The State of M&A in 2019

Mergers and acquisitions (M&A) remain one of the key methods that companies are responding to opportunities for direct inorganic growth as a result of changing business models, disruptive technologies, and shifting global markets. Improved cash flows, strengthened balance sheets, low cost of debt, and governance confidence all contributed to record M&A activity in 2018. This trend to date has continued into 2019.

Technology Rises To The Top

Acquisitions related to strategic technology plays continue to increase in the overall M&A landscape, and shorter deal cycles only exacerbate the need to apply the fundamentals of diligence to underlying technology infrastructure “fit” between companies. In fact, the technology sector has dramatically increased M&A activity, more than doubling its share of the overall M&A landscape. 

M&A market (from 6% in 2007 to 17% in 2018). 2019 Global M&A Outlook J.P. Morgan

M&A strategic planning has driven technology related acquisitions to lead the pack, followed by customer base expansion.

Top Business Drivers of an M&A Strategy

Survey respondents listed effective integration (21 percent) as the most important factors for success.

The EY Capital Confidence Barometer, comprising almost 3,000 C-suite executive surveys from around the world, shows that 56% of companies plan to make acquisitions in the next 12 months, with technology and digital disruption being two major drivers.

Digital strategy was cited by 12 percent of corporate respondents as the most important M&A driver, in Deloitte’s fifth M&A trends report.

Merger & Acquisition Integration

Merger & Acquisition Disruption

Merger & Acquisition Disruption

Robotic process automation (RPA) and integrated automation should play a pivotal role in M&A efforts, but not for the reasons that were adequate in the past.

RPA has matured to the point that it should not be thought of as a tool used to affect simple synergies across systems. Organizations should be thinking beyond RPA as a tactical tool to achieve baseline levels of process parity, and instead should be pushing the envelope during strategic planning and diligence, with the expectation that integrated automation will provide the combined organization a complete solution to more effectively manage the business.

What is the impact and value of RPA and integrated automation in M&A?

“Some of our more advanced clients have begun to integrate RPA with artificial intelligence (AI) and other emerging technologies to maximum benefit and impact to their enterprises whether it’s related to an M&A transaction or as a catalyst for innovation. We talk about RPA as the hands and AI as the brains, and working together … they create more value.” –Weston Jones, Partner, Global Robotics and Intelligent Automation Leader, EY Advisory

“It’s a way to substantially accelerate the integration of business processes and their corresponding technology without having to go do a full integration,” says a managing director in the corporate private equity business of a highly acquisitive asset management firm. “It allows you to achieve the synergies or business capabilities you’re seeking much faster than you otherwise would. At some point, you probably still need to make the longer-term, full integration investment. But it’s both an accelerator to value as well as an opportunity to at least cut some of the costs of integration. It can have a pretty substantial impact.”

Intelligent Process Automation (IPA) is already beginning to be used as a data migration tool, and as this trend continues, more organizations will take note that the underlying technologies used by RPA vendors should be included in not only the tactical use as a migration tool, but also as a focal point for a strategic overhaul of the enterprise. Source: UIPath

It does beg the question, where does an organization begin their RPA journey, in the glaring light of the opportunities and risks inherent in any M & A effort, and what are the ramifications of not thinking in terms of integrated automation across the entire business?

“Automation will enable more value to be captured through M&A,” believes Mr Barnitt. “With more bulletproof automation, buyers will have higher confidence in their ability to seamlessly combine information systems and processes. This will ultimately result in more M&A deal volume and higher prices being paid for companies. It will also have a positive effect on the M&A dealmaker, due to higher earnings visibility and greater value creation possibilities.” – David Barnitt, president and founder of Attract Capital LLC April 2018

Effective M&A activity is a primary driver of inorganic growth. It is imperative to not only proactively manage the technology challenges during the integration phase, but also use M & A as an opportunity to drive integrated automation throughout the enterprise.

An effective integrated automation effort where RPA is used as a baseline technology can provide incredibly powerful benefits to any organization that views M & A activities as a springboard for making fundamental, strategic changes to the technology landscape across their portfolio.

When properly executed in the context of an effective M&A play, integrated automation can provide lasting benefits.

  • “Demystify” your business by capturing deep insights into how your business really works. Process mining or simple process validation as part of a data migration effort.
  • Model business processes based on how you want your business to work, not simply on legacy platform “best practices”.
  • Provide a common environment that democratizes process modelling and data manipulation and abstracts it from multiple programming languages, and databases.
  • Build a foundation for finally reducing legacy code burden.
  • Bridge the gap between business users and IT.
  • Enable flexibility in business processes by removing barriers, restrictions, and dependencies across the entire technology spectrum within the enterprise.
  • Proactively plan changes to business priorities, and make “upskilling” a permanent fixture in creating happier, more valuable employees.
  • Every business unit that “inherits” this advantage becomes much more viable in the event that it is divested.