M&A automation:Leveraging the domain model to map M&A data rooms, process tools easily

The domain model will consist at least of the following parts:

• A data model that shows the data objects that are involved in M&A transactions and processes.

• A Hierarchy of tasks in different phases of M&A Processes.

• APIs for data objects and tasks.

The domain model is a programmable model. This means it is available electronically and can be navigated and displayed as you wish. It is implemented in a set of Prolog facts and rules.

Here is a first view at the phase Due Diligence. It consists of the tasks Target Due Diligence, Integration Approach Blueprint, Merger Integration Due Diligence, Deal Making and Finalize and Approve Due Diligence Business Case. Each tasks will be documented by its goals, the data objects used and a task description.Each of the data objects will be also represented in JSON notation as well as an API documentation.

Here is an example of the documentation of each task. The task Review Merger Integration Project works on concepts

 Integration Project Plan, Integration Budget, Stakeholder, Integration Success, Integration Project, Integration Project Resources.

It has the goal (that describes the result):

Integration project: tested and verified

and the objectives, which describe the qualities of the result:

 Integration success: maximized

 Quality: maximized

It has the following task description:

We review the structure and behaviour of the merger project. It is important to remember that the word "project" means that we have a professional management of integration by professional project managers who are experienced with complex projects and equipped with the skills of a certified project manager. We should also set up a project steering committee that has comprehensive competencies and can make decisions quickly.

The word "project" means that we have a project structure plan with tasks to be performed in the project. Buying companies that make frequent acquisitions have a project structure plan template that they adapt to each of the new merger integration projects. This ensures completeness and also allows a correct assessment of whether we have sufficient resources and whether the resources know what to do in the merger.

But we also focus on providing answers to questions like: Do we have the right resources for the integration tasks in mergers? Are the resources able to perform the tasks assigned to them? Do the resources have adequate social skills to guide people and convince them to integrate?

This is an excerpt of my new book “Automation of Mergers and Acquisitions“.

Automation of Mergers and Acquisitions: Due Diligence Tasks and Automation Karl Michael Popp Books on demand M&A Media Services Digitization M&A 978-3750462052

M&A digitalization: Forget data rooms for M&A: what we need is a data lake and a data warehouse during due diligence and PMI

In M&A processes, data rooms are all over the place. They are a storage for unstructured and structured data. But these structured and unstructured data are not up-to-date, not complete and they might even be contradicting each other. They might even be aggregated in a way we don´t know and cannot reproduce and we don´t know the underlying data at all. Not a perfect situation to judge based on the numbers and documents. Making sense of this information is tedious and making decision based on this information is very risky. So, what can we do about it? Let me brainstorm a little about that….

Big data is a no-brainer

There are solutions out there who can easily and quickly analyze wast amounts of structured and unstructured data. They can analyze and interpret contracts and other documents, they can find critical clauses in business documents and find e.g. indications of fraught. They can relate information to get analytics about outlyers in financial data, from which business transactions this outlyer originates and by the way, which employee is responsible and accountable for this business transaction. In seconds. This is not a vision, the technology to do this is there and can be used that way. So we should make use of it.

What is possible today?

No matter if you do the analysis during due diligence (with limited information) or post close (with access to all information), you are able to do automated scans that provide you with the following information:

• Technical IT landscape: which servers run where and how are they connected, which software runs on which servers

• Business system information: which ERP systems are running, what is the business structure, through which APIs are the different business systems communicating, which companies are there, how are they interacting, which business models are implemented. You can compare different systems with each other or with a best practice template or to-be system easily.

• Business status information: which processes are being run, how often and in which speed are they executed, how do they perform and how often are process exception handling activities executed.

To summarize, using these automated tools can increase the level of detail and precision of IT and business due diligence and provide a sound basis for a joint IT and business integration planning as early as possible in the M&A process.

Data analysis and interpretation is just the beginning

Life will be easier. Here´s my vision for next generation due diligence work based on data. Now that you found items that are interesting and you analyzed them in due diligence, you have to figure out what actions to take during due diligence and post merger integration. Machine learning is here to help. Based on a set of earlier acquisitions and the plans for the current acquisition, a machine-learning-based algorithm will propose which actions are required by the buyer or the target and/or proposed clauses in contracts to deal with this situation. Let´s imagine new ways of running due diligence and PMI

In due diligence: just give us access to a data lake of structured and unstructured information and give us access to your data warehouse structure and we can analyze the company structure, the business models and the steps needed to transform the business and to plan the integration of the business with the acquirer´s business.

In post merger integration: In addition to data lakes and data warehouses we have access to business systems details which allow to analyse, optimize, transform the acquired business and automatically get proposals which steps should be taken during the integration phase on a detailed level.

Follow me on twitter @karl_popp or stay tuned for more blog entries on innovations in the M&A process.

Automation of Mergers and Acquisitions: Due Diligence Tasks and Automation Karl Michael Popp Books on demand M&A Media Services Digitization M&A 978-3750462052

M&A Automation: Tax Due-Diligence - how digitized is it today?

Tax Due-Diligence

Why a task definition?

To enable digitization, we have to define tasks in the M&A process in detail. We use goals and objectives, a description of the task and data objects used by the task. In addition, we list questions used during execution of the tasks to provide more context. In addition we can have a look at the automatability of the task and the automation in practice. That will show us the automation potential we have today. More details will be published in my new book “Foundations of digitization for M&A processes: The Due Diligence Phase“.

  The task has the following goals:

• Tax aspects of the target: analyzed

• Draft tax integration plan: prepared

• Tax effect of the financing concept: analysed

• Tax clause in acquisition agreement: prepared

 The task has the following objectives:

• Risk: minimized

• Quality: maximized

• Information asymmetry: minimized

 Digitization capability

This task can be partially automated. Although data could be extracted from existing ERP solutions, documents are placed in the data room and no automated analysis of tax information is performed.

 Task description

 Within tax due diligence, we check hypotheses about all tax-relevant transactions of all companies of the target in all countries. This audit is usually carried out by external lawyers and auditors. Besides the examination of tax aspects, such as corporate income tax and trade tax, tax risks are also considered. The result of the tax audit is used to design the tax clause in the acquisition contract. Furthermore, the acquisition financing is analysed and designed with regard to its tax effects. Any actions to be planned with regard to tax aspects are recorded in the draft tax integration plan.

 The task works on the following data object types, among others:

 Results of the tax due diligence of the target, draft tax integration plan, target company, tax aspects of the target, legal aspect of the target taxes, tax aspects, tax aspects of the target, tax risk of the target, tax clause in the acquisition contract, taxation of the acquisition project Tax effect of the financing concept, tax aspect of the target IT service contract, tax aspect of the application contract of the target, tax aspect of the target hardware contract, tax aspect of the termination contract of the target, tax aspect of the employment contract of external employees of the target Tax aspect of a target patent license, tax aspect of target social security, tax aspect of target IP assignment.

 Questions concerning the execution of the task

The task is performed with the following questions, among others:

• Does a tax planning exist?

• Were the tax returns submitted correctly and on time?

• Does the target company have tax advantages? Will they be affected by this transaction?

• What do the seller's annual, quarterly and (if available) monthly financial statements for at least the last three years tell us about its financial performance and condition?

• Are the seller's financial statements audited, and if so, for how long? Does the audit report contain a "going concern" qualification?

• Do the financial statements and related notes list all the seller's liabilities, both current and contingent?

• Are there internal controls for financial reporting issues?

• Are the company's revenues and margins growing or declining?

• Are the vendor's financial projections for the future and underlying assumptions reasonable and realistic?

• How do the vendor's projections for the current year compare with the budget approved by management for the same period?

• What normalized working capital will be required to continue as a going concern?

This is an excerpt of my new book “Automation of Mergers and Acquisitions“.

Automation of Mergers and Acquisitions: Due Diligence Tasks and Automation Karl Michael Popp Books on demand M&A Media Services Digitization M&A 978-3750462052

M&A Automation: Due-Diligence of the culture - how can it be automated?

Due-Diligence of the target strategy

Why a task definition?

To enable digitization, we have to define tasks in the M&A process in detail. We use goals and objectives, a description of the task and data objects used by the task. In addition, we list questions used during execution of the tasks to provide more context. In addition we can have a look at the automatability of the task and the automation in practice. That will show us the automation potential we have today. More details will be published in my new book “Foundations of digitization for M&A processes: The Due Diligence Phase“.

The task has the following goal(s):

• Target strategy: analyzed

The task has the following formal objectives:

• Information asymmetry: minimized

• Quality: maximize

Automation capability

This task can be partially automated. However, there are only a few actions for which tools are available. Since strategies today are usually not managed and updated in application systems, automated analysis and evaluation is difficult.

Task description

While the market analysis and the evaluation of potential commercial synergies dominate in the current literature for strategic due diligence , the market analysis and evaluation in our approach is carried out in the GTM due diligence. Hence, a different approach for strategic due diligence is to be taken. The core of the considerations is exclusively the strategy of the target. Assumptions, strategic goals and measures are determined and analysed. The relationship between the business model and the operations model is considered. In comparison to the buyer strategy, the complementarity of the target strategy with the buyer strategy is established. Any strategic risks are identified and evaluated.

The task works with the following data objects:

Target Strategy, Strategic Goal of the Target Company, Strategic Measure of the Target Company, Assignment of Strategic Measures and Goals of the Target Company, Hierarchy of Strategic Goals of the Target Company, Strategic Risks of the Target Company, Strategic Assumptions of the Target, Buyer Strategy, Strategic Measure of the Buyer Company, Assignment of strategic measures and objectives of the buyer company, strategic risks of the buyer company, strategic assumptions of the buyer, strategic objective of the buyer company, hierarchy of strategic objectives of the buyer company, draft of the strategic integration plan, strategy, complementarity of the strategy, strategic synergy.

This is an excerpt of my new book “Automation of Mergers and Acquisitions“.

Automation of Mergers and Acquisitions: Due Diligence Tasks and Automation Karl Michael Popp Books on demand M&A Media Services Digitization M&A 978-3750462052

M&A automation: 50 technologies to be used within the M&A process

50 Technologien für den M&A-Prozess

Es gibt eine Herausforderung für M&A-Fachleute: Sie kennen oft nicht alle Technologien, die verfügbar sind und ihnen das Leben erleichtern könnten. Aus diesem Grund habe ich eine große Anzahl von Technologien definiert, die für verschiedene Aufgaben im M&A-Prozess anwendbar sind. Auf diese Weise können wir zeigen, welche Werkzeuge welche Technologien verwenden und wie die Technologien entlang der Aufgaben des M&A-Prozesses verteilt sind.

Die Attribute sind wie folgt definiert:

Fortgeschrittene Analytik

Fortgeschrittene Analysen verwenden nicht-deskriptive statistische Methoden wie Schätzungen oder Interpolationen oder Entscheidungsunterstützung.

 Erkennung von Mustern

Mustererkennung ist die Fähigkeit, Muster in Daten zu erkennen.

 Erkennung von Anomalien

Die Erkennung von Anomalien ist die Fähigkeit, automatisch Anomalien in Daten zu erkennen, wie z. B. Ausreißer innerhalb einer Verteilung.

Artikel

Artikel sind Auszüge aus Büchern, Blogs oder anderen Veröffentlichungen zu einem bestimmten Thema.

Erweiterte Analytik

Augmented Analytics sind Analysefunktionen, die automatisch Hintergrundinformationen aus internen oder externen Quellen zur Verfügung stellen, die sich auf die jeweilige Aufgabe beziehen.

Automatische Schwärzung von Dokumenten

Wenn kritische Teile von Dokumenten ohne menschliches Zutun geschwärzt werden können, spricht man von automatischer Schwärzung.

Automatische Identifizierung fehlender Daten

Ein wichtiges Thema bei M&A sind fehlende Daten. Wenn ein Werkzeug das Auffinden fehlender Daten ohne menschliches Eingreifen ermöglicht, nennen wir dies automatisches Auffinden fehlender Daten.

Automatische Verdichtung

Wenn mehrere Originaldokumente zu einem Dokument zusammengefasst werden können und das resultierende Dokument kürzer ist als die Summe der Originaldokumente, nennen wir dies automatische Zusammenfassung, wenn diese Zusammenfassung in einem vollautomatischen Prozess erfolgt.

Automatische Übersetzung

Das maschinelle Übersetzen eines Textes oder eines Dokuments in eine andere Sprache wird als automatische Übersetzung bezeichnet.

Hintergrundinformationen

Hintergrundinformationen sind reale Daten aus Quellen innerhalb oder außerhalb eines Unternehmens, die helfen, den Sachverhalt zu verstehen und zu analysieren.

Chat

Chat ist eine Werkzeugfunktion, die eine schriftliche Ad-hoc-Interaktion zwischen zwei Benutzern eines Werkzeugs ermöglicht.

Kollaborationsräume

Kollaborationsräume sind elektronische Räume, in denen Menschen elektronisch miteinander interagieren können, z. B. Dokumente austauschen, Inhalte gemeinsam erstellen und miteinander kommunizieren.

Privatsphäre und Datenschutz

Die Gesetze in den verschiedenen Ländern schreiben bestimmte Regeln für den Zugang zu und den Schutz von personenbezogenen Daten vor. Die Auswirkungen dieser Gesetze werden unter den Begriffen Datenschutz und Datensicherheit zusammengefasst.

Datensicherheit

Die Datensicherheit gewährleistet, dass nur befugte Personen auf die Daten zugreifen können.

Prüfpfad

Ein Datenspeicher mit Audit-Trail schreibt und speichert Protokolle über alle Aktivitäten von Benutzern mit den im Datenspeicher befindlichen Daten.

Mehrdeutigkeit

Bei der Disambiguierung wird eine der vielen möglichen Bedeutungen eines Begriffs ausgewählt.

Klassifizierung von Dokumenten

Automatische Klassifizierung bedeutet, dass Dokumente anhand von Metadaten oder dem Inhalt solcher Dokumente kategorisiert werden.

Dokument-Redlining

Das Redlining von Dokumenten bedeutet, dass ein Werkzeug eine Markierung der in einem Dokument vorgenommenen Änderungen anbietet.

Versionierung von Dokumenten

Die Dokumentversionierung bietet eine Historie der Dokumente und ermöglicht es, jede der vergangenen Versionen zu sehen.

Alleiniger Zugang in EU-Ländern

EU-Zugriff bedeutet, dass die Daten innerhalb der Europäischen Union gespeichert werden und nur die in der EU ansässigen Mitarbeiter des Werkzeugherstellers Zugriff auf die Daten haben.

Forensische Suche

Die forensische Suche ermöglicht das Durchsuchen vorhandener Daten auf der Grundlage semantischer Beziehungen zwischen in Dokumenten oder Daten enthaltenen Entitäten.

Hilfe-Technologie

Die Hilfe ist ein Inhalt, der den Benutzer bei der Ausführung einer Aufgabe mit dem jeweiligen Tool unterstützt.

Unterstützte Hyperscaler

Dieses Attribut gibt an, welche Hyperscaler verwendet werden können.

Funktionen zur Datenintegration

Datenintegration ist die Fähigkeit eines Werkzeugs, Daten aus verschiedenen Datenquellen zu integrieren.

Intelligente Assistenten

Intelligente Assistenten, die auf einen Benutzer achten, den Kontext und die Absicht des Benutzers verstehen und dem Benutzer bei der Ausführung der Aufgabe helfen.

Wissensgraphen

Wissensgraphen sind semantische Darstellungen eines Bereichs in Form eines Graphen. Die Knoten und Kanten des Graphen stellen semantische Konzepte der Domäne dar.

Mehrsprachigkeit

Mehrsprachigkeit ist die Eigenschaft eines Tools, eine Benutzeroberfläche und Funktionen in verschiedenen Sprachen bereitzustellen.

Andere Anwendungen des maschinellen Lernens

Dieses Attribut fasst alle anderen Möglichkeiten der Nutzung des maschinellen Lernens in Werkzeugen zusammen, die nicht durch die anderen Attribute zum maschinellen Lernen abgedeckt sind.

Abspielbücher

Playbooks sind vordefinierte Dokumente, die beschreiben, wie Aufgaben ausgeführt werden.

Aufgabenspezifische Fragen oder Fragebögen

Fragen sind Anfragen nach Informationen, die zur Erfüllung der jeweiligen Aufgabe benötigt werden. Die Fragen werden oft in Form von Fragebögen nacheinander aufgelistet.

Beispiele aus der Praxis

Real-Life-Beispiele sind Inhalte zu einer Aufgabe, die von Praktikern stammen und über Erfahrungen bei der Ausführung der Aufgabe in realen M&A-Projekten berichten.

Robotergestützte Prozessautomatisierung

Die robotergestützte Prozessautomatisierung ermöglicht es Benutzern, Arbeitsabläufe zu beschreiben und auszuführen.

Beispielhafte Inhalte

Beispielinhalte sind Dokumente, die sich auf die jeweilige Aufgabe beziehen.

Ein nahtloser Übergang zwischen Aufgaben

Nahtlose Erfahrung ist die Anforderung, eine oder mehrere Aufgaben auszuführen, ohne zwischen verschiedenen Tools wechseln zu müssen.

Nahtlose Integration mit anderen Werkzeugen

Nahtlose Integration bedeutet, dass keine manuellen Eingriffe erforderlich sind, wenn ein Wechsel zwischen verschiedenen Werkzeugen erforderlich ist.

Sicherer Dateibetrachter

Zur Vermeidung von Datenverlusten oder -lecks

Sicherheitsprüfpfad

Ein Sicherheits-Audit-Trail liegt vor, wenn ein Tool alle sicherheitsrelevanten Aktivitäten aufzeichnet und die Abfolge dieser Aktivitäten zusammen mit den Informationen darüber, wer was getan hat, bereitstellt.

Semantische Interpretation von Daten

Semantische Interpretation bedeutet, dass Daten, z.B. Bilder oder Zeichenketten oder Zahlen, automatisch eine semantische Bedeutung zugewiesen bekommen.

Semantische Suche

Die semantische Suche ermöglicht es, Daten anhand ihrer semantischen Interpretation zu suchen.

Analytik

Einfache Analysen sind deskriptive Statistiken und deren Visualisierungen.

Suchfunktion

Wenn Sie nach einer Folge von Wörtern suchen und diese in verschiedenen Dokumenten finden können, wird dies als einfache Phrasensuche bezeichnet.

Spracherzeugung

Spracherzeugung ist die Fähigkeit eines Tools, Text in gesprochene Sprache umzuwandeln.

Spracherkennung

Spracherkennung ist die Fähigkeit eines Werkzeugs, gesprochene Sprache in Text umzuwandeln.

Aufgabenspezifisches Training

Aufgabenspezifisches Training ist ein Inhalt, der den Benutzer in die Lage versetzt, die anstehende Aufgabe unabhängig von den Werkzeugen auszuführen.

Telefonie

Telefonie ist das Führen von Audioanrufen über ein Werkzeug.

Werkzeugspezifische Schulung

Tool-Schulungen sind Inhalte, die den Benutzer in die Lage versetzen, die Aufgabe mit einem bestimmten Tool auszuführen.

Benutzerunterstützung

Die Benutzerunterstützung ist die Summe aller Werkzeugfunktionen, die dem Benutzer bei der Ausführung seiner Aufgabe mit einem Werkzeug helfen.

Virtuelle Besprechungen

Virtuelle Meetings sind Meetings, die mit Hilfe eines Tools durchgeführt werden. Das Tool verbindet und ermöglicht die Kommunikation zwischen Teammitgliedern an verschiedenen Standorten.

Watermarking

Ein Wasserzeichen ist eine Unterschrift auf einem Dokument, die oft auf jeder Seite angebracht wird. Wasserzeichen können zur Erstellung eines Prüfpfads verwendet werden.

Whiteboarding

Whiteboarding ist ein gemeinsam bearbeitetes Dokument, das von mehreren Benutzern parallel geändert werden kann.

Dies bezieht sich auf mein neues Buch “Automation of Mergers and Acquisitions“.

CLICK OR SCAN THE QR CODE TO ORDER THE BOOK

GET Excellence - Organisation und toolgestützte Steuerung des Integrations- & Synergien- Managements

Risikomanagement in M&A und PMI- wie stellt man Compliance sicher und ist trotzdem effektiv

Bewertung und Mitigation von Cyberrisiken bei der PMI

Digitization potential for M&A strategy - tasks and tools

Tools for automation of M&A strategy tasks

In the M&A strategy phase you typically find the following tasks:

• Embedded M&A Strategy

• Finding potential targets

• Processing the long and short list

• Evaluation of the fit of a target

• M&A Capability Maturity test

• Finalize and Approve Deal Proposal

So far, so good. Now let us assign different tools to the tasks. The result is shown in the next picture. Each box is a task. Within the box, you find the task name in bold. Below the task name, you will find names of tools that can be used for the task.

This is just an interim result. More tools will be added to the model.

By looking at the automatability of a task and available automation oprtions (tool), we can give an estimate of the digitization potential of the tasks in discussion as shown in the next graphics.

By adding more tools over time, we can build a map of tools and automation options for the M&A process. The result will be shown in detail in my new book “M&A strategy automation“.

The book will be available later this year. Until then, enjoy these fine books and magazines on M&A and the software business.

Ensuring merger integration success with innovative due diligence

Merger integration success based on innovative due diligence

We introduce merger integration due diligence as a new type of due diligence that arises from the objective “Maximize likelihood of integration success”.

Definition of merger integration due diligence

Merger integration due diligence has the goal to review the merger integration project and plans. 

All aspects of merger integration are being reviewed for viability and for likelihood of success. Viability relates to the work breakdown structure for the integration to be consistent and complete. It also relates to resources (employees and budgets) that have to be sufficient and available. The objective of the task is to maximize the likelihood of merger integration success.

Based on the decomposition of the merger integration task we can define the corresponding decomposition of the merger integration due diligence task.

Review of the design of the new entity

The design of the new entity has to be reviewed for consistency and completeness. We start with the business strategy and plan layer and review the defined business strategy for the new entity. Then we enter the second layer and ask questions like: will the business processes work? Are the business processes compliant with compliance rules? Is governance of the business ensured?
In parallel, we have a look at the business resources and at the questions: Are enough qualified resources planned and available? Are the assignments of resources to tasks sufficient? Are sufficient resources planned and available?

Review merger integration plans

Next we review merger integration plans. Keeping in mind the design of the new entity and the resource situation, we review the schedules and the steps of the merger integration plans. We ask questions like: Can the merger integration plan be executed the way it is defined? Will sufficient resources and budgets be available at the right time to execute the merger integration plan successfully? What happens if we run late or we have resource shortages?

Review merger integration project

This is the part of the review that is often neglected in practice. We review the structure and behavior of the merger integration project.
It is important to keep in mind that the word “project” implies that we have a professional management of the integration leveraging professional project managers, experienced with complex projects and equipped with skills of a certified project manager. We should also have a project steering committee in place that has wide competencies and can drive and take decisions quickly.
We also focus on getting answers to questions like: Do we have the right assignments of resources to merger integration tasks? Are the resources capable of executing their assigned tasks? Do the resources have appropriate social competences to lead people and convince them the integration is the right thing to do?

With the results of the merger integration due diligence, you are well prepared to have the right budget, business plan and integration approach.

Automation of Mergers and Acquisitions: Due Diligence Tasks and Automation Karl Michael Popp Books on demand M&A Media Services Digitization M&A 978-3750462052

Complementarity and synergies of buyer and target: an attempt at a definition

Synergies and complementarities are often discussed in company acquisitions. Here is an attempt at a definition.

Complementarity

Complementarity between two companies shows advantages in the cooperation or merger of the two companies.

Complementarity at company level can consist of numerous other complementarities at detail level, as the following figure shows.

In this example, complementarity includes brand complementarity as well as market, product and cost complementarity.

Synergy

Each of the complementarities considered can, but does not have to, lead to a synergy. That is why I would like to define synergies as follows:

Synergy is a concrete, anticipated strategic advantage based on complementarity, which will occur in the future, after the purchase of the target. As with complementarities, an advantage can have a wide variety of characteristics such as market, product, technology or cost advantage.

Here is an example: A strategic synergy is a concrete, anticipated strategic advantage that will occur in the future, after the purchase of the target. It can arise if strategic assumptions, measures and goals of two companies complement each other or interact positively.

The separation of these two concepts is advantageous, as it enables a selection of complementarities to be transformed into synergies and also allows explicit consideration of the planning, implementation and control of synergies.

This is an excerpt of my new book “Automation of Mergers and Acquisitions“.

CLICK OR SCAN THE QR CODE TO ORDER THE BOOK

Automation of Mergers and Acquisitions: Due Diligence Tasks and Automation Karl Michael Popp Books on demand M&A Media Services Digitization M&A 978-3750462052

M&A Automation - Vision of extreme automation of remote due diligence meetings

How automatable are tasks in Due Diligence?

Every company is pushing the digitalization of business processes. But what about the digitalization possibilities in the M&A process? What is the current status of the automation possibilities? This article is intended to define a vision of extreme automation in the due diligence phase.

Target Due Diligence

This task can be partially automated. Individual actions can be partially automated. Details can be found in the individual subtasks. Activity control is often carried out using project control applications. These can be generic tools such as MS Project or project management tools or data room application systems specialized in the management of M&A projects. But how if we apply extreme automation to onsite due diligence? Onsite due diligence often entails corporate M&A teams to visit a location of the target company for a meeting.

Extreme automation of onsite due diligence

If we automate the visit and the due diligence meeting in an extreme fashion, we fully automate the physical presence of the buyer at the meeting.

Enter Synomic and double robotics

The advent of presence robots enables us to leverage robots for visiting a site and for moving around. But robots can do more, of course. They can ask questions and collect answers for us.

Synomic, together with Double Robotics has provided a solution. See the picture below.

Instead of travelling to a location, you send a box to the target company. The box contains a presence robot from Double Robotics.

Instead of people from the buyer, the robot can participate in the meeting, move around the offices and interact with the representatives from the target company.

During the meeting, the buyer decides if the presence robot is used for communication between people from the buyer and the target or if the robot acts in a fully automated fashion asking questions from the due diligence request list for the buyer.

I hope you liked this extreme automation example. This example was presented in conjunction with my new book “Automation of Mergers and Acquisitions“.

CLICK OR SCAN THE QR CODE TO ORDER THE BOOK

Automation of Mergers and Acquisitions: Due Diligence Tasks and Automation Karl Michael Popp Books on demand M&A Media Services Digitization M&A 978-3750462052

M&A Automation - Due-Diligence tasks: can they be automated?

How automatable are tasks in Due Diligence?

Every company is pushing the digitalization of business processes. But what about the digitalization possibilities in the M&A process. What is the current status of the automation possibilities? This article is intended to give a brief overview based on selected tasks in the due diligence phase.

Target Due Diligence

This task can be partially automated. Individual actions can be partially automated. Details can be found in the individual subtasks. Activity control is often carried out using project control applications. These can be generic tools such as MS Project or project management tools or data room application systems specialized in the management of M&A projects.

Valuation calculation of the target without synergies

This task can be partially automated. Automated tools are available for the "Calculate evaluation" action, but the data usually has to be compiled and cleaned manually.

Financial due diligence

This task can be partially automated. Usually, financial data is extracted from existing ERP solutions of the target and stored as documents in data room application systems. Evaluations of this data are performed using MS Excel or specialized evaluation calculation applications.

Legal due diligence

This task can be partially automated. Fully automated tools are available for individual actions, such as the automatic analysis of contract documents. Other actions such as the evaluation and assessment of contracts must not be automated.

Tax due diligence

This task can be partially automated. While data can be extracted from existing ERP solutions, no automated evaluation of tax information is performed.

Operations Due Diligence

This task can be partially automated. Individual actions can be partially automated. Details can be found in the individual subtasks.

Due-Diligence of the production

This task can be partially automated. The action control is usually not automated. Individual actions can be automated.

Human resources due diligence

This task can be partially automated. The analysis of contractual documents, such as employment contract templates, can be automated.

IT due diligence

This task can be partially automated. There are several automated tools for network scanning and inventory creation, as well as vulnerability scanning tools, which today often completely automate manual actions.



Due diligence of intellectual property

This task can be partially automated. There are automated tools for individual actions, e.g. for scanning contracts, which today often completely automate manually executed actions.

Cultural due diligence

This task can be partially automated. The analysis of the sentiment of employees and former employees on social networks and rating portals can be automated. The action "Survey of the cultural status of the target" can be automated.

Business model due diligence

This task can be partially automated. There are tools for semi-automated creation and management of business models. The action "Check the business model" can be automated, but is usually not performed automatically.

Due diligence of the target strategy

This task can be partially automated. However, there are only a few actions for which tools are available. Since strategies today are usually not managed and updated in application systems, automated analysis and evaluation is difficult.

This is an excerpt of my new book “Automation of Mergers and Acquisitions“.

CLICK OR SCAN THE QR CODE TO ORDER THE BOOK

Automation of Mergers and Acquisitions: Due Diligence Tasks and Automation Karl Michael Popp Books on demand M&A Media Services Digitization M&A 978-3750462052

M&A Automation: Automation potential for M&A processes - how to assess it and show the tools

Digitization potential in the M&A process

How can the digitization potential be captured in the M&A process? What information is needed? These questions will be answered here.

Automation and automatability of tasks

Decisions on the digitisation of processes depend on the implementation options available. The goal is the extensive, meaningful automation of operational tasks.

Automation of tasks

To fully automate a business process, both the tasks and the coupling of tasks must be fully automated. In addition to full automation, there are other levels of automation. The automation levels of tasks can be differentiated from the external view of the tasks by the assignment of combinations of task owner types to tasks [cf. FeSi93, 178 f.].

The task owner types available are humans and machine/software (computers, robots, software). If only humans are assigned to a task, it is not automated.

If human and machines are assigned to a task, it is called semi-automated. A task is called fully automated (automated) if it is assigned only to computers, robots or software.

Figure: Degrees of automation of tasks, source: FeSi93

Automated and semi-automated tasks and the associated application systems are relevant for digitisation. Before a task can be automated, the automatability of tasks must be clarified. Only a task that can be automated can also be automated.

Automation of tasks

The following figure describes the execution of a task from an internal perspective. It consists of a set of actions that are linked together and monitored and controlled by an action control.

Figure: Actions and action control, source: FeSi93

Whether a task can be automated depends on the properties of the inside view of a task. To be more precise: the automatability can be described by the automatability of all actions and the action control.

If the inside view can be functionally described, the task can be fully automated. At the current state of the art it is also possible to automate tasks that cannot be functionally described (so-called decision tasks).

With the increasing availability of machine learning, the automation of decision tasks increases. Many decision tasks, which in the past could only be performed by personnel, can now be fully automated. An example is an automated analysis of contract texts for certain features. Action control can also be at least partially automated today. Workflow systems, project control software or even data rooms with action control are available for process and action control.

Digitalisation potential in the M&A process

A digitization potential for a task exists if the degree of automation of the solution process is lower than the automation capability of the solution process. The same applies to task coupling.

The digitization potential for the M&A process is the sum of the digitization potential of all tasks and task linkages.

Requirements for the reference model regarding tasks

The reference model is to describe the tasks, their automatability and show exemplary automation possibilities in the form of software (tools). This enables companies to determine the digitalization potential in the M&A process.
Displaying the tasks together with tools to automate could look like this:

This is an excerpt of my new book “Automation of Mergers and Acquisitions“.

CLICK OR SCAN THE QR CODE TO ORDER THE BOOK

Automation of Mergers and Acquisitions: Due Diligence Tasks and Automation Karl Michael Popp Books on demand M&A Media Services Digitization M&A 978-3750462052

M&A automation: Interview on Automation of M&A Processes

This is the transcript of an interview by Prof. Dr. Kai Lucks with Dr. Karl Michael Popp on the topic of "Digitization of M&A Processes" from July 2020.

Kai Lucks: Mr. Popp, you are propagating a reference model for a digitized M&A process. What is the potential of this model in view of the lack of application knowledge and different M&A procedure models in companies?

Karl-Michael Popp: As the first step, users must understand what is technically feasible today. The second step I see is that the processes in many companies are quite different. So it makes sense to use a reference model. In his current book, Prof. Thorsten Feix has developed a next generation M&A phase and task model. On the basis of this model it is easy to consider which processes can be automated or at least partially automated with the help of which tools. Thus a kind of orientation framework of processes and tools is created. The third step is to consider what can actually be applied from this process and tool map for a specific task in the M&A lifecycle.

Kai Lucks: On the one hand, you speak of individual tools, but in addition, a kind of backbone is needed to which these tools can be connected. Is the typical virtual data room suitable for this?

Karl-Michael Popp: In order to automate the entire process as end-to-end as possible, you need a kind of integration layer that brings together all these specialized tools via interfaces. Besides data rooms, M&A process management applications are suitable candidates for such an integration layer.

Kai Lucks: As innovative M&A tasks, you mention business model due diligence and merger integration due diligence. How should these be used so that they can be applied to achieve successful integration?

Karl-Michael Popp: Currently, the acquisition of new, digital business models and therefore innovative business models is increasing. It is particularly important to compare the business models of target and acquired and, one level below, the operational models. These results have an impact on integration plans and should be transferred to them in the form of data. The implementation of integration plans also requires certain budgets and resources, usually in the form of employees. The earlier the corresponding data is available, the better budgets and resource requirements can be planned.

Question from the podium: How far are we from a data room that can create itself completely on its own from company data, such as data stored in ERP or data warehousing systems?

Karl-Michael Popp: This technology already exists today, but we are not using it. There are very pragmatic reasons for this, because we do not want to and should not make it a reality today. A kind of data vacuum cleaner would be technically easy to implement, but there is also decision-support information that is not available in the ERP systems.

Kai Lucks: I see the main problems with strategic and legal issues. After all, the sellers want to be in control of what data is made available, and an all-encompassing data vacuum cleaner would be difficult, especially since there are limits to data protection laws.

Karl-Michael Popp: It would be conceivable to have a filtered extract that conforms to data protection regulations and is generated automatically. This would do justice to both sides, buyer and seller. Automatic anonymization is already supported by SAP.

This is an interview in line with my new book “Automation of Mergers and Acquisitions“.

CLICK OR SCAN THE QR CODE TO ORDER THE BOOK

Automation of Mergers and Acquisitions: Due Diligence Tasks and Automation Karl Michael Popp Books on demand M&A Media Services Digitization M&A 978-3750462052

M&A Automation: Finding potential acquisition targets

Findin potential acquisition targets - a task definition

Why a task definition?

To enable digitization, we have to define tasks in the M&A process in detail. We use goals and objectives, a description of the task and data objects used by the task. In addition, we list questions used during execution of the tasks to provide more context. In addition we can have a look at the automatability of the task and the automation in practice. That will show us the automation potential we have today. More details will be published in my new book “Automation of M&A: Due Diligence Tasks and Automation“.

  The task has the following goal(s):

• Longlist of targets:  created

 The task has the following objectives:

• Information asymmetry:  minimized

 Automatability

This task is partially automatable.

Tools are available.

 Task description

 Finding targets requires a selection of the righ sources, ad definition of selection criteria followed by detailed walkthrough of target candidates and decision which candidates make it onto the longlist of potential targets. You can look for acquisition targets in the company ecosystem, e.g. partners, suppliers and in adjacent markets.

 The task consists of the following actions

Define selection criteria and market

• Scan sources for potential targets

• Review candidates

• Decide longlist

The task works on the following data object types, among others:

 Target company, Target company, Target locations, Buyer, Longlist of targets, Ecosystem, Product of the target, Sales of the target, Target employees, Target business model.

This is an excerpt of my new book “Automation of Mergers and Acquisitions“.

CLICK OR SCAN THE QR CODE TO ORDER THE BOOK

Automation of Mergers and Acquisitions: Due Diligence Tasks and Automation Karl Michael Popp Books on demand M&A Media Services Digitization M&A 978-3750462052

M&A automation: M&A data model as a sound basis for the M&A API

What is the domain model for M&A?

The domain model will consist at least of the following parts:

• A data model that shows the data objects that are involved in M&A transactions and processes.

• A Hierarchy of tasks in different phases of M&A Processes.

• APIs for data objects and tasks.

The domain model is a programmable model. This means it is available electronically and can be navigated and displayed as you wish. It is implemented in a set of Prolog facts and rules.

Give me an example for a task in the M&A domain model

Here is an example of the documentation of each task. The task Review Merger Integration Project works on data objects:

 Integration Project Plan, Integration Budget, Stakeholder, 

Integration Success, Integration Project, Integration Project Resources.

It has the goal (that describes the result):

Integration project: tested and verified

and the objectives, which describe the qualities of the result:

 Integration success: maximized

 Quality: maximized

It has the following task description:

We review the structure and behaviour of the merger project. It is important to remember that the word "project" means that we have a professional management of integration by professional project managers who are experienced with complex projects and equipped with the skills of a certified project manager. We should also set up a project steering committee that has comprehensive competencies and can make decisions quickly.

The word "project" means that we have a project structure plan with tasks to be performed in the project. Buying companies that make frequent acquisitions have a project structure plan template that they adapt to each of the new merger integration projects. This ensures completeness and also allows a correct assessment of whether we have sufficient resources and whether the resources know what to do in the merger.

But we also focus on providing answers to questions like: Do we have the right resources for the integration tasks in mergers? Are the resources able to perform the tasks assigned to them? Do the resources have adequate social skills to guide people and convince them to integrate?

What about the data model inside the M&A domain model?

Each of the data objects used by tasks in the M&A domain model are connected in a domain data model. So let us have a look at Integration Project Plan and how it is connected in the data model. Currently the data model contains 376 data objects and many more relationships.

The data model can be used for several purposes. It is used as part of the documentation of tasks and allows a user to understand the task at hand better. Secondly, it can serve as part of a M&A domain API definition that allows to integrate several digital tools within the M&A process.

Example of a data object and its relationships

The task Review Merger Integration Project works on a data object called integration project.

on the left side you see other data objects that have relationships that are incoming. On the right side you see outgoing relationships pointing to other data objects. This data object relates to a stakeholder and an integration plan. So every integration plan has at least one integration project. The integration project might have several risks associated with it. And the integration project has an integration plan.

Since the data model contains 876 data objects, it provides a comprehensive model for implementing tools for the M&A process.

This is an excerpt of my new book “Automation of Mergers and Acquisitions“.

CLICK OR SCAN THE QR CODE TO ORDER THE BOOK

Scaling new business models in corporates: Similarity of M&A and digitization initiatives

Scaling new, unfamiliar  business models is a popular topic in large corporates. These new business models might originate from internal or external initiatives, even from acquisitions. How can corporates scale new business models successfully in such situations? Here are my views on it.

Not the usual merger

A widespread perception of mergers and merger integration is that an important objective of such activities is collecting cost synergies or consolidating industries or buying your way up and down the supply chain. Scale and growth are a second thought, if at all. This is different in high tech industries, such as pharma and software. This is different and even more challenging when acquiring and scaling new business models.

Similarity of M&A and Digitization initiatives

A large company acquires a small company to adopt a new business model. An intrapreneur tries to implement a new business model in a large corporate.  Both represent the same type of challenge:  making an existing organization adopt a new business model.  Both can be solved with appropriate, new approaches.

Modulating the corporate immune system

Integrating new business models needs new approaches. The acquirer has to ask the question: “Why have we acquired the company?” If the answer is: “Because they are different” or “Because they have a business model that is new to us”, the acquirer should carefully select integration speed and depth. The acquirer should also make sure that he is preparing his own organization to be ready and able to integrate the new business model. Getting prepared for that might take some time, which influences integration speed.

The acquirer also has to manage the “corporate immune system” which typically rejects new business models due to employee statements like “not invented here” and “that is not the way we do it”.

Change intensity in your court

While in usual merger integration most of the changes happen to the target, this is a different ballgame. A massive change in the operating model  of the acquiring organization is needed. Such change is only possible if the large organization is willing and able to change.  In addition strong empowerment and executive support is needed to establish such change.

Interview zur Digitalisierung von M&A-Prozessen

Dies ist die Mitschrift eines Interviews vom Vorstandsvorsitzenden des Bundesverbandes M&A, Prof. Dr. Kai Lucks, mit Dr. Karl Michael Popp zum Thema “ Digitalisierung von M&A-Prozessen“ von Juli 2020. Informationen zum Bundesverband M&A finden Sie unter https://www.bm-a.de/

Kai Lucks: Herr Popp, sie propagieren ja ein Referenzmodell für einen digitalisierten M&A-Prozess. Welches Einsatzpotenzial hat dieses Modell angesichts fehlendem Anwendungswissen und unterschiedlichen M&A-Vorgehensmodellen in Unternehmen?

Karl-Michael Popp: Im ersten Schritt müssen die Anwender verstehen, was heute technisch machbar ist. Als zweites Problem sehe ich, dass die Prozesse in vielen Unternehmen doch recht unterschiedlich sind. Da ist es durchaus sinnvoll, ein Referenzmodell zu nutzen. Prof. Thorsten Feix hat in seinem aktuellen Buch ein M&A Phasen- und Aufgabenmodell der nächsten Generation entwickelt. Auf Basis dieses Modells lässt sich gut überlegen, welche Prozesse mit Hilfe welcher Tools automatisiert oder zumindest teilautomatisiert werden können. Somit entsteht eine Art Orientierungsrahmen aus Prozessen und Tools. Als dritten Schritt braucht es die konkrete Überlegung, was aus dieser Prozess- und Tool-Landkarte für eine bestimmte Aufgabe im M&A Lifecycle tatsächlich zur Anwendung kommen kann.

Kai Lucks: Sie sprechen einerseits von einzelnen Tools, doch zusätzlich braucht es eine Art Backbone, an welchen diese Tools andocken. Ist dazu beispielsweise der klassische virtuelle Datenraum geeignet?

Karl-Michael Popp: Um den gesamten Prozess möglichst durchgängig, also End-to-End, zu automatisieren, braucht es ein Art Integrationsschicht, die alle diese spezialisierten Tools über Schnittstellen zusammenführt. Neben den Datenräumen sind auch die M&A Prozessmanagement-Anwendungen geeignete Kandidaten für eine solche Integrationsschicht.

Kai Lucks: Als innovative M&A-Tools nennen Sie ja die Geschäftsmodell Due Diligence sowie die Merger Integration Due Diligence. Wie sollten diese eingesetzt werden, damit diese möglichst bis zum Ende der erfolgreichen Integration eingesetzt werden können?

Karl-Michael Popp: Aktuell nimmt die Akquisition neuer, digitaler und somit innovativer Geschäftsmodelle massiv zu. Dabei ist der Vergleich der Geschäftsmodelle sowie, eine Ebene tiefer, der Operationsmodelle besonders wichtig. Diese Ergebnisse wiederum haben Auswirkungen auf die Integrationspläne und sollten in Form von Daten in diese übertragen werden. Für die Umsetzung von Integrationsplänen bedarf es ja auch eines gewissen Budgets oder Ressourcen, meist in Form von Mitarbeitern. Je frühzeitiger entsprechende Daten vorliegen, desto besser können Budgets und Ressourcenbedarfe geplant werden.

Frage aus dem Podium: Welche Plattformen und Module werden denn bereits heute von SAP für Corporate Business Development angeboten? Und welche Anwendungen werden aktuell entwickelt?

Karl-Michael Popp: Es gibt bereits heute Anwendungen, die strategische Planung erlauben oder die Transformationen wie zum Beispiel Post Merger Integration unterstützen. Speziell auf M&A-Prozesse spezialisierte Anwendungen sind rar. Aber wir verfügen über die Technologien, über Machine Learning generierte Daten in betriebswirtschaftliche Prozesse einzubinden.

Frage aus dem Podium: Wie weit sind wir davon entfernt, dass sich ein Datenraum komplett von selbst aus den Unternehmensdaten, wie diese beispielsweise in ERP- oder Datawarehousing-Systemen vorgehalten werden, erstellen kann?

Karl-Michael Popp: Diese Technologie gibt es heute schon aber wir machen es nicht. Das hat ganz pragmatische Gründe, denn zu einem wollen und sollen wir es heute noch nicht machen. Eine Art Datenstaubsauger wäre technisch leicht realisierbar, aber es geht eben auch um andere entscheidungsunterstützende Informationen, die eben nicht in den ERP-Systemen vorgehalten werden.

Kai Lucks: Die Hauptprobleme sehe ich bei strategischen sowie juristischen Fragestellungen. Die Verkäufer wollen ja die Kontrolle haben, welche Daten zur Verfügung gestellt werden und da wäre ein alles umfassender Datenstaubsauger schwierig, zumal es datenschutzrechtliche Grenzen gibt.

Karl-Michael Popp: Vorstellbar wäre ein datenschutz-konformer und gefilterter Auszug, der automatisiert erstellt wird. Dies würde beiden Seiten, also Käufer und Verkäufer, gerecht werden. Automatische Anonymisierung wird ja bereits von uns unterstützt.

Due-Diligence of the target strategy - can it be automated?

Due-Diligence of the target strategy

Why a task definition?

To enable digitization, we have to define tasks in the M&A process in detail. We use goals and objectives, a description of the task and data objects used by the task. In addition, we list questions used during execution of the tasks to provide more context. In addition we can have a look at the automatability of the task and the automation in practice. That will show us the automation potential we have today. More details will be published in my new book “Foundations of digitization for M&A processes: The Due Diligence Phase“.

The task has the following objective(s):

Target strategy: analyzed

The task has the following formal objectives:

Information asymmetry: minimized

Quality: maximized

Automation capability

This task can be partially automated. However, there are only a few actions for which tools are available. Since strategies today are usually not managed and updated in application systems, automated analysis and evaluation is difficult.

Task description

While in the current German literature under strategic due diligence the market analysis and the evaluation of potential commercial synergies dominate, the market analysis and evaluation in our approach is carried out in the GTM due diligence. Here, a different approach for strategic due diligence is to be taken. The core of the considerations is exclusively the strategy of the target. Assumptions, strategic goals and measures are determined and analysed. The relationship between the business model and the operations model is considered. In comparison to the buyer strategy, the complementarity of the target strategy with the buyer strategy is established. Any strategic risks are identified and evaluated.

The task works with the following data object types:

Target Strategy, Strategic Goal of the Target Company, Strategic Measure of the Target Company, Assignment of Strategic Measures and Goals of the Target Company, Hierarchy of Strategic Goals of the Target Company, Strategic Risks of the Target Company, Strategic Assumptions of the Target, Buyer Strategy, Strategic Measure of the Buyer Company, Assignment of strategic measures and objectives of the buyer company, strategic risks of the buyer company, strategic assumptions of the buyer, strategic objective of the buyer company, hierarchy of strategic objectives of the buyer company, draft of the strategic integration plan, strategy, complementarity of the strategy, strategic synergy.

You will find more content here:

M&A digitization: A first glimpse of the domain model

The domain model will consist at least of the following parts:

• A data model that shows the data objects that are involved in M&A transactions and processes.

• A Hierarchy of tasks in different phases of M&A Processes.

• APIs for data objects and tasks.

The domain model is a programmable model. This means it is available electronically and can be navigated and displayed as you wish. It is implemented in a set of Prolog facts and rules.

Here is a first view at the phase Due Diligence. It consists of the tasks Target Due Diligence, Integration Approach Blueprint, Merger Integration Due Diligence, Deal Making and Finalize and Approve Due Diligence Business Case. Each tasks will be documented by its goals, the data objects used and a task description.Each of the data objects will be also represented in JSON notation as well as an API documentation.

Here is an example of the documentation of each task. The task Review Merger Integration Project works on concepts

 Integration Project Plan, Integration Budget, Stakeholder, Integration Success, Integration Project, Integration Project Resources.

It has the goal (that describes the result):

Integration project: tested and verified

and the objectives, which describe the qualities of the result:

 Integration success: maximized

 Quality: maximized

It has the following task description:

We review the structure and behaviour of the merger project. It is important to remember that the word "project" means that we have a professional management of integration by professional project managers who are experienced with complex projects and equipped with the skills of a certified project manager. We should also set up a project steering committee that has comprehensive competencies and can make decisions quickly.

The word "project" means that we have a project structure plan with tasks to be performed in the project. Buying companies that make frequent acquisitions have a project structure plan template that they adapt to each of the new merger integration projects. This ensures completeness and also allows a correct assessment of whether we have sufficient resources and whether the resources know what to do in the merger.

But we also focus on providing answers to questions like: Do we have the right resources for the integration tasks in mergers? Are the resources able to perform the tasks assigned to them? Do the resources have adequate social skills to guide people and convince them to integrate?

So stay tuned for more information. One of the next blogs will talk about programming on top of the domain model.