Artificial Intelligence in M&A: Not a People Substitute

As in Many Other Industries, Adoption of AI in M&A Growing

It’s no secret that artificial intelligence (AI) technologies have taken the world by storm, and the mergers and acquisitions (M&A) industry is no exception. A significant amount of research has already been conducted regarding artificial intelligence in M&A, and as you might expect, there are a variety of benefits and limitations (as well as risks).

In terms of benefits, the most immediate is that artificial intelligence in M&A can be used for research during the due diligence process. These tools can mine significant amounts of data — from documents and contracts to various sources of financial data and past media coverage. And with the development of AI over many years, they are easily able to spot patterns, trends, inconsistencies, and other valuable insights.

• This is helpful for buy-side parties to consolidate and accelerate research while still verifying and using AI findings as a springboard for interviews and further research.
• On the sell-side, AI tools can assist in the organization of information and documents loaded into virtual data rooms (VDRs) as part of due diligence.

Microsoft Copilot, which integrates with many of the tools firms and other organizations use today, can conduct deep analysis of company data — enabling teams that otherwise would have to use separate tools or more manual methods to accelerate next steps and decision-making processes. ChatGPT has also now moved beyond its previous limitation of referring to pre-2021 data and can now search the web for information.

While these are significant advantages for M&A firms, there are of course still risks. AI systems are always learning and are not infallible, thus the data they analyze and present could be erroneous and should be verified. Additionally, if AI tools are used in the preparation of due diligence items on either side, legal complications arise. For example, what is the standard for a fairly disclosed fact in a disclosure agreement?

AI is Not a Replacement for Your Number One Asset

And that’s people. The above are just a sampling of the many benefits and risks that come with artificial intelligence in M&A transactions, but it’s important to remember that M&A is about relationships just as much as it’s a financial process. People — those involved in the due diligence process of a transaction and those at the buyer and seller organizations themselves — drive value, have a vision, and innovate. AI does not lead, inspire action, or develop entirely new processes and ideas.

When it comes to artificial intelligence in M&A, we must always remember that AI is automation. It enables efficiency and productivity with the aim of enhancing the value of businesses that utilize it and adding value to firms that use it to streamline deal-making. But it won’t be able to make an assessment of people.

Organizations are already using artificial intelligence in M&A transactions, but those who’ve adopted it early on and who continue to use it for the foreseeable future will need checks and balances to ensure it’s working correctly for the business and is delivering valuable information.

At MelCap, Relationships Come First

With our firm celebrating its 25th anniversary this year, we have recently been reflecting on the importance of people and relationships in our industry and our own growth. From day one, our firm has put relationships first — from working with close connections who advised us throughout our early years to navigating transformative transactions with individuals we’ve worked with multiple times.

In every deal, whether we’re supporting a sale, an acquisition, a capital raise, or any other opportunity, people come first. We build relationships with our clients and their partners and provide the level of service and support that befits the significance of the transaction they’ve entrusted to us. And thanks to that commitment, we’ve been fortunate to be recognized numerous times for excellence.

If you’re looking to work closely with a partner on an important transaction that will always put you and your people first, reach out to us today.