This past year, many businesses completed mergers and acquisitions (M&A). In fact, between May and August, there were nearly 30 mega M&As – Microsoft acquired Nuance Communications, Apollo Funds acquired Verizon Media, Amazon acquired MGM, Celonis acquired Integromat, and many more.
Globally, M&A volumes have surpassed $4.3 trillion this year so far, for several reasons: larger businesses tend to acquire smaller competitors that aren’t performing well during challenging times, companies want to expand or augment their current product portfolio, or a company may want to enter new markets.
Process Mining: The Key to Successful M&A
No matter the reason, M&As are a complex project for everyone involved: lawyers, HR, accounting, IT services, employees, and many other stakeholders.
But the most difficult thing lies with managers; connecting two companies with different cultures and established business processes is not easy.
Over the past few years, ABBYY has acquired several companies around the world, most recently Timeline PI in the United States and Pericom Singapore in Southeast Asia. Here, we’ll dive into three groups: resources, processes, and people, and discuss how process mining can integrate businesses successfully that won’t result in profit losses, process bottlenecks, or employee attrition.
It’s not just legal entities that are acquired when it comes to M&As. Inherited buildings and equipment come into the possession of IT systems, and the parent company will typically audit everything to decide which resources should remain and which are better to offload.
However, when evaluating different technologies and generations of systems, IT leaders need to ensure business continuity of end-to-end business processes while integrating processes. And the sooner they start doing so, the better.
The common way is to meet with stakeholders and manually map out the systems, applications, and known processes. But it’s a time-consuming and costly process that takes months. Another way is to automate the integration with robotic process automation (RPA) software robots. Software robots copy human actions in a computer interface and transfer data from one system to another.
However, robots work effectively only in well-structured processes, and don’t understand which systems have been optimized for integration. If the company needs the integration to be optimized faster, process mining and discovery tools are the key accelerants.
Process mining platforms duplicate information about the execution of processes (digital traces) from corporate systems and build a model of the company’s processes, calculate metrics, help find optimization methods, and help with analytics for starting digital integration and transformation. This ultimately helps streamline processes, identify bottlenecks, and improve operational efficiency.
Enterprise Management System
Another use for process mining is as an Enterprise Management System (EMS), which does not require large-scale work related to setting up or writing code. In this case, each of the linked systems loads its audit logs (or the data could come from databases, custom data extracts, etc.) into the analytics platform.
The platform, based on the actions recorded in them, will register the occurrence of a business event that corresponds to a scenario, a set of conditions, and causes.
This is what it looks like: Imagine that a chain of events of one end-to-end process goes through two non-integrated systems of different companies, and the onset of a certain business situation requires turning to another system. Process mining provides visibility and alerting across a distributed system, allowing you to quickly establish interaction between the IT landscapes of different companies and ensure business continuity.
How the Enterprise Management System Works
Here’s how it might work at a car dealership that has acquired a carrier company with its own fleet of car carriers. Maybe the dealership is now offering a new service to customers where they can transport cars to any part of the world, but there are several different companies that work together and follow several steps to make this happen. Below are examples of what steps might be taken:
- To start with, each company has its own separate IT system, and each of them transmits digital traces of transactions in different formats to a process mining platform. When a car dealer signs a preliminary contract with the client, they determine the date of sale and shipment of the car to the buyer.
- For the analytical platform, a sequence of events occurs in the accounting system, including determining a preliminary contract and completing an advance payment.
- Then, in the dealer’s system, it’s noted that the service of transporting the car to the destination is required and, in the carrier’s system, the process of booking a car carrier for the desired delivery date range begins.
- If payments are complete, a trigger occurs. In the carrier’s IT system, the process mining platform can see the warehouse’s attributed address where the car is located, along with a waybill for the driver.
Although none of the systems communicate with each other directly in this example, the task is still accomplished. All of this occurs at a stage when companies have yet to establish work in different delineations and businesses.
After integrating resources, it’s important to understand how the merged businesses’ processes are flowing. This is only possible when you have a complete, detailed understanding of the data and business workflows in the organizations.
This transparency can be achieved through intelligent analysis of business processes. Process mining allows you to see what a typical sequence of actions looks like in real-time when performing a particular task, such as agreeing to a contract with a supplier or responding to a customer request within a call center.
With these decisions, you can find deviations from the norm, who is doing them, and how the process can be streamlined and improved.
ERP system, a process common with M&As
For example, many companies have integrated all their branches to a single ERP system, a process common with M&As, while other companies operate in several dozen countries around the world and use multiple ERPs of different generations and manufacturers. This can make it difficult for equipment and assets to have consistent data reporting, which makes it difficult to prepare financial statements.
By applying process intelligence to collect and correlate data from disparate systems, companies can explore different options for the same process and identify any deviations.
There are several approaches to merging company cultures during an M&A. Autonomy is used most often if the new business is engaged in activities that are radically different from the parent company and when the acquired enterprise’s processes are fully preserved. But this option contradicts the notion of merging businesses. Often, customers don’t suspect that two companies are part of the same brand.
Fully integrate the platform
The “roller method” approach fully integrates the platforms, processes, and corporate culture of the parent company. This is a fairly common and successful method when the acquired company is much smaller than the parent, but it sometimes does not always lead to good results.
There are many examples of unsuccessful M&As — from Microsoft and Nokia to Google and Motorola to Daimler and Chrysler. Each case has different specifics, but one thing united them: the new owner sought to bring “his charter to someone else’s monastery” and very quickly introduced his corporate culture, KPIs, and processes into the business.
A New Business Model for Better Benefits
The third (and less common) method brings the best of both worlds: a new business is built from elements of both buyer and seller. It may seem more labor-consuming at first, but it can provide both companies with more benefits.
Additionally, with both methods, HR plays an important role. It’s important to maintain communication as employees become part of the new system, sharing what opportunities and tasks await them and what limitations exist.
From the perspective of managers during an M&A, it’s useful to identify best practices and determine which employees are the most productive. This is where task mining can be useful. Task mining maps out how staff accomplish steps within a process and allows companies to understand how people are using and interacting with systems to improve their productivity and optimize workflows.
Modern technologies like this allow you to identify the real picture of what’s happening, including the conditions when the task is performed, the cost of the process, the opportunities for improvement.
As companies continue to find opportunities to stay competitive in 2022, many analysts agree that M&A transactions will continue to increase. The winners will be those who acquire companies wisely based on understanding and carefully integrating resources, processes, and people.
Image Credit: Gabrielle Henderson; Unsplash; Thank you!