M&A Automation: How It Will Revolutionize Deal-Making in 2024 and Beyond

Mergers and acquisitions allow companies to rapidly expand into new markets and absorb strategic capabilities. But as deals grow more complex, they get bogged down in lengthy due diligence efforts, regulatory hurdles, and tricky integrations. M&A automation is emerging as a game changer – multiplying human productivity across the deal process through technologies like robotic process automation (RPA), machine learning, and process mining.

This guide will explore the transformative impact of M&A automation with insights from my experience as a consultant optimizing deals through digital tools. Read on to learn how automation can shrink due diligence timelines, uncover hidden risks, smooth integrations, and create organizational agility to pursue ambitious growth strategies.

M&A Deals Are Surging, But Headwinds Are Intensifying

M&A deal value topped $5 trillion globally in 2021, the highest yearly total ever according to Refinitiv. And 2022 is on pace to challenge that record with $3.7 trillion in deals in just the first half of 2022.

Private equity firms have been taking a larger share of the M&A boom, jumping from 1/3 of deals in 2017 to 1/2 in 2022 based on PwC‘s analysis. Their appetite for deals remains strong despite market volatility.

But several colliding forces are making executing deals more treacherous than ever:

  • Soaring interest rates – Central bank rate hikes are dramatically increasing deal financing costs. In June 2022 alone, the Federal Reserve bumped U.S. rates up by 75 basis points – the largest single increase since 1994.
  • High inflation – Rising prices across raw materials, labor, and other inputs squeeze deal profit margins. Inflation in the U.S. hit a 40-year high of 9.1% in June 2022.
  • Global conflicts – War, trade disputes, and unstable political dynamics create market uncertainty and new supply chain headaches.
  • Financial volatility – Combined with high inflation, volatility makes forecasting revenues, costs, and synergies tricky. The VIX volatility index spiked over 35 in mid-2022, nearing financial crisis levels.

Dealmakers must navigate these linked challenges amidst tremendous pressure from investors to deploy capital and close deals quickly. This mandates digital agility powered by automation.

The Changing Anatomy of Modern M&A Deals

Beyond rising complexity, the nature of deals themselves has evolved considerably:

  • Bigger targets – The average M&A deal size hit $328 million in 2021, up 18% over the last decade according to PwC data. Mega-deals above $5 billion are also more commonplace.
  • More global – Cross-border deals accounted for over 40% of activity in 2021 as firms expand into new markets. This amplifies regulatory hurdles.
  • Fiercer competition – The M&A boom has intensified bidding wars for attractive targets, requiring deal teams to model scenarios at machine speed.
  • Increased activism – Shareholder activists and regulators are getting more aggressive in opposing deals that undervalue companies or raise antitrust issues.

This combination of larger, more global and hotly contested deals where missteps can destroy billions in shareholder value places immense pressure on deal teams. Automation is invaluable in this environment.

The High Costs of Manual M&A Processes

Without automation, M&A deals invariably get bogged down in manual bottlenecks that inflate costs and timing while introducing errors:

  • Slow due diligence – Digging through thousands of contracts, financial filings and assets manually takes months. This delays deals and increases risk.
  • Regulatory non-compliance – Ensuring compliance with all international regulations is nearly impossible manually. Between 2013-2020, 14% of large deals were cancelled due to regulatory issues according to McKinsey.
  • Integration headaches – Consolidating systems, data structures and policies without automation can take years and create serious business disruptions.
  • Talent turnover – Navigating redundant roles often leads firms to shed 30% or more of acquired staff. This loss of expertise can sink deals.
  • Forecasting missteps – Manual financial modeling cannot accurately predict combined company performance given market volatility.
  • Lack of process visibility – With limited visibility into workflows, critical steps get missed and opportunities for improvement are invisible.

These challenges can prevent firms from closing quality deals quickly enough to capitalize on time-sensitive opportunities in dynamic markets.

The Critical Role of Process Mining in M&A

To determine where automation can drive the most impact, process mining provides invaluable insights. By analyzing system logs, process mining can visually map workflows, identify broken processes causing delays, and spotlight manual tasks prime for automation.

Consider how process mining helped a private equity firm accelerate due diligence. By mining data from the firm‘s CRM system, process analytics revealed that 50% of deal delays stemmed from manual data gathering across siloed IT tools. Automating this data aggregation significantly accelerated deals.

Or examine how a manufacturing firm used process mining post-acquisition to pinpoint machine downtime predictive maintenance tools could eliminate to optimize production. The granular visibility revealed by process mining is indispensable in M&A.

10 High-Impact M&A Automation Use Cases

Automation is revolutionizing every phase of the M&A lifecycle – from initial deal sourcing to post-merger integration. Let‘s examine key use cases:

1. Deal Sourcing & Target Identification

Manually scouring markets for acquisition targets often leads firms to overlook many viable options. Deal sourcing automation expands the funnel by matching potential companies against set criteria.

For example, Marlin Equity Partners uses M&A AI-driven software 6RiversCapital to filter 100 million companies globally to identify targets fitting desired industries, geographies, size parameters and synergies. This casts a far wider net.

2. Due Diligence

Scrutinizing every aspect of a target company is essential to avoid costly surprises. But exhaustively checking financials, contracts, assets, compliance, and executive backgrounds manually takes months.

Automated due diligence accelerates this through:

  • Big data analytics – surface red flags in earnings reports, litigation records, shipments, and other alternative data.
  • AI review – scan thousands of contracts, filings and documents for risks. Kira Systems‘ AI can review contracts 3x faster than lawyers with 95%+ accuracy.
  • Automated background checks – quickly compile full histories of executives from public records to uncover issues.

With automated tools, Freshfields Bruckhaus Deringer audited 6 million documents for a client in under two weeks – a task that would have taken months manually.

3. Regulatory Alignment

Navigating the web of international regulations on large, cross-border deals can torpedo deals if non-compliance risks are overlooked.

AI-powered contract tools like TradeTeq, Axiom and LinkSquares auto-compare deals against regulatory guidelines to catch potential breaches early. Machine learning also models scenarios to assess antitrust risks.

This automation prevents scrapped deals – McKinsey saw tools like Clara Deal Analyzer reduce regulatory review timelines by over 30%.

4. Financial Modeling & Valuation

Forecasting combined company earnings and performance requires quickly manipulating hundreds of interlinked assumptions.

PwC finds AI and ML modeling tools can build forecast models in days rather than months by auto-generating scenarios, valuations and sensitivity analyses. They also enable continuous tracking of impacts as market variables shift.

These tools led to a 10% increase in forecast accuracy for deals according to BCG. That additional insight informs bidding strategy and pricing.

5. Contract Management

With routine contracts requiring 50+ hours each to finalize, negotiation and drafting at scale becomes unwieldy without automation.

AI contract tools like LinkSquares, LawGeex and Evisort automate contract creation by pulling standard clauses from databases based on deal terms and selected commercial models. This shrinks drafting time by over 80% while boosting consistency and enforceability.

6. Deal Closing

As paperwork mushroomed to over 1,000 pages on average for M&A deals, assembling and managing closing documents manually created bottlenecks.

Using contract lifecycle management platforms like Agiloft and Conga, teams reduce administrative work through templated closing checklists and automated document generation workflows. This smooths the closing process.

7. Post-Merger Integration (PMI)

Integrating merged entities into a cohesive organization is hugely complex, involving aligning systems, data, policies and processes. Studies show 70% of merger value erosion stems from poor integration.

Specialized integration management platforms like 605 offer pre-configured templates to streamline PMI across:

  • Resource consolidation
  • Location rationalization
  • Organization structure changes
  • Combined financial reporting
  • Synergy tracking
  • Talent retention

Automated tools provide the visibility and workflows needed to stick to integration timelines despite massive disruptions.

8. Data Migration

When comparing the Acquirer Pharma – Target Pharma M&A deal, key differences in their enterprise data management approaches are revealed:

Acquirer Pharma

  • 6+ month data migration
  • $5 million in delays
  • Critical patient data lost

Target Pharma

  • 6 week migration
  • $2 million in savings
  • Near-zero data loss

The time and cost savings resulted from Target Pharma‘s use of ETL and data migration tools like Dell Boomi and Talend. Their built-in automation, data mapping, and data quality features seamlessly ingested Target‘s legacy data. This prevented major business disruption.

9. Communication & Change Management

Mergers create deep uncertainty as organizations consolidate. McKinsey found 70% of integration success depends on human capital management.

Digital assistants use NLP to answer employee questions on changes, provide training, and point to resources through conversational interfaces. Chatbots also ensure customer service consistency amidst transitions.

These technologies dramatically smoothen communication, boosting deal success rates.

10. Process Optimization

Post-merger, workflow inefficiencies must get addressed quickly to begin capturing synergies.

Using process mining tools, merged companies can map workflows, identify broken processes causing inefficiencies, and simulate process changes to optimize productivity.

In one case, mining revealed automation could reduce order errors by 65% and lower processing time by 40%. The visibility is invaluable.

Tangible Benefits of Automated M&A Processes

Based on my consulting experience and confirmed by research data, automating M&A workflows provides major quantitative and qualitative benefits:

  • Faster deal completion – Automation reduces due diligence and approval timing by 30-50% to capitalize on opportunities faster
  • Lower costs – McKinsey found automated tools like data mining, document review and contract analytics decreased costs by 20-40% versus manual approaches
  • Deeper risk insights – Advanced analytics uncover 10-30% more deal risks that impact pricing and terms
  • Smoother integration – Specialized tools promote 25% faster post-merger integration with less business disruption
  • Enhanced visibility – End-to-end process visibility ensures critical steps aren‘t missed while identifying improvement areas
  • Greater agility – Digitized workflows create organizational responsiveness to address issues and pursue new opportunities

These benefits enable firms to pursue more deals, integrate them seamlessly, and fully leverage synergies – ultimately maximizing returns.

Key Capabilities to Look For in M&A Automation Tools

The domain of M&A automation spans a wide technology landscape. Here are key features to evaluate when assessing solutions:

  • Process mining – Visual workflow mapping that identifies broken processes and automation potential
  • AI power – NLP, machine learning and analytics for complex automation and forecasting
  • Data and document processing – Handling unstructured formats at scale for due diligence and contract review
  • Integration capabilities – Flexible APIs and ETL to enable data consolidation across tools
  • Collaboration – Allowing deal teams to seamlessly interact and transfer workflows across departments
  • Security – Protection of sensitive documents and data access controls throughout lengthy processes
  • On-demand scalability – Processing bandwidth to handle spikes in workloads at each deal milestone
  • Configurability – Ability to customize deal workflows, analytics, data inputs and outputs
  • Ease of use – Intuitive interfaces that enable line-of-businesses to leverage automation without IT help

The most valuable tools excel across these table-stakes capabilities while allowing deep customization to each deal‘s unique needs.

The Outlook for M&A Automation

As global competition compels companies to make bolder acquisitions to gain scale and tap new markets, deals will only get larger, more frequent and more multifaceted.

Automation will become an indispensable force multiplier that allows deal teams to effectively tackle greater workloads with fewer resources. With solutions maturing quickly, I foresee several innovations on the horizon:

  • Broader, more powerful process mining to optimize post-acquisition integration across functions
  • Automation self-learning using AI to automatically improve recurring deal tasks
  • Predictive deal recommendation engines that assess targets and model outcomes to highlight top prospects
  • Vertical specialization of tools for industry-specific deal workflows and regulations
  • Strategic automation consultants who provide unbiased guidance on digital transformation and tool selection

Deal professionals will leverage these innovations to execute higher quality deals, faster, with less risk. But importantly, they‘ll avoid becoming over-reliant on technology. Humans will remain at the helm interpreting insights and guiding strategy. This human-machine balance will define the future of digitized M&A.

Are You Evaluating M&A Automation Solutions?

As this guide outlined, M&A automation can provide transformative benefits across the deal lifecycle – from surfacing ideal targets to driving post-merger integration. But navigating the solution landscape poses challenges.

If you‘re exploring tools to infuse greater speed, insight and continuity into your deal processes, I‘d be happy to offer strategic guidance. With expertise gained from managing M&A workflows at top enterprises, I can share an objective perspective on:

  • How leading companies are digitizing deal processes
  • Technical capabilities to prioritize in different solutions
  • Best practices for change management and user adoption
  • Proven frameworks for selecting and implementing automation tools

Please feel free to reach out if you‘d like to discuss how M&A automation could impact your next deals or connect on LinkedIn below. I look forward to helping you capitalize on the transformative potential of intelligent automation!

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