Artificial intelligence offers enormous potential for due diligence during M&As

Rory O’Keeffe, Transaction Services Partner recently featured in The Irish Times Special Report on Mergers & Acquisitions.

Use of AI to enable companies accelerate target identification and evaluation of potential acquisitions.

The explosive arrival of ChatGPT last year marked a starting gun for the diffusion of generative artificial intelligence (AI). Transactions are already feeling the effect.

“AI has been a prominent discussion point in recent times as many companies explore opportunities that digitisation and AI can bring to their business. It is no different in the M&A [mergers and acquisitions] environment, where AI has the opportunity to change the landscape in how deal-making is carried out and how target companies are evaluated,” says Rory O’Keeffe, partner of the transaction services team at professional services firm BDO.

Traditionally bringing a transaction to market, negotiating a deal and running due diligence has been complex, time-consuming, and resource-intensive.

“Given this, M&A professionals and due diligence advisers are actively moving forward in developing their AI capabilities in order to enhance their deal-making capabilities and to best support their clients through their M&A transactions,” he says.

For deal makers, the use of AI will allow companies to accelerate their target identification and evaluation of potential acquisitions. “We already see AI technologies used in many deal-research platforms where global M&A data is aggregated to provide insights on sectors, upcoming transactions, prospective target companies and buyer lists,” he explains.

In due diligence, AI technology has the potential to enable greater efficiency in understanding and evaluating target company data, while also deepening the sophistication of diligence being carried out.

“Traditionally, the due diligence process starts with long lists of data requests where significant time is spent reviewing, reconciling, analysing and summarising in order to extract key insights and metrics to be considered in the context of the transaction. The potential benefits that AI can bring to this process are huge. However, it is not without risk as AI lacks human judgment and intuition, both of which are important attributes in evaluating financial metrics and other qualitative factors. The understanding of such can impact the due diligence findings and the overall deal success,” he adds.