How to Optimize Deal Value in M&A Integrations with O2C Automation https://www.emagia.com/resources/ebooks/how-to-optimize-deal-value-in-ma-integrations-with-order-to-cash-o2c-automation/

1. How to Optimize Deal
Value in M&A Integration
with O2C Automation

2. • Introduction
• Value Creation (or Destruction) in M&A
• The Role of O2C in M&A Success or Under-Performance
• Automation and Successful M&A Integration
• Case Study
• Benefits
• Conclusion
• Questions
Agenda

3. 3
Introduction
• Mergers & Acquisitions are the fastest way for a company to
achieve large increases in revenue in a short time period
• Integrating the two companies to realize the projected synergies is
a major challenge. A Deloitte study concludes that 30% of
combined companies did not meet growth objectives
• Operations of the two companies must be integrated: Marketing,
Sales, Production/Procurement, Order Fulfillment, Finance, HR,
etc., etc.
• Evaluation of the investment, using discounted cash flow
techniques, places great importance on generating increased profit
and cash flow in the early years following combination.

4. 4
Value Creation/Destruction in M&A
• The success of many business operations are required to produce
an overall successful merger or acquisition. Order to Cash (O2C)
functions are among the most critical.
• Orders need to be processed accurately & promptly and quickly
fulfilled. Accurate invoices need to be delivered same or next day
following fulfillment.
• 99+% of Accounts Receivable (AR) need to be collected on or close
to payment term due dates from Day 1, including “inherited” AR.
• AR Collections are often problematic due to attrition of the acquired
company’s Collectors. In my 35 years of consulting experience,
approximately 33% of projects were to help clients recover from
post-integration cash flow and AR problems.

5. 5
Value Creation/Destruction in M&A
Examples of poor Order to Cash (O2C) integration:
• A medical device manufacturer saw total AR increase 22% and >90
day-past-due AR increase from $7 to $19 million post combination
• A scientific equipment supplier had its >150 day past due AR
skyrocket from $16 to $48 million in 6 months following its
combination with an acquired company in the same industry
• An insurance company implemented a new ERP system while
integrating an acquisition. Implementation difficulties prevented them
from invoicing their customers for two months. Much of that revenue
was paid late and a substantial portion was never paid.

6. Case Study
• AR > 150 Days Past Due Post-acquisition

7. 7
The Role of O2C in M&A Success
The O2C process is the driver of success or under-performance of
these key “must haves” cited by Deloitte:
• Increased sales at acceptable margins. Lost orders, sub-optimal
pricing, excessive revenue leakage from returns, price discounts,
deductions must be minimized.
• Negative customer experiences must be minimized
• The cost structure must be optimized: but not reduced too
much to impact customer facing/Order-to-Cash operations
• A strong cash flow must be delivered. There will be many large,
one-time expenditures made during the integration. Management will
want to finance these with cash generated from operations, not
borrowing. Credit, Collections and Dispute/Deduction Resolution
must be operating near full effectiveness in the first month of merger.
There is little margin for shortfalls in these factors

8. 8
The O2C workload of the combined company will increase
substantially. However, the business case for the combination will
inevitably include significant cost reduction; i.e., staff reduction.
There will be substantial staff attrition. There will be new hires.
The post-combination environment will be:
• Substantially higher workload
• Fewer staff
• A significant proportion of new staff
Automation & Successful Integrations
The new work environment demands a high level of automation.

9. 9
There will be an urgent need to “hit the ground running” post
combination in:
• Credit Vetting and Control
• Collections
• Dispute and Deduction Resolution
• Cash Application
Artificial Intelligence driven automation, which can automate 70 – 90%
of manual operations in these four O2C sub-processes, can meet the
needs of the post-integration O2C process.
Automation Capabilities Required

10. • Customizable, online credit application with digital signature
• Automated customizable credit scoring – with real-time import
of credit bureau data, verification of legal and tax status, etc.
• Automated AI-powered credit decisions based on pre-defined
rules to assign credit limits
• Full featured Approval Workflow guided by Delegation of
Authority policy
Automation in Credit Risk Management
Gathering the information for a Credit investigation and setting a credit
limit can be almost completely automated, leaving only the quantification
of the credit limit or the review/approval of a machine-recommended one
for human judgement.

11. • Configurable Collections Strategy – multiple parameters
• Prioritized Task List
• Collector Workbench with all required information
• Automated Interactive Dunning - 100% customer touch
performed by AI Digital Assistant
AI Automated Collections
AI Dunning communication enables 100% portfolio
coverage with a persistent request for payment
and logging of Promise to Pay when successful

12. • AI-assisted dispute reason code assignment (reason code read from
remit advice and translated)
• Full featured Workflow to route deductions to assigned Resolver, with
audit trail, internal dunning, & robust reporting of status & results
• Automatic credit to debit matching & clearing
• Root cause analytics to fuel process improvement efforts
AI Automated Deduction Resolution
Deductions are routed through resolution process and
cleared from AR Ledger automatically

13. • IDP extracts remittance data from multiple customer
sources/documents in multiple formats (read & keypunch)
• Remittance data automatically applied to open invoices by
Auto-Cash engine at 85% - 90% hit rate
• Automatic creation of deductions to be routed for resolution
• Automatic execution of small balance write-offs and matching
debits to corresponding credits
AI Automated Cash Application
Reading data and inputting it into a file consumes the most
time in manual Cash Application. It can be 95% automated.

14. 14
Challenge:
AR management needed overall improvement.
SAP deployed in 30 countries, multiple languages
Solution:
Emagia AI-powered Digital Assistants for Deductions, Cash Application,
Collections and Analytics modules
Customer Value Achieved:
• Deduction resolution cycle time reduced to 5 days
• Auto-cash hit rate increased from 50 to 80%
• DSO reduced 7% in 6 months
Customer Success Story –
Global Medical Products Supplier

15. Avoidance of extended, severe drop in cash flow,
followed by large write-off of acquired AR
Cost Savings: staff cost, bad debt expense, funding of AR
Improved Customer Experience
Increased Cash Flow from AR
Higher Cash Flow & Lower Cost
over the Long Term
Improved Customer
Experience/Satisfaction
Low Cost
Operations
Greater
Cash Flow
Increased Cash &
Profit
Benefits of AI Digital Automation in AR

16. Conclusion
• Order to Cash functions play a major role in the
success or under-performance of a
merger/acquisition
• They need to be operating near peak effectiveness
shortly after the companies merge
• With increased workloads and proportionately
decreased resources, increased automation is a
necessity

17. If you have any questions or comments
about this session, please let us know
in the chat box or write to us at
info@emagia.com
Orders
Credit
Cash
Application
Collections
Deductions
Payments
Invoicing