M&A has formed a key component of the success of Inflexion’s portfolio since inception in 1999. Doing so requires great resource, from originating to negotiating to integrating. Fortunately, technology is helping part of this process.
While data has long been crucial for business activities, overlaying advanced technology is boosting human efforts on M&A. Two years ago, artificial intelligence was integrated into Inflexion’s origination efforts, driving smarter decision-making and accelerating the deal-making process. The efforts are paying off, with approximately 40% of potential opportunities viewed within Inflexion’s AI-powered tool ‘Tearsheet’ before they enter into the firm’s CRM. Over the last 12 months, more than 200 companies have been added to the firm’s CRM, highlighting the tool’s effectiveness in casting Inflexion’s deal-sourcing net wider.
“AI is proving hugely beneficial for laying the foundations for our M&A work, creating longlists for analysts and angles for our campaigns. It is creating efficiencies which allow our team to connect with the right people and devise the right angles faster, since people are crucial to success of any M&A,” says Andrew Priest, Partner and Head of Origination at Inflexion.
Artificial intelligence, real benefits
The first step in harnessing AI well is establishing robust data.
“This foundation is crucial for creating comprehensive datasets that AI can analyse, ensuring accurate and meaningful outputs,” explains Jan Beitner, Director in Inflexion’s Value Acceleration team focused on Data & AI.
With the data in place, AI is supporting Inflexion’s M&A efforts. Tearsheet acts as a centralised repository aggregating decades of work with data from various external providers of financial and alternative data, internal intelligence from meetings and conversations with experts, and documents and information from the CRM. This enhances team collaboration and decision-making as it democratises access to the information rather than having gatekeepers guard information flow. “This is a differentiator as it eliminates bottlenecks driving efficiencies and enables effective monitoring of targets,” Jan explains.
The entire investment team is encouraged to use Tearsheet to identify companies based on specific criteria such as headcount, financials, with the in-house tool canvassing around 700,000 companies covering virtually all possibly relevant deal or bolt-on targets across the UK and Europe.
“AI is really helpful for finding niche companies, especially when sector classifications aren’t clear. It understands what you’re looking for, moving beyond simple keyword searches to deliver more nuanced results,” Jan notes.
This makes it an excellent tool for buy-and-build strategies when fragmented markets often mean a disparate and numerous group of businesses which can be tricky to pinpoint.
Finally, AI is helping Inflexion to enhance knowledge sharing. The firm utilises an internal version of ChatGPT integrated with their data and document systems providing access to various data sources, including records of expert calls, allowing the team to more effectively search and analyse their internal knowledge base. This capability is especially useful for developing strategic angles and identifying potential opportunities.
“This internal ChatGPT helps us to quickly access this wealth of knowledge, enabling us to build stronger cases for potential deals,” explains Jan. “AI helps us target our approach, driving fast, more focused and informed decision-making, but ultimately our team continues to drive the approaches.”
Top tips for succeeding with AI
With the tools in place, ensuring their effective use is critical.
- Monitor usage to ensure teams are leveraging AI and data tools to their full potential. This allows you to identify gaps in training but also drive future development delivering maximum value.
- Run regular internal training sessions to boost adoption and to maximise the benefits of AI. Getting people onboard is very important. Traditional change management is the key to success,” Jan says.
Implementing an AI-driven approach aims to enhance human decision making rather than fully automating origination. AI is the means to move faster, conducting new analysis that was previously too time-intensive. Automating high-volume but simple tasks such as monitoring targets frees up time for humans to focus their efforts.
SBTs in Action: BES’s journey to setting targets
BES Group is a provider of premium quality engineering testing, inspection and consultancy services backed by Inflexion and earlier this year had its SBTs validated. The process took approximately 18 months from start to finish, beginning in late 2022 with internal discussions and in February 2023 the engagement of a consultant specialised in sustainability and carbon footprint management. “The consultant’s expertise was crucial in navigating the complexities of the process,” recalls Helen Guest, Group Procurement Manager at BES.
The initial phase involved an extensive data gathering process, which took several months. Following this, they undertook internal validation and target setting, which required additional months of meticulous work. The targets were submitted to the SBTi in August 2023. Due to a backlog, the validation process extended until March 2024. During this period, BES responded to several rounds of additional queries from the SBTi.
BES’s baseline data revealed a total carbon footprint of over 15 tCO2, distributed as Scope 1: 10%, Scope 2: 2%, Scope 3: 88%. Helen describes the firm’s targets for 2030 as “ambitious, yet achievable” comprised of a 42% reduction in Scope 1 and 2 emissions and absolute reduction in Scope 3 emissions, with net-zero targeted by 2040.
BES is taking a number of steps on its journey:
- Investing in renewable energy: While this may seem straightforward, the influx of new companies and existing contract obligations can complicate the process.
- Adopting low-carbon refrigerants: Transitioning to environmentally friendly refrigerants is a key component of BES’s strategy.
- Employee engagement: Engaging colleagues in sustainability initiatives is crucial for success.
- Decarbonising the grey fleet: BES launched an EV salary sacrifice scheme to encourage the use of electric vehicles among employees.
Each Inflexion investment, regardless of size or stake, has full access to Inflexion’s value acceleration support which includes ESG strategy, international expansion, M&A, digital enhancement, talent management, and commercial effectiveness.
Inflexion’s ESG toolkit provides the portfolio with a suite of support to help them progress through the levels of the ESG Framework and drive value. It's designed to upskill the portfolio on relevant ESG topics, share best practice, and enhance collaborative opportunities. This is supported by 19 playbooks and over 30 vetted and experienced advisers to help guide the journeys.
