March 2, 2020
Interviewed by: David Snow

CEOs Ask: Is Automation Worth the Effort?

Experts from Thomas H. Lee Partners, Bain & Co., and Automation Anywhere discuss the process by which the best CEOs determine where to begin automating functions within their companies. They explain why robotic process automation typically begins with processes that involve humans touching many pieces of paper.


PRIVCAP TRANSCRIPT “CEOs Ask: Is Automation Worth the Effort”

David Snow, Privcap: Today we’re joined by Mark Benaquista of Thomas H. Lee Partners, Tamas Hevizi of Automation Anywhere, and Michael Heric of Bain and Company. Gentlemen, welcome to Privcap today. Thanks for being here. So we’re talking about automation, sometimes called robotic process automation, sometimes called AI. The three of you are experts. It’s a huge opportunity for private equity to transform the businesses in which they invest and yet, a lot of people have questions and so I have questions for you today. Why don’t we start with a question for Mark from Thomas H. Lee Partners, a major private equity firm. You know, CEOs who are deciding what tools to use to improve their companies are bombarded with requests from consultants and technology providers. What do they need to know about automation as far as whether or not it’s worth their time exploring?

Mark Benaquista, Thomas H. Lee Partners: I would say, in the last 18 months, automation, or robotics, is on every CEO’s mind. It’s on every board’s mind. In the years leading up to about 18 months ago, it was something where you had to press a little bit more to help people understand how automation can help the cost structure and SG&A inside of a company be improved. But in the last 18 months, you can’t turn a page or read something online without hearing the word robotics or automation. So I don’t think it’s quite as difficult to have that conversation today. CEOs want to learn more. There are a lot of misconceptions about what it is and how it works, but I don’t think it’s difficult to discuss that topic these days.

Tamas Hevizi, Automation Anywhere: I noticed that there is a distinct difference between industries. Certain industries like healthcare and banking have a very deep understanding of not only what the technology is, but also how it applies to their businesses. And there are other industries that are just getting up to speed, like Mark said.

Michael Heric, Bain & Co.: I think we’re seeing two types of clients – ones that are very interested, they see the value, they want to explore, learn more, they’re very bullish on the prospects around automation. And then you see others that are a bit more skeptical.

Privcap: In what ways can a company determine the impact that automation can have on their operations?

Benaquista: Well, right from diligence, we’ll form a point of view around SG&A. In certain categories, we’ll dive in deeper and understand the amount of paper that has to move and the work flows in an organization. How much of that is automated? We’ll ask how many manual hours are involved in there.

Hevizi: There’s this emerging question – not only, can this particular process be automated, but what is the art of the possible? If we want to step back, how much of the gains can be attributed to the automating process? Most of the firms start asking that bigger question and then work back from that. How much of that is actually bankable? How much of that can be attained realistically given the investment horizon?

Heric: Privity equity funds that we see create a value creation plan around the particular asset that they’ve acquired. Automation should be a part of that plan. Increasingly you’re going to see that automation has become a bigger part of that plan.

Privcap: It’s one thing to say, we’ll save a few dollars by automating some things, but it’s another thing to look at a company, perform due diligence say we can tremendously change the operations of this company.

Benaquista: We will actually underwrite automation into that plan. It’ll depend on some of the leverage we see during diligence. We will come up with a plan to gain alignment within the management teams at the company, and actually staff a project around so that we can see the actual outcomes to be achieved.

Hevizi: Automation is a bigger part of the private equity conversation. In my prior career, when I worked with the firms at SAP, it didn’t come up that often. It’s coming to a stage where it can start addressing processes and areas of the business where previously there was no technology to support. Those two things are converging and it’s making automation a bigger conversation.

Privcap: What type of due diligence will a firm perform to get a sense of impact?

Heric: We do detailed benchmarks by industry, by process, where there are greater opportunities around automation and what they might be and what they might be worth. Bottom up, you can take any asset in a particular industry, look at those individual processes, and you can use those benchmarks against the relative size of those process to estimate how much potential there might be from automation.

Benaquista: We’ll look at it through that lens of whether the automation component is going to allow us to scale more quickly with the right tribal knowledge in the company. Every company may operate a little bit differently. The automation piece may allow us to scale without having to make major changes.