Whether you’re taking steps to acquire another company, or are in the process of merging with another, the subsequent transition period allows us to delve a little deeper into the assets involved. The consolidation of multiple businesses via mergers and acquisitions (M&A), aims to successfully connect these separate businesses and reform them as one entity all through a series of complex steps and formal transactions.
This is where highlighting the importance of digital due diligence is crucial.
What is digital due diligence?
You may be familiar with the term ‘due diligence’, which involves the assessment of a company’s infrastructure, finances, and operations. In today’s digitised world, these meticulous examinations extend to the digital assets of the company in question, highlighting everything from their systems and data handling to their chosen technology platforms. Compliance considerations and digital security are also thrust into the spotlight, as well as any social media assets, platforms, safeguarding of privacy policies, websites, and subsequent online communities. This kind of assessment is essential in establishing an accurate valuation of a company’s digital assets.
Digital assets hold intrinsic value, and the details of these valuations will be highlighted during the digital due diligence process. Therefore, ensuring that digital assets are worth purchasing is essential to the M&A procedure as they provide investors with an encouraging snapshot into an accurate digital footprint.
Ensuring a website is worth purchasing
The business in question may have you believe that their website is performing well, but as a digital asset with a current question mark over its value, ensuring the website is worth the high cost of investment is key. To confirm it’s worth and whether you should move forward with the acquisition, some simple checks should be performed:
- Verifying the maintenance/running costs of the site
- Ensuring reliable insight of active user data in terms of potential marketing purposes
- Confirmation of domain ownership
- Accuracy of website traffic and analytical data packages, confirming visitor continuity, bounce rate, geo location and visitor behaviours
- Assessing backlink quality and referral traffic relevancy
- What sources of monetisation are in place, including third party advertising, affiliate links, PPC and even visitor donations from its online community
Justifying the cost of a website purchase
An investment of this nature can raise questions over it’s ROI, especially if there are queries about the value of the website and how well the digital asset has performed in the past. It’s reputation, improvements to the site, and the subsequent cost and time spent making any further changes, can cast doubt on the viability of this complicated investment, emphasising the potential financial risks involved.
However, the right kind of investment, and a meticulous digital marketing due diligence process, can help you pinpoint the factors that need adjustment, helping improve the website’s overall performance and place a higher value on this tangible asset. Despite these expenses, the benefits and potential revenue of purchasing a website can outweigh the costs. Including:
- Being able to hit the ground running with a profitable business model and website
- Gaining existing customer data and assets
- Taking full advantage of profitable opportunities the previous owner overlooked, including marketing opportunities, improving content quality, website optimisation and other monetisation channels
- Increasing your presence within your industry and boosting profitability by merging with one of your competitors
Associated risks of poor digital due diligence
A company’s digital assets are the key to business success or failure, which makes digital due diligence an integral part of the M&A process. It’s important that investors have a strong, transparent insight into the value and performance of any digital assets. This means that everything from their website’s performance, to their social media platforms, data handling, online security and compliance considerations must be pulled together to create an accurate digital footprint. This, in turn, can highlight potential risks and possible future growth opportunities.
We understand the importance of this crucial process, but what are the associated risks of poor digital due diligence implementation? Overlooking gaps in your due diligence and compliance process can lead to all kinds of issues. Let’s take a closer look:
Poor technical health
Compromised website security and poor data handling can lead to security breaches and mismanagement of client data.
Poor analytical systems and inaccuracies can lead to issues with business insights and the use of poor-quality data. An overly complicated or overly-simplistic analytical mode may also fail to provide accurate results, making it difficult for you to achieve the results you need.
High cost of investment
In the event of uncovering an issue with acquired digital assets after the acquisition has gone through, the high cost of the investment and the issues you now have to rectify will be felt across your business.
A digital due diligence process conducted by experts will ensure all potential issues are uncovered, and any weaknesses are brought to the table before any deal is finalised.
Improving on or fixing an asset after acquisition
No matter how well your digital due diligence reports state the assets are performing, there’s always room for improvement. This kind of investment means good asset management and a routine focus on improving their intrinsic value. This can be done in several ways, including:
- Employee training
- Applying proven marketing strategies or previously overlooked growth opportunities
- Routine, detailed asset tracking
- Focusing on brand consistency across all digital assets
- Utilising DAM software to ensure everyone is on the same page
Stay one step ahead, by purchasing digital assets
When purchasing digital assets, it’s the ROI that matters the most. While the company you’re dealing with may have an attractive website, your real interest is how this well-performing site can propel your business forward and boost your capital. Purchasing digital assets means spotting opportunities for growth and grabbing them with both hands, keeping you one step ahead of your competitors. This can involve:
- Good returns: The purchase of digital assets means, you’ll be making profit within a rapid turn-around period. This capital can then be reinvested into your business, propelling you forward and helping your company grow faster than your competitors.
- Buying up the competition: Moving in and acquiring digital assets relevant to your industry means buying up the competition and shrinking the number of market rivals, giving you a bigger monopoly of your chosen sector.
- Getting ahead of the curve: When your acquired digital assets are already performing well, you can either improve their value with increased investment, or continue to let them run in the background, providing you with a strong, additional income and giving you more time to focus on new projects and staying one step ahead of your competitors.
Ensuring extensive digital due diligence is undertaken, ensures that you have a clear understanding of the genuine value of the assets in question and that your investment has a strong return. If you’d like to help your business succeed further with the help of a thorough digital due diligence analysis, get in touch with us now.