As technology has become embedded into most parts of our lives, the majority of companies have completed a digitization process. Maintaining a digital platform has become the new norm, and increasingly sophisticated technologies continue to be developed. Accenture’s Technology Vision 2019 (Vision Report), describes this as the transition to the “post-digital era,” where “digital” is a new normal and is no longer a sign, on its own, of innovation. The Vision Report highlights main technology trends that companies will need to get ahead of in order to become leaders.
The main questions related to this “post-digital shift” are; what is next, and how can companies get ahead? One possible answer appears to be “DARQ” technology, acquired through transactions with disruptive technology companies.
Emerging DARQ Technology
According to the Vision Report, 45% of businesses attribute a significant acceleration of innovation to emerging technology. One trend discussed is the growth of “DARQ” technology. The acronym DARQ stands for four different emerging technologies including; distributed ledger technology, artificial intelligence, extended reality, and quantum computing. As they develop, these technologies will have a profound impact on the way companies interact with consumers, employees and each other. For example, distributed ledger technology, such as block chain and cryptocurrency removes the third party from transactions and can enable self-executing smart contracts. Additionally, virtual reality is poised to completely change the consumer experience with on-demand and immersive interfaces.
The Vision Report also warns that it is in the best interest of companies to get ahead of the DARQ technology. It emphasizes learning from the experience of companies who did not get ahead of the previous social, mobile, analytics, and cloud (SMAC) innovation. Those that lagged behind with embracing SMAC were met with a struggle to keep up with the digitizing age. This should be kept in mind as the new wave of DARQ technologies emerges.
As DARQ technologies grow, they are set to become the “next source of differentiation and disruption” for years to come. Consequently the investments in DARQ technology seem to be ramping up steadily, as 89% of businesses report experimenting with at least one of the four DARQ technologies. Against this backdrop, the question becomes how can companies stay relevant and get ahead.
Disruptive M&A
In the context of DARQ technology, the Vision Report suggests that companies can either invest in innovation themselves, or acquire smaller start up companies specializing in such technology. As we have previously discussed, disruptive technology is an emerging driver of M&A, and as predicted, companies have an increasing interest in acquiring disruptive technology.
Deloitte recently discussed the acquisitions of companies involved in disruptive technology as “Disruptive M&A” in a recent article (Disruptive M&A Article). The focus of Disruptive M&A is different from standard M&A transactions, as it is usually geared toward accessing technologies, talent and operating models. According to Deloitte, companies that are targeting disruptive technology start ups, are often not in the technology sector themselves. This suggests a push to interface with new disruptive technologies across a variety of industries.
However, the challenge with Disruptive M&A is the inherent complexity of such transactions. The transactions are usually more rapid, and may be done in groups, executed in series or simultaneously. Adding to the complexity, is the nature of the target companies in Disruptive M&A transactions whose value may be analyzed differently. Finally, after the transaction is complete, integration may prove more difficult.
Companies who want to get ahead of the DARQ technology trend may be interested in participating in Disruptive M&A to acquire companies currently building specialization in this area. Utilizing this nuanced form of M&A will allow companies to begin acquiring and developing technologies that will soon become part of the fabric of business before the next wave of new technology. It will be interesting to follow how companies acquire and adopt such technologies, and how it might change the landscape of M&A.
The author would like to thank Lauren Rennie, summer student, for her assistance in preparing this legal update.
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