The mergers and acquisitions (M&A) strategy is challenging, time-consuming, and expensive.
Although there have been discussions about the use of technology in M&A transactions, there has been no significant change.
There are three main problems in the M&A market-
- Information Asymmetry
- Transaction accessibility
- Data Inefficiency
To solve these three main problems, it is important to encourage individuals who promote transparency in delivering information within the platform and provide economic structure.
The traditional M&A market has a monopoly in the role of corporate analysis, valuation, and advisories.
The data inefficiencies occur in M&A because sometimes the interest of intermediaries doesn’t match with the investors or buyers.
The centralized institutions are difficult to access by the general public, and the information they gather may not be readily available to them.
The Present Position of Blockchain in M&A
The market is working toward a technology that can help lower risks and allow investors to enter into contractual arrangements with confidence, regardless of the region of the party, necessary for an international transaction.
Blockchains offer a great deal to make M&A transactions economically beneficial by introducing effective digital technology that can instantaneously record and verify transactions in real-time.
“Blockchains” have the potential to transform the way investors value an asset, negotiate, and execute transactions.
In the end, the benefits of a blockchain surpass the costs and risks.
Blockchain Features That Can Improve M&A
1. Due Diligence
Blockchains offer a database that is shared digitally among all users and cannot be modified later.
A blockchain database can be a great help in creating a permanent and irreversible record of the information. It also increases data connectivity.
And the decentralized nature of blockchain safeguards the transfer of intellectual property.
2. Smart contracts
A smart contract is a program that automatically executes transactions based on preset business standards.
In the blockchain, a smart contract functions as a decentralized, cryptographically secure method to transfer assets and regulate business operations that do not require human intervention.
Smart contracts enforce governance and enhance trust and transparency quality in the business.
Additionally, smart contracts could be helpful in post-closing activities, like the transfer of funds after the merger agreement.
3. Security Controls
Although blockchain provides a high level of security and data integrity, applications built on top of blockchain might be sensitive.
Because of their short operating span, many blockchains haven’t yet undergone testing as much as the current financial systems.
Additionally, as more people enter into cryptocurrency, the market value of cryptocurrencies will rise as well, creating perfect spots for cybercriminals to attack.
It is critical for M&A adopting firms to include cryptocurrencies that have updated and appropriate internal controls and security checks.
Many past checks and balances might not be strong enough to cover the intricacies of cryptocurrency transactions.
In a blockchain network, tokenization enables the digital transfer of physical assets from one owner to another.
But now, it offers a means of sharing ownership. This network also allows people and organizations to invest and even own sections of an asset.
Investors believe this may develop into a very economical way to acquire money and possibly financially aid projects in ways that would be too time-consuming or costly using conventional methods.
It’s important to note that, depending on the intention of the usage, tokenization is available in various forms, such as asset-backed or security tokens.
Individual shareholders who purchase fractional ownership shares in the asset share its advantages, including licensing rights, income distribution, better access, and discounted rates.
Blockchain-enabled cryptocurrencies and their underlying technology will significantly impact the overall M&A process in the future.
The “Blockchain” network will decentralize the operation and governance of the M&A market.
The blockchain-enabled cryptocurrency applications offer transparency, integrity, and effectiveness in the M&A market.
The Star Apple platform aims to solve ineffectiveness and data monopoly by designing DAO, which is now gaining popularity as a future organizational structure, by assigning M&A roles and securing economic structures.
The sellers, investors, and experts are the three primary forms of participants in the M&A process. Each one of the performers seeks a structure that can give gradual advantages through M&A activities focused on their DAO.