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Leveraging Technology for Due Diligence
- 1. Leveraging Technology for Due Diligence April 27, 2017 Chris Carnahan President Chris.carnahan@carnahangroup.com Clevonne Jacobs Associate University Counsel Vonne.Jacobs@duke.edu
- 2. Agenda • Utilizing technology as a disrupter or enabler • Expediting transactions and identifying risk factors in mergers and acquisitions • Quantifying right-fit target acquisitions • What to look for in data rooms • Time is the enemy of the deal • Minimizing costs © Carnahan Group 2017
- 3. Technology Cannot Replace Professionals • Deals have heartbeats • Not for novices or the faint of heart • Technology is a tool – there is no such thing as an IT “solution” • Professional judgement cannot be outsourced or replaced • There are too many intangibles that need to be accounted for to waste human capital on the mundane © Carnahan Group 2017
- 4. Fee-For-Service Paradigm • Are we living in a fee-for-service world (per-hour billing), while our clients are moving to a quality and outcome-based world? • How do we: • Drive more value into the transaction process • Increase speed of decision making • Lower costs • Can technology help healthcare organizations manage some of the most subjective and complex challenges in a deal, such as finding a partner? © Carnahan Group 2017
- 5. Getting The Deal Done Is A Lot Like Dating © Carnahan Group 2017
- 6. Dating Today Is Much More Efficient And Effective – Deals Should Be Also © Carnahan Group 2017
- 7. Humanize the Extraordinary Systemize the Ordinary • Use humans for: • Creative thinking • Forming personal relationships • Advancing ideas • Pattern recognition • Integration of unrelated concepts • Understanding emotions and human irrationality • Use technology for: • Routine and redundant tasks • Calculations • Boring tasks • Step-by-step programable processes (algorithms) • Searches • Artificial intelligence and neural networks • Sequence and pattern identification © Carnahan Group 2017
- 8. The Dating Game • Getting Out There • Desire • Attractiveness • Connection • Getting to Know Each Other • Strengths and weaknesses • Complimentary style, culture, values, etc. • One-night stand or heading down the aisle • Meeting the Parents • Managing interference • Anticipating and overcoming objections © Carnahan Group 2017
- 9. Getting Out There • Healthcare market is like internet dating – lots of buyers and sellers • If you only go to one bar, and one of the two people find you attractive, that’s your only choice • Pretty yourself up – put on a little lipstick • Signal to the market that you’re “single and ready to mingle” • Highlight your best features • Show them what makes you better than everyone else out there • Be accessible – “why you?” • Show them who you are – of course, this requires that you know yourself • Show them what you’re made of • Choosing vs. being chosen © Carnahan Group 2017
- 10. Getting To Know Each Other • Timing is everything • Get your data room set up early • Understand what you’re going to share and with whom and when • Use technology to mine the data from start to finish on both sides • Due diligence is a two-way street • Don’t want to put yourself in a position where you can be taken advantage of simply because you didn’t know your potential partner • Also don’t want to have your top talent distracted by the low hanging fruit, instead of focusing on generating value (strategic or otherwise) – highest and best use • Information is power – don’t give away your power © Carnahan Group 2017
- 11. Meeting the Parents • Using technology to mine the data from start to finish on both sides • It’s not a good look when the PI tells your soon-to-be-in-laws about his felony record, when a simple Google search would have told you everything • Do everything you can to avoid the “I told you so” • You’re going to have to live with the each other after the transaction • Avoid target lock, i.e., falling in love with the deal • What are the things you MUST know before it’s too late – where is that information and how do you get your hands on it? • Scores of advisory firms in the marketplace that have efficient processes, excellent infrastructure, and technology to help you speed up the process and lower the costs © Carnahan Group 2017
- 12. Embracing Technology https://jackfisherbooks.com/tag/artificial-intelligence/ © Carnahan Group 2017
- 13. Singularity is Near © Carnahan Group 2017
- 14. Not just for Manufacturing • The legal profession is on the cusp of a transformation in which artificial-intelligence platforms dramatically affect how legal work gets done • “Profound reforms" will occur in the legal sector over the next decade, estimating that nearly 40 percent of jobs in the legal sector could end up being automated in the long term • Over 100,000 jobs in the legal sector have a high chance of being automated in the next twenty years, according to extensive new analysis by Deloitte © Carnahan Group 2017
- 15. Technological Transformation 1. Digitize-it becomes represented in ones and zeroes 2. Deceptive-technologies get introduced and it takes a while for them to get up to speed and right 3. Disruptive-technologies then play a role in subverting established industries 4. Demonetize-money comes out of the equation 5. Dematerialize-the technology itself is disappearing 6. Democratize-access becomes available to anyone © Carnahan Group 2017 The 6 D’s of Exponential Growth Peter Diamandis
- 16. Benefits of Virtual Data Rooms • Set-up is fast and efficient (minutes) • Relatively low cost • Digitally secure data and secure permissions • Documents control and efficiency over paper process • Coordination and containment of communication • Access to more bidder’s and better understanding their intent • Virtual tours save time and resources © Carnahan Group 2017
- 17. Files Simple to Create and to Upload © Carnahan Group 2017
- 18. Look Who Is Coming to Dinner © Carnahan Group 2017
- 19. Inside the Data Room • GIS (mapping) tools to identify market type • Population health tools to measure opportunities • Access issues in community • Not just about discharges • Data mining • OCR readers • Identifying certain words makes diligence 10x easier • Keywords such as referrals © Carnahan Group 2017
- 20. Data Mining • Beyond the financials • Predictive analytics • Business intelligence • Unstructured data • Intangibles • Intellectual property rights • Ownership rights • Contracts © Carnahan Group 2017
- 21. Risky Business • Physician contracts • FMVs • Expiration dates • Compliance structure • Implementation of technology • Contract management tools • EHMR © Carnahan Group 2017 • Contracts not signed by both parties • Contracts that have been amended but without the amendment terms signed • Missing or unsigned board minutes or resolutions • Missing or unsigned stockholder minutes or resolutions • Board or stockholder minutes/resolutions missing referenced exhibits • Incomplete/unsigned employee-related documents, such as stock option agreements or invention assignment agreements • Incomplete patent documents • Incomplete capitalization table • Missing stock purchase agreements and related investor rights documents https://www.forbes.com/sites/allbusiness/2016/08/15/the-importance-of-online-data-rooms-in-mergers-and- acquisitions/#4b5e44933566
- 22. Contract Mining © Carnahan Group 2017
- 23. © Carnahan Group 2017 Contract Statuses
- 24. Disrupter or Enabler? • Demonstrating the advantages of technology from the pre-point of identifying your targets, to post-closing • Wrapping your hands around the closing risks • Game plan for your first 90 days • Advantages of technology at every stage of the deal • Can you use technology to align the purpose and also ferret out when someone is not in an alignment? • Very early in the game people are screwed up • Get out before you tattoo his name on your derrière • Once people have their heart set on it they will be in front of the OIG with billions of dollars in front of them… © Carnahan Group 2017
- 25. The Really Expensive Part of the Deal - Divorce • Real costs that people forget • The breakup and burn rate is expensive • Career derailment • Opportunity costs • Litigation © Carnahan Group 2017
- 26. War Stories © Carnahan Group 2017
- 27. Be a Hero: Use Technology to Get the Kiss © Carnahan Group 2017 Male Professions That Woman Prefer to Kiss Percentage Military Men 31 % Lawyers 27 % Accountants 22 % Athletes 11 % Other 9 % Female Professions That Males Prefer to Kiss Percentage Lawyer 36 % Marketing 21 % Advertising 18 % Teacher 9 % Physical Therapist 5 % Other 11 % http://www.statisticbrain.com/kissing-statistics/ Spider-Man is a Marvel Comics superhero.
- 28. Questions? © Carnahan Group 2017
- 29. www.fmvmd.com
Editor's Notes
- Transactions are complex living organisms They have their own life force They grow and change They struggle to survive They must be guided by experienced and patient hands – highly trained professionals with significant experience and specialized expertise Transactions and legal work are complex and therefore need highly trained professionals with years of experience Technology is a tool, not a solution – no matter what your IT people tell you Oftentimes in opposition
- back in the 90s dating was a lot like this when Clarence Worley had to figure out what the heck Alabama Whitman was all about https://www.youtube.com/watch?v=W5-CyWvTY-A
- Or use technology to be the best choice Or at least improve your odds, save time and money
- Machines == information finders Humans == information leverages
- ... a future period during which the pace of technological change will be so rapid, its impact so deep, that human life will be irreversibly transformed. Ray Kurweil -Utilizing cutting-edge technology to ensure speed, affordability, and compliance. -The enemy of the deal is time -Data-driven decision making -Transparency across system -Understanding regulations and potential risk-factors -Getting rid of the billable hour mind-set -Not necessary for lawyers and valuation analysts talking for hours on the phone; billable hours
- Lawyers could be the next profession to be replaced by computers Dan Mangan | @_DanMangan Friday, 17 Feb 2017 | 1:55 PM ET http://www.cnbc.com/2017/02/17/lawyers-could-be-replaced-by-artificial-intelligence.html -Utilizing cutting-edge technology to ensure speed, affordability, and compliance. -The enemy of the deal is time -Data-driven decision making -Transparency across system -Understanding regulations and potential risk-factors -Getting rid of the billable hour mind-set -Not necessary for lawyers and valuation analysts talking for hours on the phone; billable hours
- -Utilizing cutting-edge technology to ensure speed, affordability, and compliance. -The enemy of the deal is time -Data-driven decision making -Transparency across system -Understanding regulations and potential risk-factors -Getting rid of the billable hour mind-set -Not necessary for lawyers and valuation analysts talking for hours on the phone; billable hours
- Things you can use technology to identify – bring to the attention of the appropriate people what things need to be addressed and when
- The Premise: Transactions are tough and humans have to get the deal done
- Important lesson about Cameras: talk about Kodak camera; digital-put in photo; how do we take this lesson and put it into our own industry.