Guide to using RPA in Mergers and Acquisitions

M&A is a tough sport, especially if you are the one responsible for making the deal work. And, contrary to what some VDR marketers might claim, there is no silver bullet for a successful project. Successful executives use an array of tools, from the most traditional (like the balanced scorecard) to the most innovative, like artificial intelligence.


RPA (short for Robotic Process Automation) is one of those innovative tools which hold the promise of significantly improving several aspects of how M&A is done. This guide gives you an initial feeling for the possibilities, application areas and limitations of using RPA in due diligence and post-merger integration.


Contents:

Using RPA in M&A due diligence

Using RPA in post-merger integration (PMI)

Data operations

Interim system integration

Using RPA to accelerate TSA replacement

Common questions

Should I consider RPA for my M&A project?

How long does it take to implement RPA?

What does RPA cost?

How to make the best use or RPA in Mergers & Acquisitions

What’s next?


Using RPA in M&A due diligence


Before transaction announcement, the deal teams on both sides are resource-constrained and bound by confidentiality. This often puts critical team members from IT, Customer Success and Sales beyond the reach of the deal team. As a result, no comprehensive diligence can be performed on the non-financial documentation of the target.


Example: buying an e-Commerce company, or any other business where a significant portion of the value comes from target’s customer data. The acquirer has to understand whether the data is current and complete. At the same time, they cannot get access to the actual database (for confidentiality, security, and competitive reasons). This can be resolved by requesting a seller’s warranty on the quality of key data. However, if the data inspected post-Closing turns out to be incomplete or corrupted, the buyer is looking at litigation, attorney fees and an tarnished deal record instead of just acquiring another target in better shape.


RPA opens up a principally new way of doing due diligence. Thanks to its simplicity and quick deployment, it can be employed by the deal team to loop through all of the relevant data, identify irregularities and missing data fields, and conduct rule-based assessment of data quality (e.g. check if the emails are still valid). Importantly, any data operations occur within the target’s IT environment, so that the seller does not need to worry about cybersecurity or competition concerns. RPA’s user interface is easy enough for target’s management without any technical background to verify which operations will be performed by the robot.


While the benefits that RPA can offer in M&A due diligence are significant, its application field is also fairly targeted. Even when equipped with Artificial Intelligence, RPA as of today cannot substitute proper financial or legal due diligence. As suggested by the term, DD will remain the responsibility of executives responsible for making the deal.


You can think of RPA bots as on-demand, highly efficient and accurate (but not independently-thinking) inspectors which become part of your deal team at a moment’s notice. They can work with the level of access to the target’s IT systems that the target’s management can provide within the M&A process (most commonly, just through the user interface).


Using RPA in Post-Merger Integration


Once the deal is closed, the real work starts. The integration team is tasked with achieving revenue and cost synergy targets, meeting the IT integration timeline, and getting off the Transitional Services Agreement (in the case of corporate divestitures). For public acquirers, the markets are eager to hear about the progress of integration.


PMI is a complex, cross-functional undertaking, and here RPA is again one of the novel tools in the executive’s toolkit. It can be used strategically (with the intention to build out the RPA practice in the long term) or tactically (as a short- to medium-term component of the integration roadmap).


Strategic uses of RPA are similar to those outside the M&A context. Closing an acquisition (especially a major one) might be a logical moment to introduce RPA to your organization with a limited pilot project, but often executives do not want to spread their attention too thin by dividing their attention between an integration project and other digitalization initiatives.

In this guide, we are focusing on the tactical uses of RPA within PMI. These are the cases where, pre-RPA, the merged entity would have to either employ (offshore) workers to handle massive integration tasks, or wait many months until the integrated IT system is available to both companies. Below are just some examples.


Data operations


Data operations are a textbook use case for RPA: extracting data entries from the target’s system, identifying missing data fields and irregularities (e.g. wrong-type or wrong-format entries), remediating, converting and entering data. Robots perform data operations an order of magnitude faster than people and with much higher accuracy.


RPA performs particularly well where a database needs to be verified against source documentation. Coupled with AI (artificial intelligence) and OCR (optical character recognition), RPA bots can loop through gigabytes of scanned documents and make sure that the data being migrated to the acquirer’s systems is complete and correct. This is especially relevant for companies which have large volumes of legacy documentation outside the DMS (document management system), e.g. leasing contracts or environmental documentation.


Interim system integration


You might already have an integration plan signed off by the CEO and put to execution, but if its final end-state is more than a couple of months away, this means one thing: the target’s resources and customer experience will be strained for a long time. Sometimes the implementation of a state-of-the-art ERP can be several years down the road, but the company needs to hit synergy objectives long before that.


It is often overlooked but critically important that a prolonged transition puts additional pressure on your best employees, who put in extra hours to keep up customer service and internal reporting. For the first months after the deal they are enthusiastic about the change, but also anxious about how it will affect them. Losing those people to competitors can launch a death spiral with immeasurable costs to the target company.


RPA offers a quick-fix way to connect any number of IT systems and create user-friendly interfaces and reports. This improves organizational agility and takes pressure off employees (think about a customer service rep who has to juggle different systems to find customer’s information on a call, or even worse – cannot access the target’s systems at all, as was the case for a long time following Vodafone’s acquisition of Unitymedia).


You can think of RPA as assistants who will look through various systems and find the right information for the right person at the right time, and then put it in the right format (or enter ir into the right system) – all in a few seconds’ time. However, RPA is much cheaper than increasing the FTE count, much faster, and it is easy to turn off or repurpose once the need for it has subsided.


RPA can help integration managers and business unit managers achieve their integration goals using existing operational budgets.

Companies typically try to avoid introducing interim solutions. Understandably, any software implementation (RPA is no exception) comes with one-time costs, change management effort, and maintenance expenses. However, post-merger transition is a very sensitive time for any company. Both customers and competitors are on the lookout for signs of weakness or instability. If using RPA helps improve customer experience during the transition, accelerate the integration timeline and retain key employees, it will pay for itself many times over.


Using RPA to accelerate TSA replacement


Transitional Service Agreements (TSA) put in place during corporate divestitures often include cost ratchets, i.e. punitive pricing mechanisms to incentivize the buyer towards earlier transition. But even before the ratchet is invoked, TSA services unnecessarily weigh down on the buyer’s P&L. RPA requires little time to implement and scale, therefore it offers a useful mechanism to accelerate TSA replacement and provide an immediate return on investment.


Common questions


Should I consider RPA for my M&A project?


Here are some exemplary indicators that RPA might be a good investment for you:


In due diligence:

  • You could use some extra hands ploughing through documents or data, but cannot increase the deal team size

  • The target’s management don’t have the IT access level needed to properly examine the data

  • You are using deal lawyers to go through contracts in the DMS (and would rather not see that legal bill)

In post-merger integration:

  • You need to transition large amounts of data which needs to be checked, cleaned up, or reformatted

  • Your IT integration finalization is 6 months away or more, and you cannot just run the acquired company on its old systems with acceptable outcomes

  • The acquired company’s team needs to put in extra hours to support new requirements (e.g. double data entry or reporting), or you had to hire new people to do that

  • You are already asking your offshore outsourcer about their hourly rate for a 10,000 hour job


How long does it take to implement RPA?


M&A projects often run on a compressed timeline, and RPA implementation can match it. It takes a few days to assess whether the task at hand is automatable, and with how much effort. The robots can be finalized, tested and rolled out within just several weeks. In parallel, employee change management needs to take place. It helps if your RPA solution partner is familiar with the context of M&A deals and has done similar projects before.


A business user can learn to write and adjust simple RPA bots in about two hours. Deal team members can enroll in free-for-all courses such as Automation Anywhere University or UiPath Academy. Building enterprise-grade RPA solutions gets more complex (which is why companies like F-ONE exist), but one of the main promises of RPA is that once the main installation is completed, business users can take ownership of the automation journey.


What does RPA cost?


There are several cost drivers to consider when it comes to RPA:

  • Annual license costs (bot creators, orchestrators and runners)

  • One-time Implementation fees (consulting, engineering)

  • Recurring external maintenance costs (code adjustments, tech support)

  • Infrastructure and governance (overseeing, securing, managing the bots)

In an hourly-rate cost comparison to hiring an employee, RPA bots win by an order of magnitude. They are also predictably more productive, accurate and reliable. However, just as with people, you can mismanage robots by using them for the wrong tasks, keeping them idle, or neglecting proper oversight and maintenance. This drives the real costs up compared to initial estimates.


Most leading RPA vendors (incl. Automation Anywhere) offer free Community Edition accounts which let individual users create and run fully functional bots. If you only need a simple bot to send emails or sign attachments for you, and you have a few hours to spare, it can be done at no cost.


To give some rough industry-average numbers, the price tag for an enterprise license and initial implementation start around €20k p.a. for an RPA solution with 1-2 bots. Adding further functionality can be done by business users at no external cost, or you can use professional consultants and developers for automating more complex processes. Increasing robot capacity costs €5-10k per robot. You need additional capacity when your existing robots are fully utilized (24/7), or when you would like more jobs to be performed concurrently. If your solution requires special functionality (e.g. pre-trained AI modules), it can be added as a separate package.


How to make the best use or RPA in Mergers & Acquisitions


If your organization repeatably acquires other companies (either as a corporate buyer or a Private Equity fund), you can create an internal RPA Center of Excellence (part-time colleagues from IT or Operations) to support the deal teams on multiple transactions. This enables you to build up and leverage internal expertise, but also to better utilize your RPA licenses and infrastructure across several projects.


As a an occasional acquirer looking for a tactical solution, you might be better off using a managed services offering (RPA-as-a-Service), whereby the bots are owned and operated by a service provider, and you are paying for the actual tasks.


As described in the earlier sections, RPA opens up completely new possibilities within the M&A process (both in due diligence and in PMI). Leveraging those possibilities can help buyers improve their positioning in competitive processes, conduct better and more thorough diligence, accelerate integration and generally drive better deal outcomes. While being just one of the novel tools available to a dealmaker, RPA is very versatile and flexible, which allows it to be creatively applied in many scenarios.


What’s next?


There are a number of resources on the web covering RPA and Intelligent Automation. Websites of the major vendors (Automation Anywhere, UiPath, BluePrism) are a good place to start. If you have time, all three offer great free courses to get started, and you can download a free community edition and get a first-hand feeling for the technology.


If you don't have time (which, you being in an M&A project, is most likely the case), we can schedule a quick call to see whether your challenge can be resolved with RPA. F-ONE Group is an Intelligent Automation consultancy and implementation partner. We have particular expertise in M&A applications. Whether you are a corporate or Private Equity executive, M&A advisor, integration consultant or a due diligence advisor, don’t hesitate to drop us a note.