A number of digital and IT innovations are having a significant impact on a company’s ability to integrate a newly acquired company or to separate a divested entity to buyers. Cloud applications (e.g., email, enterprise resource planning), cloud infrastructure and next-generation networks have made IT M&A projects less complicated and less expensive, while providing value by accelerating this transition.
The most recent innovation is robotic process automation (RPA). Many companies have started to use RPA for their data migrations or have begun to pilot its use within their enterprise as part of their innovation initiatives. This application of RPA is just scratching the surface of the potential impact of this technology in M&A transactions.
What is robotic process automation?
RPA is software that mimics human action and connects multiple applications together through automation without changing the current enterprise IT landscape. RPA technology enables organizations to automate high-volume, complex, multi-step data handling actions as if business users were doing the work, typically at a lower cost than manual processing. To accomplish these tasks, RPA understands and interprets existing applications, manipulates data, triggers responses and communicates with other systems.
Processes to consider for RPA
- High-volume repetitive transactions
- High levels of manual data capture and entry
- Interaction with multiple applications or systems
- Multiple tasks to perform a process
- Definable business rules and exceptions
Activities typically performed by RPA
- Data entry, validation and manipulation
- Data transfer between applications
- Automated formatting
- Copy-and-paste operations
How can RPA be utilized in M&A?
RPA can address three major challenges that occur when buying or selling a company:
- The ability to achieve synergy targets when acquiring and integrating a company
- The ability to quickly connect systems of the buyer with the newly acquired target to achieve deal objectives
- In divestitures, the ability to separate and support all of the major business processes that exist with available people and systems
RPA can solve these challenges and many more with minimal investment in the following ways:
- Standing up a new organization. Supporting the creation of a divested organization with data entry in back office roles in finance, HR, purchasing, supply chain and other shared services to increase the value of the transaction, instead of increasing headcount
- Integration synergy. Achieving synergies by migrating the data entry roles and support roles above to RPA in acquisitions
- Interim system integration. Establishing interim integration between disparate systems that cannot be quickly integrated through traditional technologies, enabling the buyer to begin to unlock value from the newly purchased entity
Most importantly, RPA can be deployed and be operational at the speed of M&A — typically within four to eight weeks.
What is the impact and value of RPA in M&A?
The power of RPA and its speed to implementation will, no doubt, impact the execution of M&A. The consensus among leading researchers is that potentially up to 30% to 40% of existing business processes can be automated by RPA technology in divestitures and acquisitions, based on the criteria defined above.
The cost to stand up and operate a new organization in a divestiture can be reduced significantly by leveraging RPA. In addition, buyers have the ability to achieve much more synergy realization by including RPA as part of the overall integration strategy.
Based on this understanding, it becomes compelling for IT leaders to start investigating RPA with their business executives as a solution on future deals, regardless of whether it can help solve specific integration challenges (e.g., mobile or e-commerce to mainframe integration). An M&A transaction does not need to occur for an enterprise to realize these benefits of RPA. However, it can be a great catalyst for innovation for companies reluctant to try out this technology.
“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
Where do we begin?
For people interested in learning more about the technology, there are several companies already establishing themselves in the market. To maximize results, consider engaging firms that truly bring multidisciplinary M&A teams along with RPA experience to help you unlock the value in this technology as part of your deals.
“The value of RPA has been proven in the market, yet only 50-70% of these projects are successful. Those that are successful tend to have very strong project management support from a trusted advisor with significant experience with RPA .” –Weston Jones, Partner, Global Robotics and Intelligent Automation Leader, EY Advisory
RPA offers compelling advantages for IT during acquisitions and divestitures. There is a growing list of new offerings in the market, and M&A IT leaders would be well-served to reach out to companies in this area to better understand products that can lead to significant financial advantages during a strategic transaction. While RPA is relatively new, the impact over the long-term will clearly grow, along with other emerging technologies in M&A IT. Ultimately, RPA is likely to become one of the key tools of top M&A advisors, and companies considering M&A IT integration should actively consider getting help to leverage this important technology.
A special thank you to Weston Jones, Tyler Charlesworth, and Jennifer Cole for their significant contributions to this article.