AI: THE IMPACT ON MERGERS & ACQUISTIONS

Chris Chaney Chris Chaney on October 5, 2023

When I was young, I watched movies with robots and drones; we called this science fiction because such things would, of course, never come true. This was only imagined to be future scientific or technology advances as is artificial intelligence or AI. So here we are – and yes, robots and drones have come to offer technological advances that can enhance the way we interact with each other and with the world. And they are here to stay!   

So how can AI impact mergers and acquisitions (M&A)? What M&A tasks can a robot control or computer complete in the M&A world that are usually done by humans? Let’s look at just a few examples. 

 

LEVERAGING AI IN M&A TASKS 

Target Screening.To determine the best ROI, shareholders of the buying company must identify acquisition targets and understand how the deal will impact their strategy and financial performance. By harnessing the power of AI, buyers may be able to more efficiently and accurately identify potential targets, thereby increasing the likelihood of successful acquisitions. 

Due Diligence. AI can streamline the due diligence process by document review and analysis. Cloud based data rooms have already revolutionized M&A due diligence by replacing physical data rooms and I think AI will enhance the process even more. And to think that back in the day we had real paper deal books that we mailed! 

 

Analysis of Information. AI may be able to analyze information such as a company’s brand, management, trajectory, resources, productivity, and financial information to determine the profitability of the combined entities. 

Reduction of Risk. AI may be able to reduce risk in due diligence by analysis of huge volumes of data, therefore forecasting trends. This could help decision making for more successful MA strategies. Companies can leverage AI as algorithms accurately aid better predictions which makes a shift in how deals are originated and evaluated. 

Valuation. Determining the value of a PEO is made of many distinct pieces of the valuation puzzle. I just do not see a tremendous impact on the human ability to understand valuations across the PEO industry unless they have done multiple deals and understand the comparisons in detail. 

Post-acquisition. AI can follow an acquisition, facilitating the integration by automating various tasks including data migration, employee onboarding, and process standardization. 

In summary, AI is reshaping the way buyers undertake due diligence, make decisions, and integrate post-merger. Organizations can obtain profound understandings of target companies, minimize the duration and expense of M&A and make better informed decisions driven by data. 

But at the end of the day there is one thing you cannot take out of successful M&A transactions and that is the people. It takes a combination of business and emotional intelligence to be a great M&A advisor, and it takes an incredible “read” on the people involved on both the buy and sell side to know if a deal will ultimately be successful. It is kindness, integrity and respect that truly guide the M&A process and those for me are simply real-time and human.  So for now, while some of the deal tasks can be completed by AI, great deal making is about the ability to understand, guide and value the people and will not gain immediately from AI in my opinion.  But then again, I was not a believer in science fiction! 

UTILIZING METRICS AS A PATH TO IMPROVING OPERATIONALLY OVER TIME

Alex Oprica Alex Oprica on September 8, 2023

A company’s story is often written succinctly on its website, with details of the company’s history, its values, and its aspirations for the future. Internally, however, company leaders can capture a more telling story. Operational metrics, while often unique to each company, depict a different story.

THE TRUE COST OF EMPLOYEE TURNOVER: A COMPREHENSIVE ANALYSIS

Alex Oprica Alex Oprica on August 7, 2023

Employee turnover poses significant challenges to PEOs, affecting their productivity, financial stability, and overall success. In this article, we will delve into the various costs associated with employee turnover, providing a detailed analysis of the expenses involved and the detrimental effects on organizational performance. 

PROFITABILITY ABCs: IT IS AS EASY AS 1-2-3

Alex Oprica Alex Oprica on June 30, 2023

The article provides some simple guidance for streamlining operations (thus reducing selling, general, and administrative (SGA) costs) and increasing gross profit contribution from their existing client base. For the purpose of this article, we are only exploring pricing strategies that affect client profitability and operating efficiency items that impact select SG&A cost categories. Business development and organic growth are excluded from this discussion.  

CLIENT-LEVEL FINANCIAL ANALYSIS

Alex Oprica Alex Oprica on June 30, 2023

If you asked someone in the PEO space what he or she thought of actuarial science a positive response might be reserve analyses or accruals. A negative response might be collateral calls or rate increases. Naturally, the varied reactions stem from whether there is positive or negative news coming from the work of the actuary. Yet, one of the most helpful projects an actuary can perform for a PEO, eliciting either positive and negative reactions, is a client-level financial analysis.  

THE 5 Ws OF PEO GENERAL LEDGER RECONCILIATIONS

Alex Oprica Alex Oprica on June 30, 2023

General ledger reconciliation is a key control to help maintain timely and accurate financial statements in any business. If you speak to accounting or finance professionals in the PEO industry, they will agree that general ledger balance sheet reconciliations are the most telling and critical tools in analyzing a PEO’s fiscal position. Failure to reconcile balance sheet accounts timely and accurately can lead to material losses to the PEO. Let’s explore the 5 W’s of PEO ledger reconciliations.  

THE 5 Ws OF PEO GENERAL LEDGER RECONCILIATIONS

Alex Oprica Alex Oprica on June 30, 2023

General ledger reconciliation is a key control to help maintain timely and accurate financial statements in any business. If you speak to accounting or finance professionals in the PEO industry, they will agree that general ledger balance sheet reconciliations are the most telling and critical tools in analyzing a PEO’s fiscal position. Failure to reconcile balance sheet accounts timely and accurately can lead to material losses to the PEO. Let’s explore the 5 W’s of PEO ledger reconciliations.  

GETTING YOUR HOUSE ORGANIZED: STEPS FOR A SUCCESSFUL 2023

Alex Oprica Alex Oprica on February 2, 2023

To achieve success, a PEO must build and maintain a strong foundation. Without this, the weight of the inevitable operational stresses and changes to be encountered as the year progresses will not be sustainable. With the new year rush behind us, take this opportunity to get your house in order. While there are multiple financial items to tackle such as budgets, forecasts, and tax rate reviews along with sales and marketing initiatives, this article focuses primarily on operations-related steps.

ECONOMIC REORDERING REVISITED: AN OPPORTUNITY FOR PEOS

Alex Oprica Alex Oprica on September 9, 2022

All these challenges can be met by PEOs. It may take some re-engineering of the model, but the PEO service could be central in the reordered economy and business environment in the years ahead. It is a time to be especially vigilant to customer wants and expectations, for many businesses will find it difficult to be profitable. This is where the PEO value proposition will be challenged most. 

TURNING THE TIDE: SEIZING OPPORTUNITY AMID ECONOMIC CHALLENGES

Alex Oprica Alex Oprica on August 9, 2022

If you read any newspaper, watch any news program, or listen to any business podcasts it’s impossible to avoid discussions of surging gas prices, record inflation, labor shortages, supply chain bottlenecks, and—scariest of all—signs of a looming recession.External influences like these economic forces are part of any business cycle. You can’t out-grow, out-innovate, or out-think market forces. However, how you respond to such influences can be determinative in how well you fare through challenging economic cycles.

WAGE INFLATION DISTORTION

Alex Oprica Alex Oprica on July 7, 2022

As we head into the midpoint of 2022, wage and goods inflation continues to be a hot topic because it continues to negatively affect the vast majority of industries, as well as the people working within them. How has the PEO industry managed to, in large part, avoid a phenomenon that has had such high-cost implications? It’s all relative. Literally.

FINANCIAL SCORECARD: ANALYSIS & IMPROVEMENT

Alex Oprica Alex Oprica on July 7, 2022

Understanding how to analyze a PEO’s financials is beneficial for scaling and maximizing profit. Formal due diligence on potential acquisitions within the PEO space should always begin with a financial analysis. 

KEY PERFORMANCE INDICATORS

Alex Oprica Alex Oprica on July 7, 2022

In the business world, companies and individuals use goal-setting methodologies to achieve the core mission, objectives, and key metrics. Many achieve this with the use of key performance indicators (KPIs).

A Scaling Roadmap for Your PEO

Alex Oprica Alex Oprica on March 15, 2022

All PEOs start somewhere and create systems that work for them. Eventually, if the goal is to grow, scalable systems and operations need to be in place to sustain the PEO’s growth, along with the right people who can manage and execute these operations. Scaling can create many benefits for the PEO: ongoing client satisfaction, a great employee experience for team members, hitting growth targets, and ensuring profitability over the long-term. This is hard work, and it’s not for the faint of heart. Therefore, I hope to put together a practical guide to give you a roadmap for scalability.

MULTI-STATE LOGISTICS: EXPANDING THE EMPIRE

Alex Oprica Alex Oprica on March 10, 2022

Multi-state expansion for most PEOs can be planned or unplanned. This article will provide insight for small and middle market PEOs that are dealing with the operational aspects of multi-state expansion due to one-off employee hirings by clients in states where they are not currently licensed or registered.

THE PEO PARTNERSHIP: A KEY TO MULTI-STATE SUCCESS

Alex Oprica Alex Oprica on March 10, 2022

Last year, a brand-new client learned a difficult but important lesson about the value of the PEO partnership. The client was a tech start-up in an aggressive growth mode. The owners were hiring remote workers in multiple states, including employee-friendly states, without anyone with HR expertise to guide them. The PEO model was attractive to them because they knew they were not able to grow quickly while keeping up with HR and payroll compliance. However, right after the client signed the PEO agreement, it terminated an employee based in California without reaching out to us. It turns out that the terminated employee was more versed in California law than the client. Eight days later, the client called us in a panic. 

LESSONS LEARNED: REMOTE & HYBRID WORK

Alex Oprica Alex Oprica on February 1, 2022

There have been many lessons learned over the last two years as we faced the pandemic and the new world of work. When the shutdowns were announced in March of 2020, ESC immediately put an action plan together that included how we could best assist our clients and what would be most helpful for them during that challenging time. Some clients were nimble and employees began working from home with little interruption, while others did not know where to start. We assisted them through the transition to work from home, and then many of them came back to the office. Currently, the majority of our clients are either working on-site or in a hybrid model, while a few made the decision to be fully remote. We wanted to share best practices and lessons learned as our team of HR business partners and clients worked together to navigate this new world of work. 

LABOR MARKET WOES & THEIR IMPACT ON LEADERSHIP DEVELOPMENT

Alex Oprica Alex Oprica on February 1, 2022

Many issues stem from the current labor shortage crisis. Many long-term employees who are great at their specific skill sets have their eyes set on retirement. These employees are consistent, yet some are stagnant and slow to embrace change. This may pose a challenge for contribution to forward-thinking strategies. Leaders need to push long-term employees from becoming stagnant, which is especially important when these workers are in charge of hiring and training.

BUILDING A SERVICE MODEL AROUND ASO & PEO

Alex Oprica Alex Oprica on February 1, 2022

As the needs of clients evolve and change over time, it is important for PEOs to offer solutions that meet those needs. Sounds simple, right? We have all seen clients that initially onboarded with 10 employees that now have 200 employees and just hired a new CFO and HR director. Their needs have obviously changed.

HOW OUR PEO BUILT OUT ITS DEI PROGRAM

Alex Oprica Alex Oprica on December 15, 2021

It’s year end and everyone within the walls of a PEO is heads-down, preparing clients for “the push:” the end-of-year payroll, benefits renewal, W-2s, and annual tax filings. This is also a natural time to reflect and chart a path forward, maybe even make a resolution or two. If diversity, equity, and inclusion (DEI) isn’t in your review mirror or your windshield looking forward, you’re leaving your organization and your clients behind. The truth is, DEI is good for business—yours and your clients.’