M&A industry gets to grips with social media

Source: Fasken Martineau

Fasken Martineau, a leading international business law and litigation firm, released today the results of a survey of senior M&A executives primarily based in the United States that leads to some compelling observations about the growing use of social media platforms such as LinkedIn and Facebook.

The study found that some 32% of respondents reported using a social media platform to communicate a transaction.

Fasken Martineau surveyed these executives before the Securities and Exchange Commission issued its April 2, 2013 report providing companies with positive guidance for communicating material, non-public information via social platforms. The well-publicized report was the result of an investigation into whether a Facebook post from Reed Hastings, Netflix CEO, may have violated Regulation FD, which prohibits public companies from disclosing material, nonpublic information to certain individuals before it is made available to the general public. This new survey from Fasken Martineau creates an opportunity to test whether the SEC's guidance alters attitudes towards social media in the M&A realm.

"Our survey revealed that senior M&A executives are certainly using social media, and some are using it to research and communicate deals," said Kareen Zimmer, a partner in Fasken Martineau's corporate and M&A practice groups. "Interestingly, however, social platforms are currently viewed by M&A professionals as having less value than other sources of information, and most don't currently see great value in social media's application outside of post-merger integration. It will be very interesting to see if the SEC guidance will impact this perception and if in fact we will see an increased acceptance of these tools in the M&A and general Finance community," added Ms. Zimmer.

Key Findings
Entrepreneurs looking for an exit should not ignore the quality of their social profiles:

  • 36% of respondents used social media platforms to research potential acquisition targets in the last year
  • 48% used social platforms to investigate companies involved in transactions.

LinkedIn and Facebook play different roles among M&A executives using social media:

  • 72% said that LinkedIn added the most value to due diligence versus other social platforms, while only 50% said Facebook added value.
  • Of those that used social media to disclose a transaction, 78% used Facebook while 44% used LinkedIn.

Even with guidance from the SEC, social media may remain a minor player in the M&A realm for some time to come:

  • Given the unsettled state of regulatory guidance for the use of social media at the time of the survey, the percentage of executives who used social media to communicate a transaction (32%) may be considered high.
  • However, a large majority (77%) said that they do not have a social media strategy specifically for M&A, 65% do not anticipate developing such a strategy, and 74% were neutral to negative on the importance of a having a social media strategy specifically to impact M&A transactions, a bias that may be difficult to overcome despite the SEC's guidance. 

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