The future of M&A deals powered by AI

What will deals powered by AI look like over the next few decades? Learn the potential impact across all stages of the deal lifecycle and be prepared to stay ahead of the curve.

By AnsaradaWed May 29 2024Mergers and acquisitions, Due diligence and dealmaking, Industry news and trends, Innovation, Virtual Data Rooms, AI and cloud integrations

The M&A landscape is undergoing a seismic shift, driven by the relentless advance of artificial intelligence (AI). For dealmakers, understanding how AI is reshaping the M&A process is no longer optional—it's essential to maintain strategic advantage. 

According to recent research from Accenture, executives have ranked ‘Strategy & M&A’ as one of the top three areas they plan to reinvent within the next three years. 64% of M&A executives are confident that generative AI will drive this transformation of the dealmaking process.

While use of generative AI for M&A processes is low today (16%), it is expected to reach 80% over the next three years according to Bain & Company. Early adopters mostly include larger technology, healthcare and financial services companies. With 70% of M&A decision makers anticipating that genAI will boost returns on transactions, it’s no surprise that the change is expected to be rapid.

From deal sourcing to post-merger integration, AI is poised to enhance efficiency, accuracy, and strategic decision-making at every stage of the deal lifecycle. In this article, we explore the transformative potential of AI and what it could mean for the future of M&A.

The AI treasure hunt: Deal sourcing and target identification 

Enhanced market scanning

Gone are the days of sifting through endless reports and data manually. AI can now scan vast amounts of market data, financial reports, news articles, and even social media to spot potential acquisition targets. Machine learning algorithms detect patterns and signals that indicate a company is a prime candidate for acquisition. 

Predictive analytics

With AI's predictive analytics, forecasting market trends and company performance is like having a crystal ball. By analyzing historical data and current market conditions, AI can predict future opportunities, helping investment bankers to make more informed decisions. 

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The AI detective: Due diligence

Automating document review

Due diligence is critical for a successful transaction - yet it’s no secret that it can be incredibly tedious. Enter AI, specifically natural language processing (NLP), which can automate the review of massive volumes of documents. AI extracts relevant information, identifies red flags, and ensures compliance with regulatory requirements. This not only speeds up the due diligence process but also reduces the risk of human error. Research from Thomson Reuters suggests that AI could reduce DD document review time by up to 70%.

Risk assessment

AI systems can evaluate financial, operational, and strategic risks associated with potential deals. By analyzing historical data and spotting patterns, AI provides comprehensive risk assessments, highlighting areas that require further investigation. AI can act as a magnifying glass, bringing hidden details into sharp focus.

AI in the Boardroom: Valuation and negotiation 

Real-time valuation models

AI can enhance the accuracy of company valuations by integrating real-time data and advanced analytical models. These models consider a wide range of variables, including market conditions, competitive landscape, and internal company metrics, providing a more dynamic and precise valuation. This leads to more effective negotiations and fairer deal structures. 

Scenario analysis

Generative AI can simulate various deal scenarios and their potential outcomes, helping dealmakers understand the implications of different strategies and terms. This allows for better preparation and more strategic decision-making during negotiations. Imagine having the ability to run countless "what-if" scenarios in minutes, giving you the upper hand in any outcome.

The AI personal assistant: Closing the deal 

Streamlined processes

AI can automate many administrative tasks in transaction execution, such as regulatory filings, compliance checks, and coordination between parties. This reduces the administrative burden, allowing legal and banking professionals to focus on higher-value activities. 

Smart contracts

Blockchain technology, powered by AI, is paving the way for smart contracts such as NDAs that self-execute when predefined conditions are met. These contracts can significantly reduce the time and cost associated with closing deals by automating the enforcement of contractual terms and ensuring transparency. Think of it like having a digital lawyer that never sleeps.

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The AI mediator: Post-merger integration

Cultural and operational alignment

Post-merger integration is often the trickiest part of an M&A deal. AI can facilitate smoother integration by analyzing and predicting cultural and operational fit between merging companies. By assessing factors such as employee sentiment, communication patterns, and workflows, AI can identify potential conflicts and recommend alignment strategies. AI insights can be the difference between a potentially rocky merger and a smooth, successful union.

Performance monitoring

AI-driven analytics can monitor the performance of the merged entity in real-time, providing insights into the success of the integration process and highlighting areas needing attention. This enables more agile management and quicker responses to emerging issues - a dashboard providing real-time health checks of the new entity.

Creating new horizons: The role of generative AI 

Creating synergies

Generative AI can identify complementary strengths and opportunities for collaboration between merging companies. It can suggest new product ideas, market expansion strategies, or operational efficiencies that neither company could achieve independently. Generative AI is like having an innovation lab at your disposal, constantly generating new ways to create value.

Enhancing creativity and innovation

By generating new ideas and solutions based on existing data, generative AI can foster innovation within the merged entity. This can lead to the development of new products, services, and business models, driving long-term growth and competitive advantage. A brainstorming partner that never runs out of fresh, data-driven ideas.

Embracing the future of AI-powered deals

The future of M&A deals is set to be profoundly influenced by AI. For dealmakers, leveraging AI technologies can lead to more efficient, accurate, and strategic M&A processes. As AI continues to evolve, its role in M&A will only become more integral, offering new possibilities and transforming the way deals are conducted. Embracing the AI revolution is not just about staying ahead of the competition—it's about redefining the future of M&A.

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