The Future Of M&A And Automation
Founder and CEO of DealRoom, a project management solution and virtual data room for complex financial transactions.
Automation products have been seamlessly adopted into most people’s daily lives over the last few years, but automation has been around a lot longer than one may think. While automation has a few different definitions, I will be referencing it in terms of machines replacing human decision-making and labor. When you consider how much automation impacts our lives and all the different aspects it touches and benefits, it’s not so outlandish to think one day that automation technology will be applied in new ways to the mergers and acquisitions (M&A) industry. Will this benefit the industry, or could this pose security risks? Before we dive into that, let’s go back in time to when automation began.
An Abbreviated History Of Automation
First came the idea of a water clock, which was then developed by the Ancient Greeks and Arabs. Fast forward to the Western Europe Industrial Revolution and the introduction of furnaces, boilers and the steam engine required the creation of automatic control systems, such as speed control and pressure regulator devices. As the years went on, automation only advanced. Primarily adopted in factories, central control rooms became the norm as early as the 1920s. However, the big automation boom came in the 1940s and 1950s during the First and Second World Wars with the introduction of signal processing and later on solid-state digital logic modules. By the time the 1970s came around, those control rooms that were the standard in the 1920s became digital. Automation was on track to change almost every aspect of human life.
Pros, Cons And Risks
Some of the benefits of automation include the obvious, such as relieving people of repetitive work and an increase in predictability and efficiency, as well as improved quality. However, the biggest associated benefit of automation is a decrease in labor costs and faster production times.
These benefits don’t come without their fair share of disadvantages, though. Faster production times with less human intervention means a higher chance of unchecked defective outputs, which in turn actually decreases productivity.
Additionally, the implementation of automation can cause worry for those whose jobs may be replaced by new technologies. When McDonald’s first adopted order placing kiosks, many were concerned about the elimination of minimum wage job opportunities. Now, nearly six years later, McDonald’s is starting to implement automated drive-thrus — further eliminating the need for physical employees. The goal? Shorten average order times to increase the number of orders fulfilled, ultimately leading to higher profits. Although this implementation of automation was initially met with some public backlash, companies continued utilizing these methods to increase productivity and profits.
Automation And M&A
We’ve seen how automation impacts other industries, but has it impacted the M&A industry yet? Well, yes. It began with Excel and fax machines, and now we see it in different software platforms used as a way to reduce repetitive request tasks. The M&A industry is wildly competitive already, so it’s natural for companies to seek ways to give themselves an advantage over other organizations in the space.
Cloud computing can be used as an example here. The marriage of cloud computing and machine learning paved the way for a new M&A landscape, allowing the manipulating of massive databases. Given time, these capabilities we’re seeing will only expand. Machine learning, predictive analytics and robotic processing are already on the rise and at the forefront of these software platforms. With competition rising, there’s no sign these companies will stop innovating any time soon.
Where Will The Future Take Us?
The trend of innovation that has persevered for decades will only continue to become more substantial in the coming years. When we look back at the most recent 40 years, it’s quite impressive to see how far the industry has changed and improved; however, there are still many areas of improvement to consider. Although it is highly doubtful the M&A industry will ever be fully automated, there are a few phases that can be improved by implementing AI technology.
For example, deal sourcing could easily be made more efficient by the development of databases that can scrape data about potential targets for buyers. As technology becomes more mature, we might see capabilities such as background checks on owners and management and maybe even a kind of behavioral analysis. Other parts of the deal process that could be affected include strategy development, integration management and sale preparation. There are already aspects of automation that touch each of these phases — imagine what could be possible if we embrace automation fully and keep innovating.
How To Keep Up
How can you stay up to date with these innovations? Start by doing the following:
• Stay in the know by subscribing to relevant newsletters and follow journalists reporting on new automation developments.
• Start small if you are new to automation. Try a simple automation platform to see if it’s a good fit for you and your organization and go from there.
• Encourage employees to look for solutions. If there’s a bottleneck that might be resolved with an automation tool, employees should feel free to look for a solution without fear.
• Reassure employees their jobs are not at stake. It can be scary to think you may lose your job to a computer, so let people know that will not happen.
Keep in mind that automation needs human intervention to continuously improve. Maybe one day that might not be accurate, but as long as humans continue to learn and explore the different possibilities out there, the M&A industry will become much less tedious and time-consuming. Competitiveness and the desire to be on top propels the industry forward, but genuine curiosity and a need for improved processes is how automation began. Maintaining that original spark is how we keep moving forward as an industry and society.
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