ANDREW BAHLMANN: AI can enhance M&A, but human intuition can be invaluable

Artificial intelligence (AI) has the potential to greatly enhance the already fast-paced world of mergers & acquisitions — but not to the exclusion of a professional analysis. The human brain, with its limitations of speed, accuracy and memory, is ill-equipped to analyse the vast amounts of data required for identifying synergies with appropriate target companies. In contrast, computers equipped with AI technology are lightning fast, possess flawless memory, and have the ability to analyse huge volumes of data in a matter of seconds.

However, the speed and efficiency offered by AI in M&A can be a double-edged sword. On one hand it can greatly assist decision-making and provide valuable insights throughout the M&A process. However, it also has the potential to narrow the diversity of opinion if everyone relies on the same AI algorithms to make decisions. This homogeneity encourages herd behaviour, whereby individuals gravitate towards the same choices. For instance, consumers relying solely on reviews on platforms such as Amazon to decide which products to purchase.

Consequently, it is important to recognise that AI is simply another tool that can be applied to the benefit of a more comprehensive deal. Seen in this light, AI-powered analytics have the ability to revolutionise how M&A deals are conducted, enabling smarter and faster decision-making throughout the life cycle of a deal.

By harnessing data analytics and AI M&A professionals can gain rapid and comprehensive insights into a target company’s value drivers and identify synergy opportunities, potential risks and opportunities for value creation — uncovering the real story behind the data and guiding decisionmakers to a clearer understanding.

Due diligence is a critical aspect of the M&A process, requiring comprehensive analysis of a target company. Data analytics already automates this process, but as additional AI tools emerge they will further accelerate the discovery of relevant information. This ability to process and analyse vast data sets allows for a more thorough risk assessment, helping identify potential red flags and mitigating factors.

Accurate valuation and deal structuring are crucial for successful M&A. AI-driven financial modelling and forecasting tools provide more accurate and timely valuations, taking into account a wide range of factors. This enables the optimisation of deal terms and structures, ensuring transactions are executed at the right price and under more favourable conditions.

Data analytics already plays a central role in M&A, allowing a detailed analysis of transaction-level data, including cash flows, assets and operations. Such a deep dive into the data can reveal hidden patterns and trends, providing a fuller understanding of the target company’s financial health and performance. Having this information at hand before making a decision can be the difference between a successful deal or a missed opportunity.

With quicker and deeper insights potential buyers can swiftly identify and then assess whether a target company aligns with their strategic objectives or if it’s best to move on to another opportunity. This agility is paramount in today’s competitive landscape, where time is of the essence and opportunities can arise and disappear rapidly.

AI analytics can also assist in identifying hurdles that may arise during the integration and post-deal execution phases. Understanding these factors upfront allows for better preparation and more effective decision-making when it comes to executing the deal and driving value post-merger. AI can facilitate smoother post-merger integration by identifying potential operational mechanisms, streamlining workflows and automating routine tasks. 

Just as important in this process is the role of human judgment in using AI-generated data. While AI can provide valuable insights and accelerate decision-making, it cannot replace the human element. M&A professionals bring years of experience and nuanced understanding to the table, allowing them to interpret AI-generated signals in the context of their industry knowledge and strategic goals. So while there are numerous benefits to using AI in the M&A process, over-reliance on it may lead to neglecting human intuition, which can be invaluable in many circumstances.

While AI cannot replace managing the regulatory hoops — M&A transactions involve navigating many complex, time-consuming and costly legal frameworks — it can assist in lowering the cost and reducing the risk of human error, thereby ensuring compliance with relevant laws and regulations.

AI is only as good as the intellect behind what it is asked to do, as well as the quality of data it inspects. Inaccurate or biased data can also lead to flawed insights and decisions. Additionally, there are concerns about data privacy and security, as AI systems may require access to sensitive information during the M&A process, and companies frequently block such financial information.

To maximise the advantages of AI in M&A it will always be crucial to balance AI-driven insights with human judgment.

• Bahlmann is CEO: corporate & advisory at Deal Leaders International.