Fig 1: Example of dashboard with Maintenance Key Performance Indicators (KPIs).
Some of these variables must be quantified, qualified, and compared, in addition to the average service levels of the industry where the seller is operating and the competitors, also compared with the objectives established in the 5-year horizon in order to have information and a management control once the transaction has been carried out, in the post-acquisition phase. The role of information technology in M&A has gained greater importance due to the globalization of digitization and it creates value in the processes of a Company. It is a support for the risk-free evaluation of the mentioned variables, and therefore can analyze the appropriate acquisition price. (Stein, Zureck & Jäger, 2018).
2. Technology can reduce information asymmetry:
How can technology reduce information asymmetry? With correct data collection and its subsequent analysis and processing through BIG DATA tools, of the acquired company.
Nowadays, it is possible to store files and BIG DATA through remote access to software, which is called “cloud computing” and which has become an essential tool for the development and growth of SMEs. (Zabalza et al.,). This tool makes possible have all the stored data for processing and treatment. As operations become more complex, technology and people who provide and support IT are critical drivers for resolving ambiguities. ICTs are essential in the previous phase of integration. (Larsen & Larsen, 200505-01).
There are ICTs that allow communication through the Internet of Things (IoT). In the US auto insurance market, for example, some insurance companies track driver behavior through technology to apply the correct insurance premium. For example, a driver who takes risks will pay more than a driver who is more conservative and does not assume them. It is therefore about monitoring the habits and behavior of the driver through a direct recording of the information from the vehicle’s IoT. This monitoring through technology reduces information asymmetry and adverse selection. (Chen & Jiang, 2019)
ANALYSIS: ECONOMETRIC MODEL
To support the exposed theory regarding information asymmetry, an economic analysis is carried out about how would imply in an M&A process the acquisition of E&E that are not in good operational conditions and have not been identified during the DD process. Generally, around the 5-10% of the portfolio are generating more than the 50% of breakdowns. The key is to identify all those elevators that are damaging the Profit & Losses statement (P&L).
For this we propose an econometric model that relates operational variables from the E&E operation and how they affect each other, allowing us to obtain future predictions and estimates of profitability and the return of the investment. The proposed model tries to quantify the cost of acquiring a E&E in unsuitable operating conditions, and as consequence depending on the volume of these E&E acquired, how can cause a non-return on the investment. To carry out the econometric model, first of all, is needed to define the average price values ​​of the local and regional companies that can be acquired, both for preventive maintenance, and annual repairs. The econometric model proposed can be applied to any market in any region, but we have taken the average values of the Spanish market as an example.
We define preventive maintenance as that which is carried out periodically according to the Country Regulations and execution program of each company that maintains E&E. And we define corrective maintenance as all that which is not predictive maintenance represents an economic cost for the company.
In the Spanish elevator market, we have to differentiate two segments, the residential segment composed of elevators installed in residential buildings, whose average type of installation is 450Kg (6 people), 1 m / sec of speed and 8 stops. And the commercial segment that It is composed of E&E, both elevators and escalators, in buildings such as Hotels, Shopping Centers, Offices, Airports, Train or Metro Stations, and whose diversity of average characteristics makes it impossible to determine an average type of E&E installed.
The average normal preventive maintenance contract in the Spanish market contemplates the periodic review according to the RAE and the Regulations published, which implies the periodic mandatory inspection, the attention in a maximum time of 30 min from Monday to Friday and 2 hours from Saturday to Sunday for rescue of passengers. Rest of breakdowns, the time should not exceed 24 hours, and includes labor only in preventive and corrective maintenance, and does not include material in case of corrective maintenance. Repairs are budgeted separately.
Therefore, and given the evidence that local and regional companies which are the ones that are mostly bought by multinationals, have 99% of their portfolio of elevators corresponding to the residential segment, we will carry out the econometric study in the Spanish residential market. The premises we use are the average price values ​​of the Spanish market in the residential segment shown in figure 2: