DQM Group, the data value management expert, has launched its Data Information Pack - a new product, which helps guard against company value degrading post-acquisition. The service analyses the target company’s customer and prospect data, and develops effective strategies to improve data standards, data security and drive value and enhance future profitability.
An increasing number of trade and financial buyers have recognised the critical value of customer databases, and are keen to understand more about the quality – or indeed legality – of customer and prospect data held by the companies they are acquiring, not least that valuable customer data has been held securely.
Private equity firms, venture capitalists, investment banks, accountants and management consultancies are amongst the pre-launch users of this new service. End clients of DQM Group come from sectors such as media owners, utilities, telecoms, lifestyle, marketing services, logistics, financial services and mail order.
Although the huge leveraged buyouts of 2007 have disappeared as a result of the crisis in the financial markets, venture capital and M&A activity appear to be holding up well in 2008. Venture capitalists and mid market private equity firms are most optimistic amongst private equity firms, with over three quarters (77%) of venture capitalists and over half (53%) of mid-market firms predicting higher or the same returns in 2008.
However, The character of mergers and acquisitions, and of private equity buyouts is changing. Trade sales are becoming a preferred exit over IPOs; consolidation and divestiture of non-core business are likely to fuel 2008 activity; despite fears of an economic downturn, CEOs continue to recognise the strategic importance of overseas expansion; and in some sectors (such as media) the UK and Europe are expected to offer more M&A opportunities than the US this year.
Overall, venture capitalists invested $29.4 billion in 3,813 deals in 2007 - marking the highest yearly investment total since 2001.
The total invested in 2007 represents a 10.8 percent increase in dollars and a five percent increase in deal volume over 2006. Yet at the same time, another recent report identified that 91% of deals over the last three years had failed to deliver on the objectives that drove those deals in the first place.
A key factor behind poor performance of mergers, acquisitions or buyouts, is a lack of attention paid to one of a company’s most valuable assets – its customer data.
Unless a target company’s key product is itself data-based, only the minority of due diligence routines have included a proper audit and analysis of that company’s customer database to date. However, as relevant legislation is enforced, awareness is rapidly growing of the need to understand the nature, quality and validity of customer data. Failure to do so can result in a major writedown of the acquired firm’s value.
If customer data has not been ‘fairly collected’, then it may be illegal to continue using it. Enquirers’ email records may not be used unless they have overtly ‘opted-in’ to being contacted. Duplicate, out-of-date or inaccurate records lead to marketing inefficiency, customer or prospect annoyance, and inaccurate management analysis, with the consequences of increased customer defection and poor return on investment from marketing plans and other business initiatives. The adverse affect of poor customer and prospect data standards at the highly sensitive period following a merger, an acquisition or a buyout, is magnified many times.
DQM Group’s Data Information Pack audits a target company’s database to check how it complies with:
the Data Protection Act
the European Directive on Privacy and Electronic Communications
The Direct Marketing Association best practice
Information Security Best Practice (based on ISO 27001 standards).
The DQM Group service then subjects the customer database(s) to a data hygiene and quality assessment which analyses standards in terms of factors such as:
People and businesses that have moved location
People who have died
Firms that have ceased trading
Out-of-date or inaccurate records
In addition DQM Group offers the option for customers to have the value of their customer database independently measured as part of the Data Information Pack process.
Finally, the resulting analysis is transformed through the DQM Group system, into actionable strategies to manage the company’s databases for efficient and effective business value development to deliver substantial gains in the short, medium and longer term.
Adrian Gregory, Managing Director of DQM Group, comments, “Lack of return on investment from acquisitions has been regularly documented. But only now are financiers and trade buyers recognising how critical a part is played by the quality, accuracy and legality of customer and prospect databases. This issue really can determine whether an acquisition or buyout works or not. This explains why we have had very strong interest from end companies, professional advisors and financiers alike.”
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