The integration of artificial intelligence (AI) into the business world is no longer a speculative endeavor but a pressing necessity. Companies are rapidly adopting AI technologies, recognizing that the question isn't if they will integrate AI, but rather how much of a competitive edge they can gain or lose through its implementation.

The utilization of AI is set to revolutionize complex projects, offering enhanced efficiency and risk mitigation while simultaneously generating new deal opportunities. This technological evolution is particularly evident in the world of mergers and acquisitions (M&A), where AI is already reshaping the dealmaking process.

Streamlining Due Diligence with AI

AI's capacity to improve processes and efficiencies is especially notable in the due diligence phase of M&A transactions. Due diligence traditionally involves labor-intensive tasks such as organizing and categorizing vast amounts of documents.

AI-powered document analysis can significantly expedite this process, enabling faster information processing and reducing the time required to complete due diligence. For example, AI can automate the categorization of thousands of documents in minutes, allocating and indexing them into appropriate folders, which saves a substantial amount of time and reduces the likelihood of human error.

Automating Routine Tasks to Enhance Strategic Focus

By automating repetitive and time-consuming tasks, AI allows dealmakers to focus more on strategic-level decisions and creative thinking. For instance, embedded automated redaction tools can accelerate the process of identifying, blocking, and unblocking sensitive information as a deal progresses, thereby streamlining document management and enhancing productivity. This automation enables dealmakers to allocate more time and resources to higher-value activities, ultimately improving the overall efficiency and effectiveness of the M&A process.

Enhancing Target Identification and Valuation

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

In addition, AI can aid in the valuation process by providing objective analyses based on historical data and market factors. However, while AI enhances accuracy and efficiency in valuations, human judgment remains essential, particularly in evaluating qualitative factors and forecasting. The synergy between AI and human expertise is crucial for achieving balanced and informed decision-making.

AI in Action

Datasite® provides dealmakers with innovative technology that supports transaction management seamlessly across the entire deal lifecycle. Leveraging AI and machine learning (ML), Datasite has developed software applications that make the deal management process more effective and efficient.

Datasite Intelligence uses an AI-powered search engine to help dealmakers conduct faster and more accurate deal searches. By utilizing natural language processing and advanced AI technologies, this application improves the speed and accuracy of research, including relevant deal precedents and buyer recommendations. These recommendations are based on anonymized private, paid, and public data as well as activity from Datasite's closed and secure platform, which is one of the largest active transaction databases in the world.

Navigating Challenges and Risks Associated with AI

While the benefits of AI in M&A are substantial, there is a healthy awareness of the challenges associated with its implementation. Generative AI (GenAI), in particular, presents unique challenges that require robust systems, processes, and regulatory frameworks to effectively harness its benefits and mitigate risks. Key concerns include privacy, intellectual property rights, security, and data quality. Companies must establish comprehensive frameworks to address these issues and ensure that AI applications are used responsibly and ethically.

Survey Insights: The Impact of GenAI on M&A

A recent Datasite survey  of 500 dealmakers from the UK, US, Germany, and France highlights the impact of GenAI on M&A. The survey reveals that while almost half (42%) of global dealmakers cited productivity as the biggest benefit of using GenAI, 36% identified data security and privacy concerns as the primary obstacle to incorporating GenAI into their business. Other barriers include a lack of competence and expertise (26%), GenAI's immaturity or need for more validation (20%), and unclear application use cases (12%).

Nevertheless, dealmakers expect GenAI to have the most significant impact on improving processes rather than driving outcomes. They anticipate GenAI to streamline processes, improve deal intelligence, and facilitate better deal decisions. While more than half of the dealmakers surveyed believe that GenAI could speed up M&A deals by 26-50%, only 15% think it would help reduce M&A costs or improve risk identification.

Sector-Specific Impacts and Future Opportunities

The survey also sheds light on sector-specific impacts and future opportunities related to GenAI in M&A. Dealmakers expect GenAI to be most disruptive in the technology, media, and telecommunications (TMT) sector (43%), followed by financial services (24%) and healthcare and life sciences (12%). They also foresee software engineering driving the most GenAI-related M&A opportunities in the next five years (33%), followed by research and development (25%) and marketing and sales (24%).

Security, privacy, and compliance are identified as the biggest factors that could derail a GenAI deal, with 30% of dealmakers citing these concerns. Other critical factors include data quality, competence and expertise, transparency and explainability, and technology validation. Interestingly, 14% of dealmakers reported having seen a deal derailed due to concerns about GenAI.

Balancing AI and Human Involvement

M&A is fundamentally a relationship-driven business, and human involvement is essential to driving deals forward. As the industry stands on the brink of a massive shift in technological adoption, it is crucial for dealmakers to ensure that their business models are primed to leverage AI. This involves 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 M&A transactions.