M&A Advisors Shift to Automation, by Jan Diederichsen
This year in mergers and acquisitions (M&A) is off to a rough start, with the demise of many of the biggest M&A deals: Office Depot’s and Staples, Pfizer’s $160-billion acquisition of Allergan, and Honeywell’s $103-billion acquisition of United Technologies. Speculators might place the blame on regulatory concerns, but according to HBR, it is not uncommon for 70–90% of acquisitions to turn into abysmal failures without any help from external sources.
How can advisors of M&A lead the industry with new strategies to “do the right deal” and “do the deal right?” What can digital do to help enhance and accelerate the M&A lifecycle process and improve the winning odds?
Automation doing the right deal
When viewed at a high level, the transaction lifecycle appears to be a good candidate for intelligent process automation, in other words software robots. But when you look closely at even a less complex transaction, we believe only select parts of a transaction are truly suitable for automation. The unique characteristics of each merger challenge the transition team as they progress through the M&A deal and they also challenge the reuse of artifacts from prior mergers in the same firms. Knowing which aspects will be best served with automation increases the likelihood of a successful evaluation and merger.
Here are three aspects where automation will add the most value:
- IT Due Diligence. Automating IT due diligence is feasible if you use frameworks to facilitate the capture and interpretation of due-diligence-related information. Third-party tools, such as CAST, can be used to assess the technical debt and risk of the target application landscape. The shift and disruption created by these tools is changing the role of the traditional strategic adviser into more of a data interpretation, bench-marking and visualization position. The bottom line is, performing IT due diligence with automation tools reduces time, complexity and costs. Who doesn’t want that?
- M&A Playbooks. Automating the M&A Playbook is feasible. We’ve been working with a major technology firm for three years, first establishing application integration playbooks, then adding infrastructure playbooks. Next, we created playbooks for mergers and divestitures. We then adopted the processes to account for specific transactions and categorized those by deal type and deal size. The playbooks cover the distinct part of the transaction, from post-strategy planning to integration execution. We now have an operational M&A center of excellence for this serial acquirer, where 15 dedicated Cognizant associates touch all the client’s IT activities for mergers and divestitures. The processes are defined and predictable, yet they are still based on an Excel model. At this point, we have started transitioning the processes into a digital operating environment that will include real-time collaboration and workflow between Cognizant and the client. While this highly automated playbook require mainly experienced transaction project managers, its opens opportunities for a new breed of M&A advisory services in which additional skills will need to be added to make this successful. These skills include transaction change management, synergy analysis, and tracking.
- Integration PMO / Transaction Health Checks. Conducting an M&A health check is possible with automation. In order to meet customer perceptions of understanding the health of the acquiring entity, Cognizant is launching a new M&A diagnostics service. Initially the service would require an in-person interaction that will be replaced by a web-based service to allow the interviewees to populate answers to pre-defined questions. The final diagnostic output will interpret the current state of the client’s transaction health that can be bench-marked against peers in the industry, across industries, and against deal types and sizes.
Of course, traditional IT M&A advisory will not disappear any time soon. Based on our experience,we expect a greater degree of segmentation of the transaction lifecycle because of the need for quick standardized results requiring new skill-sets for certain parts of the deal. Wherever automation and digital enablement are possible during a transaction lifecycle, traditional advisory may be reduced to an oversight function and project management, while deal hypotheses interpretation, data interpretation, and visualization skills will be in greater demand. It is important to prepare IT M&A advisory professionals for this change.
Do you see other areas intelligent automation can improve the M&A transaction? Let me know.
Opinions expressed in this blog are of the author and may not represent Cognizant’s point of view.
Senior Director within CBC Strategy & Transformation and the M&A Practice Line Leader for North America. Jan has worked with many Fortune…
Join our LinkedIn Group: Be Digitally Cognizant
Originally published at digitally.cognizant.com on August 1, 2016.