The Transformative Impact of AI on M&A Dealmaking

The integration of artificial intelligence (AI) into business is essential, especially for companies that want to remain competitive. The mergers and acquisitions (M&A) sector is no exception. AI is already transforming M&A processes by increasing efficiency, mitigating risks and discovering new opportunities.

The major challenges of mergers and acquisitions

Dealmakers must manage information and data from multiple stakeholders in time-sensitive, high-pressure environments. They must consider a variety of risks, including ongoing geopolitical, regulatory or financial uncertainties. In reality, risk assessment is expected to be the most challenging aspect of the deal process in the coming year.

Given the current circumstances, closing deals is more complex than ever. Buyers are increasingly focused on conducting thorough due diligence and gaining deeper insight into target companies before moving forward. In turn, salespeople are expected to provide greater transparency, reflecting a more discerning approach to dealmaking. The time it takes to prepare a deal has increased 27% in America in the first half of 2024 compared to the same period in 2023, while the time required to complete due diligence has also increased. Additionally, the volume of content in virtual data rooms – a critical part of the due diligence process – has increased significantly per deal compared to last year. Dealmakers have also said there are unrealistic expectations resources and bandwidth is the biggest reason why deals have failed over the past two years.

AI in mergers and acquisitions

AI helps dealmakers deal with these challenges. AI and generative AI can automate many of the manual, time-consuming tasks that are critical to the due diligence process. For example, AI can streamline the organization and categorization of files needed for investor or buyer review, reducing human error and ensuring compliance with regulatory requirements.

By automating repetitive tasks, AI can help dealmakers focus strategic decisions. For example, AI-powered redaction tools can speed up the process of identifying, blocking and unblocking sensitive information as a deal progresses, streamlining document management and improving productivity. This automation allows dealmakers to allocate more time and resources to higher-value activities, ultimately improving the overall efficiency and effectiveness of the M&A process.

AI also makes other parts of the dealmaking process more efficient. One of the most crucial steps in mergers and acquisitions is identifying potential targets. AI can assist in this process by analyzing data sets and market trends, which is especially beneficial for companies pursuing programmatic M&A strategies. Some AI-powered tools can analyze anonymized private, paid and public data and other transaction activity within a secure platform, helping dealmakers identify better and faster deal targets.

Furthermore, AI can assist in the valuation process by providing objective analysis based on historical data and market factors. While AI increases the accuracy and efficiency of valuations, human judgment remains essential, especially when evaluating qualitative factors and forecasts. The synergy between AI and human expertise is crucial for achieving balanced and informed decision-making.

Dealmakers want to use AI tools in the M&A process. In reality, two-thirds of global dealmakers They said exploring the use of new AI tools will be their main operational focus next year, and most see that increased productivity as one of the key benefits of AI in their business, accelerating deals by just as much 50%. Still, there are some gaps that need to be bridged between AI knowledge and its application.

A significant number of dealmakers say data security and privacy issues are the biggest barriers to integrating AI into their businesses and a majority want the technology regulated.

AI adoption is increasing and dealmakers will need to ensure their business models are ready to leverage these to gain a competitive advantage. This includes not only integrating AI to increase efficiency, but also applying sharper insights to improve deal outcomes. Achieving a balance between AI and human expertise is key to maximizing productivity and ensuring successful mergers and acquisitions.