Artificial intelligence (AI) has the potential to change the landscape in how deal-making is carried out and how target companies are evaluated. M&A professionals and due diligence advisers are increasingly using the new technology to enhance their deal-making capabilities.
AI has become an influential force in M&A, enhancing the efficiency and accuracy of various processes. AI-powered tools are now employed to conduct due diligence and origination, where they can analyse vast amounts of data at unprecedented speeds, says Grit Young, EY Ireland technology industry leader and valuations partner.
“Moreover, AI can assist in the valuation of companies by generating data-driven insights to support the review of financial forecasts and identifying synergies between organisations. Through machine-learning models, AI can help predict the future performance of a target company based on historical data, alternative data and market trends.
“Overall, the arrival of AI has improved the accuracy and efficiency of M&A but also uncovers new dimensions of value creation and risk management.”
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AI is beginning to make inroads into the delivery of M&A advice, but it is early days in the adoption across the industry, agrees James McMenamin, partner, corporate finance, PwC Ireland. “We see transaction services providers using AI to prepare initial data analysis quickly and it appears to be able to do it to a reasonable base level standard. That said, it requires significant input from specialists to provide any thoughtful analysis and conclusions.”
There is a saying in the industry that “AI won’t take my job but someone proficient in the use of AI will”, says McMenamin. “It is essential that M&A professionals get proficient with the capabilities and limitations of AI because if they aren’t using it, their competitors will, and they will be at a distinct disadvantage.
“There is a sense of excitement about AI because we are only just starting to see the potential to increase productivity in the M&A sector.”
The reaction to AI in M&A is a mix of excitement and apprehension, agrees Young. “On one hand, professionals can see the potential of AI to revolutionise their workflows, providing enhanced analytics, deeper insights and more precise decision-making capabilities. They recognise the power AI holds in transforming the landscape of M&A, making the process more dynamic and insightful. In the area of origination, it can be a very powerful tool to identify potential opportunities for buyers and accelerate the funnel.
“On the other hand, there is a degree of caution. Some individuals fear the unknown, worrying about the implications of relying heavily on AI, such as an over-dependence on technology and diminished human judgment making processes vulnerable to system failures.”
Despite these concerns, the overall sentiment leans towards optimism and our clients are asking us more and more about it, says Young. Greater confidence in AI should be fostered as more success stories emerge and the technology continues to evolve.
Pros and cons
The pros of using AI in M&A include improved data analysis, time savings and enhanced decision-making, says McMenamin. “The main con is the potential for people to rely on the output without doing a careful review and fact check. Human judgment cannot be replaced.
“AI in M&A requires a balanced approach, combining advanced technology with human expertise. Organisations must focus on data quality and invest in training to maximise AI’s benefits and mitigate associated risks.”
Young agrees that AI has improved the accuracy and efficiency of M&A but also uncovers new dimensions of value creation and risk management. “AI can help an acquisitive company identify a potential M&A target with the click of a button, a target that may not have been found through the more traditional methods of desktop research and contacting peers/international colleagues.
“Routine tasks such as document analysis and compliance checks can be automated with more time to focus on strategic activities. Paradoxically perhaps, AI can also help assess the risk of a target company being disrupted by AI and can help an expert with scenario planning when assessing forecasts.”
On the other hand, one concern Young hears across the industry and from clients is the reliance on the quality of the input data. “Another big factor is the initial implementation costs, but these are starting to reduce as more competition arrives and CEOs, CFOs and CTOs are starting to see the long-term value added and, therefore, return on investment.”
Is it the future?
AI has the potential to revolutionise our industries and position Ireland and Europe as leaders in this technology frontier, says Young. “We are yet to see significant investment in Ireland’s AI sector, but it could become a European hub given our access to quality talent, location and business-friendly policies.”
