M&A Automation: 10 Ways Automation Will Helps Deals in 2024

The number of M&A (mergers and acquisitions) deals have been steadily growing since 2010. And with it, the contribution of private equity firms: Their share in mergers and acquisition deals has grown from 1/3 in 2017 to 1/2 in 2022.

But with:

• High inflation and interest rates
• Supply chain issues
• Global conflicts
• Overall financial volatility

Private equity firms must digitally transform their M&A processes to get ahead of the investment curve. This article explores how M&A automation improves the efficiency of mergers.

What are mergers and acquisitions?

Mergers and acquisitions (M&A) are when two entities become one. They are used in horizontal and vertical market integrations. Supply-side benefits include of mergers and acquisitions include:

• Economies of scale & scope
• Bigger market share
• Access to talents
• Resource and plants consolidation
• Costs reduction

What are the challenges in mergers and acquisitions?

1. Delays

The average time it took to close a deal in 2019 was 38 days, up 31% from in 2010. For midsize and large deals, the time was 106 and 279 days respectively.

2. Regulations

M&A deals are subject to heavy antitrust and regulatory regulations. McKinsey has found that between 2013 and 2020, 14% of M&A negotiations, worth over $1B valuation, broke over regulatory/antitrust rulings (Figure 1).

3. Incomplete due diligence

Fraud is not uncommon in big M&A deals. In 2012, for instance, HP acquired a firm 90% more than what it was worth, because the company had cooked its books. The due diligence process is tricky but is the bedrock of a successful merger.

4. Consolidation

Whether its data or resource consolidations, merging resources can be complex. For instance, employee records might be lost in the migration process. Implication could be employee payroll delays.

5. Customer service inconsistencies

Customer care services might negatively be affected due to personnel shifts. Consistent customer service to clients is important (any stats?).

6. Organizational uncertainty

Related to customer care inconsistencies is organizational uncertainties. If a robust hierarchical contingency plan is not in place, mergers and acquisitions could result in operational halts.

What are the use cases of merger & acquisition (M&A) automation?

Pre M&A activities to be automated include:

1. Deal sourcing

If private equity firms do not know a business or an industry to invest in, they can use deal sourcing solutions (give an example from private equity automation article). The software takes in the investors’ risk appetite, interested industry, and provides examples.

2. Due diligence process

Alternative data coming from different sources, such as IoT devices (L), social media sentiment, satellites, etc., can support the due diligence process. Organizations can better assess the legitimacy of the company they are merging with during the due diligence phase.

Or companies can run automated background checks on the executives of the target company, with public data, to better know who they will be dealing with. Additionally, they can run background check on the target company’s employees to familiarize themselves with the new workforce.

Learn more about:

• Due diligence automation
• RPA in due diligence

3. Contract generation

Contract automation technology can automatically create contracts once the negotiation is done. The benefit of automating contract generation is that the repetitive work, of filling the counter-party’s info and the like, will be delegated to bots. However, these M&A contracts could be about billions of dollars value and they are not good tasks to completely automate. Humans would be reading every line of the contract and machines would be producing drafts of commonly repeated contract sections.

After the deal is concluded, PMI starts:

4. Post Merger Integration (PMI)

Post merger integration is about unifying resources. Companies can use dedicated automated tools to handle processes related to post merger integration.

For example, assets of the acquiring and the target company should be unified. An asset management software can help companies reduce human errors in this use case and streamline data transformation.

Or when it comes to intellectual property (IP), the acquired company can use an automated intellectual property software to manage, review, and renew the target company’s IPs.

5. Data migration automation

Data migration tools, leveraging workload automation and job schedulers, can automate the data migration process. These automated tools can eliminate the manual tasks associated with ETL (Extract, Transform, Load) of data from different software into a singular data base.

6. Onboarding & off-boarding

Sadly, 30% of the acquired company’s workforce is, on average, laid off after a merger. Companies can leverage employment onboarding and off-boarding solutions for:

• Restricting outgoing employees’ access
• Scheduling orientation interviews with department heads
• Automatically adding/removing employees from payroll

During and after PMI, the new buyers will be looking for ways to bring more efficiency into the company

7. Customer service

Companies that leverage chatbots in their front office tasks, such as customer service, can keep their services consistent. Withstanding any operational or organizational changes, chatbots can still answer customers questions and address their enquiries. IT teams can reprogram its knowledge base to reflect the latest company information.

8. Employee communication

Digital workers leverage RPA (robotic process automation), NLP (Natural Language Processing), computer vision, and other cognitive automated tools. They can be used to improve employee productivity by giving them easy access to key documents or ask key questions via digital workers.

9. Process optimization

After a merger and acquisition, the company might want to assess and optimize the legacy processes, workflows, and systems of the target company. Process mining and process mapping technology can give organizations an as-is image of the processes. This helps in analysis and pinpointing areas and tasks that can be automated.

10. Predictive analytics

Companies can use predictive analytics technology for creating bots that do the initial analytics of the new business landscape if they merge with the target company. For instance, financial solutions have capabilities to calculate future cash flows based on current data. Or they can stress test the company’s liquidity risks by putting it in different scenarios.

For instance, a company used process mining to assess machine failures in the target company. The insights enabled them to find a solution for early conveyor belt breakdowns during post-merger integration.

For more on process automation

To learn more about process automation, read:

• AI Resume Screening: 10 Ways It Helps Hirings Managers
• 3 Types of Process Automation Tools
• Top 10 Use Cases of Service Level Agreement Automation

And if you want to invest in a process automation tool, we have a data-driven list of business process automation tools.

We will help you choose the best one:

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