As a business owner, investor, or corporate transactions advisor, you may not have realized that artificial intelligence (AI) can also streamline M&A processes. Media headlines are certainly full of stories about the use of this Industry 4.0 technology in industries such as automotive, healthcare, and retail, but reports on its use in mergers and acquisitions are gradually starting to appear.
How long does it take you to gather company or market information? To monitor data that might indicate whether investing in a particular area makes sense? To analyze legal or financial data during due diligence? Not to mention something that's essential today: measuring the carbon footprint generated by a given investment.
AI does indeed have an answer to all of these questions in an area traditionally reserved for advisors, finance professionals, and/or lawyers, where strategy and commercial skill come together.
M&A processes where AI can help
Which M&A processes can artificial intelligence software help with? We can identify five areas.
- Market research. These advanced programs can extract economic data in real time, providing a more accurate and complete view of the industry landscape and, as a result, helping you know when to make a move in a specific market. You can even get a geographic comparison, which helps spot opportunities that offer a better ROI.
- Identifying companies. The same applies at the microeconomic level, helping you search for potential companies to invest in. This search can be narrowed by different criteria, such as business model, customer type, or international presence.
- Due diligence. Applying AI to this audit, which is essential in any M&A process, has a big impact because it automates parts of it. AI algorithms can review hundreds of documents and data points in a short time, something that would take a person weeks. And that's not all: it also eliminates human error in collecting and analyzing the data.
- Valuation. Intelligent software can cross-reference financial data from different companies or from the same company. At the same time, the target financial return is applied to produce possible valuations that help measure the deal's profitability. It can even forecast cash flows to help assess growth expectations.
- Exit planning. Some types of investors usually invest in companies for a set period of time. Artificial intelligence is also useful for planning a divestment, given its ability to monitor the performance not only of the portfolio company but also of competitors and the industry.
Benefits for companies, advisors, and investors
All of this adds up to considerable time savings for professionals, who can spend that time on tasks that add more value to the corporate transaction itself. It also helps predict possible regulatory responses and project the deal's results across several companies and different scenarios.
Here are some of the specific advantages for each party:
Companies
AI can act as an advisor recommendation engine, helping companies find the expert advice they need in a short time, which reduces the costs of searching for the professionals required in M&A deals.
Advisors
With a text similarity feature, advisors can avoid answering the same questions over and over, saving time and effort. They also benefit from recommendation algorithms that help them find the companies that best match their profiles.
Investors
This type of software makes personalized recommendations, helping investors make more informed and effective decisions. Not only can this lead to a higher return on investment, but it can also reduce the risks of investing in companies that don't fit their investment profile or strategy.
