Integrating artificial intelligence in M&A processes: A new strategic era - Part 1: Leveraging AI and its advantages

Artificial intelligence (AI) is transforming established practices in multiple areas across all industries, and mergers and acquisitions (M&A) are not immune to this transformation. From the exploratory phase to due diligence, including contract drafting and negotiations, AI enables M&A teams to leverage powerful tools for analysis, automation, and prediction, thus improving efficiency, accuracy, and objectivity. While this is still an emerging use case, studies indicate we can expect to see AI leveraged in a majority of M&A deals in the coming years, offering businesses an opportunity to be at the forefront of this revolution and leverage the benefits of AI ahead of their competitors. This article outlines the main contributions of AI at each key stage of the process, highlighting concrete benefits for companies: time optimization, risk reduction, improved decision-making quality, and stronger strategic alignment.

Rapid and intelligent opportunity identification

AI can first help companies enhance and deploy their M&A strategy. AI tools, combined with advanced analytics can help companies better identify opportunities worth pursuing and reduce the risk of low-yield acquisitions. M&A teams save time, cover a broader range of opportunities, and can spot emerging targets before competitors, by leveraging such AI tools. By analyzing historical data and market trends, AI can anticipate future performance and integration risks. It can also simulate different scenarios on negotiations and business integration to help deal teams make well-informed decisions with respect to the pursuit of a potential M&A opportunity.

More sophisticated M&A teams can leverage automated systems that continuously monitor the market, identify targets aligned with corporate goals, and prioritize them according to defined criteria such as size, complementary offerings or corporate culture. With the help of AI, these criteria can be adjusted in real time based on various factors, including market feedback and business orientations. By automating part of the selection process, decisions based on personal preferences are limited, enhancing objectivity and decision-making rigour. This approach helps structure external growth efforts and accelerates decision-making. In short, integrating AI into these processes can ultimately improve the quality of decisions, increase operational efficiency and align acquisitions with the company’s strategic objectives.

Optimized due diligence

The due diligence phase, essential in any M&A process, involves a thorough analysis of a large volume of legal, financial, and operational documents. This process can be optimized significantly with the help of AI, which can review contracts, financial reports or regulatory documents rapidly, enabling business advisors (including lawyers and accountants) to work more efficiently. AI tools can identify sensitive clauses, legal obligations, or areas of non-compliance flagged as being of relevance or interest, thereby allowing businesses to quickly assess their comfort level regarding certain issues, as identified by AI.

Beyond saving time, AI can provide strategic value by highlighting sensitive financial data, revealing accounting irregularities, or identifying underlying trends that could impact the viability of the transaction. Algorithms can also detect anomalies in cash flow or identify recurring discrepancies between forecasts and actual results, which can foreshadow structural weaknesses. With its predictive capabilities, AI also helps anticipate and mitigate against post-acquisition risks, as well as providing critical assistance in the evaluation of a target’s future performance. In short, AI can transform due diligence into a faster, more reliable, and more well-informed process, reinforcing both the legal and financial security of the transaction for all parties involved.

AI-assisted drafting and negotiation

AI can play a significant role when drafting contractual documents and conducting negotiations as part of an M&A operation. Certain tools can quickly generate draft contracts based on past transactions and integrate standard clauses tailored to the contemplated transaction, incorporating insights from the due diligence phase. In this way, the use of AI tools enables legal teams involved in the transaction to ensure comprehensive contract drafting adapted to the client’s targeted needs, while limiting the risks of potential litigation. Additionally, AI can be used to standardize documents from one transaction to another, which is particularly useful for fast-expanding companies with a more aggressive M&A strategy. 

During negotiations, AI can also be used to compare different versions of documents and help identify and respond to problematic clauses. These practices provide advantageous information to the party using AI, enabling it to anticipate risks that could jeopardize the transaction. This informational advantage can put them in a favourable position to bring negotiations to a successful conclusion. 

Conclusion

The integration of AI into M&A processes and related activities represents a major step forward, both strategically and operationally. By automating complex tasks, improving the quality of analysis and reinforcing the rigour of decisions, these tools offer significant potential to optimize every stage of a merger or acquisition. The use of AI in an M&A context also allows stakeholders to focus their efforts on the most strategic aspects of these transactions, which can be critical in a company’s lifecycle.

However, it remains essential to keep in mind the challenges tied to the responsible use of AI technologies, particularly regarding ethics, data confidentiality, and governance. These considerations will be explored in greater detail in an upcoming article.

The authors would like to thank Anne-Florence Desjardins and Félix Baril-Cyr, students, for their contribution to preparing this legal update.