Traditional merger / acquisition valuation has an established solid methodology over time. The process of due diligence, legal reviews, accurate pricing of liabilities vs assets, and post merger growth projections have been long standing tools of the trade.
In the Digital Age however, a new parameter must be considered: The total cost of Digital Transformation (DT). Here the total cost includes actual costs to achieve full (or at least significant) DT, plus the opportunity cost while transforming the acquired organization from zero or the low level to where it needs to be. When considering that DT includes different and comprehensive facets such as tasks and processes, technology, personnel re-education, and even management alignment, DT can seem like a daunting task.
Key Takeaway: Digital Transformation is not easy and can be a drawn-out, costly process. The alternative however, is questionable business survival, and very large hidden costs due to process friction. The upside is that when done correctly, DT will not only tremendously increase Business Resilience and thus odds of survival, but also change the valuation parameters for organizations and tip the scales in your favor when it comes to M&A.