How workflow automation software supports M&A deal lifecycle

Mergers and acquisitions (M&A) can be complex and disruptive. Explore how workflow automation software can support acquisitive companies throughout the M&A deal lifecycle.

M&A can be an attractive option for companies that want to expand, diversify, and grow. However, the M&A deal process can be complex and disruptive.

As a result, highly acquisitive companies are investing in workflow automation software to streamline business operations and effectively integrate new acquisitions.

In this blog, we explore how workflow automation software can support acquisitive companies throughout the M&A deal lifecycle.

What are mergers and acquisitions?

What is a M&A deal? The Office for National Statistics (ONS) states mergers and acquisitions (M&A) occur when one company takes control of another company. The internationally agreed definition of an M&A deal is when one company gains more than 50% of the ordinary shares (or voting rights) of the acquired company.

The UK saw 3,628 M&A deals in 2023, compared to 4,362 the previous year. The latest research from Ernst & Young found that 50% of UK CEOs say they are planning to make acquisitions in the next 12 months whilst 67% are considering joint ventures.

What are the challenges of the M&A process?

From delays and bottlenecks to due diligence and regulatory compliance, highly acquisitive companies must successfully navigate an M&A deal process rife with obstacles that threaten M&A success.

In this section, we discuss the key challenges seen in the M&A deal lifecycle.

Delays

The time between deal announcement and completion is typically 15 – 20 months as completing the due diligence and gaining regulatory approvals/clearance requires careful planning and patience.

Regulatory compliance

According to McKinsey & Company, 14% of M&A deals were cancelled between 2013 and 2020 after careful analysis by regulatory authorities.

In certain situations, the regulator may request a remedy with the acquiring or target company asked to commit to act or make a permanent change for the deal to be approved.

If the M&A deal process falls, both organisations may suffer financial penalties and reputational damage.

Duplication

The two organisations are likely to have different procedures, policies, and technology. This makes integrating (and streamlining) the combined organisation’s operational processes and IT systems a major challenge.

Lack of (or poor) due diligence

Inadequate due diligence can result in undisclosed risks or liabilities, affecting the success of the deal.

Poor communication

Effective communication with employees, customers, suppliers, and other stakeholders is crucial during the M&A procedure. Poor communication leads to mistakes, uncertainty, and hostility to the M&A amongst key stakeholders.

What M&A processes can be automated?

As we have seen, there are many challenges for organisations to overcome before realising shareholder value. These challenges are magnified if the M&A deal process is paper based.

Workflow automation software like Process Director includes powerful tools to mitigate the risks and automate the M&A lifecycle.

In this section, we review the M&A deal stages that are ripe for automation.

Deal sourcing

The M&A lifecycle begins with deal sourcing and target identification.

Managing M&A deal sourcing is easy with workflow automation software like Process Director. The low-code process automation platform allows executives to identify potential target companies, evaluate potential acquisitions, build target lists, and monitor the deal lifecycle, making it the ideal tool for automating the M&A workflow.

Due diligence

The due diligence process in M&A involves the investigation of target companies by a potential buyer who reviews sensitive legal, financial, and commercial information. The investigation aims to confirm the valuation is fair and identify issues that require further investigation or renegotiation.

Manual due diligence is laborious and time-consuming with Gartner reporting that the average time to close an M&A deal has risen more than 30% since 2010 . Yet, it is crucial part of the M&A procedure and failure to conduct adequate due diligence can lead to unsuccessful M&As.

M&A software expedites due diligence in mergers and acquisitions with templates for data collection, automated workflows, document reviews, notifications, reporting and dashboards. These tools help companies conduct thorough due diligence, protecting the buyer by highlighting concerns and ‘red flags’ early in the M&A deal process.

Document management

M&A deals generate a multitude of documents including non-disclosure agreements (NDA), transaction/purchase agreements, and disclosure letters. Managing documentation is laborious and error-prone if done manually.

The Process Director platform provides the following tools to support document management:

• Automated workflows to route documents for teams on the buy-side and sell-side to review and approve
• Document authoring to collaborate simultaneously with colleagues on documents, spreadsheets, and presentations with versioning, rollback, and attribution
• Document markup to annotate and comment on documents pending approval
• Fully searchable repository to archive and retrieve policies, procedures, and other documentation with automated disposition available
• Personalised dashboards with real-time visibility of all deals in the pipeline and task management

Post-merger integration (PMI) planning

Post acquisition, the integration of two organisations is an opportunity for process consolidation.

Yet, according to Harvard Business Review, up to 90 per cent of acquisitions fail with problems integrating the two parties cited as a key factor.

The goal of PMI is to integrate the combined businesses into a single entity. The acquiring company is likely to inherit a multitude of manual, paper-based workflows and the acquiring company should focus on identifying and modernising obsolete systems and processes at the target company while integrating data and applications to capture operational synergies quickly.

In such scenarios, the best M&A software can be truly transformative and help maximise deal value – at a time when employees will more readily absorb changes.

The first step is to identify which processes should be retained, eliminated, or re-engineered. A good first process to integrate is employee offboarding as mergers and acquisitions inevitably lead to duplication.

In most cases, executives from both organisations will work together during the due diligence phase to identify key processes.

Conclusion

By leveraging workflow solutions during the M&A process, organisations can expedite deal-closing, maximise deal value, reduce their risk profile, and increase the chances of a successful integration.

Do mergers and acquisitions support your strategic objectives? If you are a highly transactional organisation managing the M&A process on paper, spreadsheets, and eMail, call 03300 100 000 or complete our form to talk to us about Process Director, a low-code business process automation platform for automating M&A transactions.