telecommunications (TMT) CEOs believe it’s become more difficult to hire talent in their industry; retaining the tech talent to complement your new technologies, therefore, is paramount.

Those looking to create value in their tech acquisition should plan not just for the potential cost of failing to retain tech talent, but incentivising the acquired talent to remain on-board and grow as part of the new organisation – rather than succumb to the temptation to jump ship predicated by the change in ownership.

It's also crucial that you don’t simply shoehorn the acquired talent into your operating procedure, nor cannibalise theirs. Acquisitions can in fact be collaborative processes, where both operating models complement each other.

Of course, successfully retaining the right talent to complement a technology business can be attributed to a more long-term, detailed approach to value planning.

 

Create the right culture to create value

Our new research, Creating value beyond the deal, which surveyed more than 600 global executives and deals leaders about how they approach value creation, found a clear link between maximising value and talent retention; 82% of deals that lost significant value were the ones which lost more than 10% of key employees.

Businesses that make acquisitions without a clear strategy to address the issue of talent are putting the potential success of their deal in jeopardy. But acquirers that focus on the cultural fit and core values of a target, including talent retention, are more likely to create value in their deals.

Of course, issues surrounding people and culture can be intangible for value planning. Nonetheless, they should form an essential part of any integration strategy.

Compare a tech startup with the larger corporate that acquires them, and there’d be no denying that they’re wired differently; their intended career paths and their goals – even their job titles – can be fundamentally different. The question you need to ask, therefore, is how you can tailor operations to them?

"Let's not forget, the technology being acquired as part of M&A is only as valuable as the people who go with it."

Sarah Moore, People in Deals Lead, PwC UK

You should also remember that even the seemingly innocuous can have an impact on culture. Factors like desk space, office plans, privacy, IT equipment, access to said equipment, even what people wear – this all contributes to the cultural makeup.

The tech talent that is set to be acquired, and the culture they create, needs to be understood at the diligence phase. That way, with key stakeholders appeased, you can develop a plan to address a culture clash in advance at the strategic phase.

In essence, successful value creation lies in recognising that there is a human element to technology-based organisational transformation.

And those who want to create value and deliver on the breathless promise of disruptive tech firms should remember the importance of – and plan extensively for – the culture and people behind the exciting new app or the game-changing machine learning algorithm.

© 2019 PwC. All rights reserved.

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

Contact us

Malcolm Lloyd

Malcolm Lloyd

Global, EMEA and Spain Deals Leader, PwC Spain

Tel: +34 629 11 83 08

Sarah  Moore

Sarah Moore

People in Deals UK Leader, PwC United Kingdom

Tel: +44 (0) 77 3460 7421

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