How many M&A deals actually use AI for diligence?

4 March 2025

The Role of AI in M&A Due Diligence: Trends and Insights

In recent years, the landscape of mergers and acquisitions (M&A) has been significantly transformed by the advent of artificial intelligence (AI). Yet, a question persists: How prevalent is the use of AI in due diligence during M&A transactions?

Despite the abundance of discussion on this topic, a clear consensus is elusive. To shed light on the matter, it’s particularly insightful to hear from legal professionals who have navigated this space in the past couple of years. Their experiences can provide valuable insights into the evolving role of AI in M&A.

The Intersection of Technology and Due Diligence

Has technology, especially AI, made its way into the standard practices of due diligence? Over recent years, there’s been an observable uptick in the employment of advanced technologies during M&A processes. However, whether this trend is on an upward trajectory remains a topic for debate among experts.

M&A Insurance: A Tech-Driven Shift?

One intriguing angle to consider is the intersection of M&A insurance with technological advancements. Are we more likely to see AI being leveraged in deals that include M&A insurance? The integration of technology in such cases could potentially streamline processes and mitigate risks, making it a desirable option for entities involved.

Strategic versus Private Equity Deals

Another aspect worth exploring is whether there’s a disparity in AI adoption between strategic transactions compared to those driven by private equity. Are strategic deals more inclined towards adopting cutting-edge technologies, or does private equity show a higher propensity to embrace AI for due diligence?

Ultimately, as AI continues to evolve and demonstrate its value, the frequency of its use in M&A scenarios is expected to increase. However, the extent of its integration and influence remains a varied terrain, shaped by several factors including deal type, insurance considerations, and the strategic priorities of the involved parties. As the industry continues to adapt and grow, the real-world application and benefits of AI in this domain will become even more pronounced.

One response to “How many M&A deals actually use AI for diligence?”

ccadmin

4 March 2025
The use of AI in M&A due diligence has been gaining traction, though the extent of its adoption can vary significantly across different deals and sectors. Speaking to the integration of AI over the past few years, a few insights can be provided:
1. Prevalence and Adoption: AI technology is becoming increasingly prevalent in M&A due diligence, especially in larger transactions and more tech-savvy sectors. In 2021 and 2022, there was noticeable uptake as firms sought to improve efficiency and accuracy in reviewing vast amounts of data. AI is now used to automate document review, analyze financial data, spot risk factors, and even forecast the future performance of target companies.
2. Sector Differences: The adoption of AI can differ between strategic buyers and private equity (PE) firms. Strategic buyers, who may have a longer investment horizon and deeper industry knowledge, may utilize AI to gain competitive insights and operational synergies. Meanwhile, PE firms, which often operate under tighter timelines and look for quick value enhancements, might employ AI for rapid due diligence to accelerate deal closing and optimize investment returns.
3. Impact of M&A Insurance: Deals that include M&A insurance, such as representations and warranties insurance, may have an increased likelihood of incorporating AI in due diligence. These insurance policies often require thorough due diligence to assess the risk profile of the transaction accurately. AI can offer a more comprehensive risk assessment, helping underwriters to better understand potential exposures and facilitate smoother insurance underwriting.
4. Trends Over Time: The popularity of using AI for due diligence has been increasing, driven by advancements in AI technology and a growing recognition of its benefits. However, the adoption rate can be affected by the nature of the deal and the willingness of the parties to invest in technology.
5. Practical Advice for Attending Counsel: For attorneys involved in M&A, staying abreast of AI developments is crucial. Familiarize yourself with AI tools relevant to M&A, and consider forming partnerships with technology providers who specialize in legal or financial tech. It’s also wise to remain cognizant of the data privacy and security implications that AI usage may entail, ensuring compliance with regulations like GDPR or CCPA when applicable.
In conclusion, while AI is becoming an integral part of the M&A due diligence process, its adoption is nuanced and varies by deal specifics and stakeholder preferences. Attorneys and dealmakers should view AI as a valuable ally in enhancing the thoroughness and speed of due diligence, while
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